The Bottom Line

or a brief period from October, 1801, through the middle of May, 1803, Napoleonic France and the Great Britain of George III shared an uneasy peace. Mutual mistrust fed an appetite for building up armies and navies. Expenditures in turn fueled a great need for hard cash. The French had wasted thousands of men and vast sums trying to re-shackle the recently freed slave population in Haiti. That old imperial dream died hard. Napoleon needed cash to prepare for the looming war with England and her continental allies. His decision to sell not just the city of New Orleans and a duty-free port to Americans, but to convey the whole Louisiana Territory to the new democracy, was part of his strategy to raise funds for a new war and perhaps to acquire an ally. There were many uncertainties in the air--Napoleon was besieged by those who wished to restore the old colonial empire, or who wished him to renege on his promise to sell the Louisiana Territory.

President Jefferson and Albert Gallatin faced the challenge of delivering enough money to Paris to satisfy the First Consul's appetite, and to do it promptly. They issued certificates of public debt, or bonds. Bonds would be sold in various denominations at six percent. However, no French banking house would serve as intermediary in the transaction, for fear of British blockade and seizure. Marbois turned to the London-based merchant bankers, the House of Baring. It was a well known Anglo-American firm with strong ties to a major continental house and would be acceptable to all parties. Sir Francis Baring, scion of the house, in turn relied upon his son-in-law Pierre Cesar Labouchere, a partner not only in Baring but also in the prestigious Hope and Company of Amsterdam. The Dutch conduit would make prompt payment in Paris possible. Alexander, Sir Francis' second son, would handle the American end of the deal. Alexander had married Anne Louisa, the daughter of Henry Bingham, the richest man in America. The two younger men worked out the details. It was a tidy family arrangement. Strikingly, it was not a major challenge for these veteran financiers. Both had worked in this entangled international money market for some time.

Thus it was that a London banking firm sold American bonds on an international market to help France finance a renewed war with Great Britain.

The U.S.Treasury sent $11,250,000 in bonds to the French ministry of finance.The remainder of the $15 million purchase price would be set aside to pay Americans' claims against France. Livingston and Monroe had pledged an advance of $2 million to be channeled through a Philadelphia banking firm, Willing and Francis. Baring bought a third of those bonds. Eventually all funds would pass through Barings. Every major player was happy: Napoleon bought arms; we doubled our territory; Great Britain controlled this financial pipeline and enhanced her national wealth.

Consider how a nation just emerged from its revolutionary fatigues could acquire such an increase in security and territory, and how it could pay for it right after another war largely fought on its own soil. The United States operated on a shoestring financially, but paid its way in an increasingly complex world of finance, and proved its worth. Gallatin's prudent budget administration meant that no additional taxes had to be levied upon citizens to pay off the bonds. Interest, and later redemption, payments came from selling public lands.

In late November 1803, the Spanish Governor of Louisiana presented a representative of the French government with a silver platter holding keys to important public buildings in New Orleans. (It was a comic-opera scene, of course; Spain had retroceded Louisiana to France three years before.)

A few weeks later, the Frenchman handed the same silver platter and keys to an American official. When Lewis and Clark crossed the Mississippi from Camp DuBois on May 14, 1804, and started up the Missouri River, they entered a land that had been delivered on a silver platter.

Baring and Sons might have smiled at the irony. They, in turn, had found a pot of gold. It is estimated that after all the bonds were retired and all payments made, their company profited to the tune of $3 million.

And Marbois had gotten a better price for Louisiana than Napoleon expected!

Pierce Mullen