Connecticut’s Role in The Nation's First Debt Default

Recently, politicians of both parties and numerous pundits have said repeatedly that the United States government has never in its history defaulted on a loan. That’s simply not the case, but you have to go back to the 1790’s to the most obscure and little-known war in our history — the Quasi War with France — to prove the point.

Most Americans are well aware of the important aid that France gave to the United States during the American Revolution, especially from French military leaders such as Lafayette and Rochambeau — both of whom visited Connecticut numerous times. Financial aid in the form of loans from France also accompanied military aid, as a result of the Treaty of Alliance in 1778. Throughout the 1780s and into the early 1790s, the United States honored its financial obligation to repay French loans.

Initially, most Americans supported the cataclysmic French Revolution of 1789, but public sentiment soon turned against it during the Reign of Terror of the early 1790s when thousands were executed, and both Lafayette and Rochambeau — beloved by the American public — were threatened with the guillotine.

The Federalist administration of George Washington pursued policies that served to tighten the young government’s relationship with Great Britain and to alienate it from its former ally, France. The Jay Treaty, for example, strengthened America’s relationship with England; furthermore, the French were furious when the U.S. government refused to continue payment on its loans from France. The American government claimed that since France had changed its government as a result of the French Revolution, the U.S. no longer had to repay its debt. The technical term used to describe a situation when one nation refuses to pay back a loan from another nation is “sovereign default.”

For most of the decade of the 1790s, the United States government refused to pay back to France money that it had borrowed from it. The consequences of this default played a major role in causing the Quasi War with France from 1798-1800, a war in which Connecticut played a significant role. The infamous XYZ Affair and the controversy surrounding Citizen Genet were also part of the deterioration of Franco-American relations in the run-up to the Quasi War.

From about 1796 to 1800, French privateers roamed up and down the Atlantic coast, especially the Caribbean, to seize American merchant vessels in retaliation for American policies. Hundreds of American merchant vessels were lost. By 1798, Congress, urged on by ardent Federalists such as Congressman “Long” John Allen of Litchfield, CT, rescinded all treaties with France and ordered retaliatory attacks against French ships. This action marked the beginning of the Quasi War with France.

One ship that was constructed to retaliate against the French was the USS Connecticut.  Built in Middletown, it was launched into the Connecticut River on June 6, 1799. The Connecticut was one of the most successful of all of the American naval vessels during the Quasi War. It patrolled the West Indies for just over nine months, protecting American ships from French raiders.

Weighing 492 tons and carrying a crew of 180 along with 26 cannons, the Connecticut was known for its speed. During its tour of duty there, it captured or destroyed six French ships and recovered five captured American ships. Among those destroyed was the Italia Conquese, defeated on December 29, 1799. This French ship had captured or destroyed an incredible 150 American vessels. The Connecticut’s last action came on July 15, 1800, when she captured the French ship Le Chou Chou. The Connecticut returned to New London on October 15, 1800, and was subsequently sold at auction for just under $20,000 — an ignoble ending for a ship with such an accomplished war record.

Peace came about in 1800 with the Convention of 1800, also known as the Treaty of Mortefontaine, signed on September 30, 1800. One of the lead negotiators for the United States for this treaty was Oliver Ellsworth of Windsor, CT, who at the time was Chief Justice of the Supreme Court. By 1800 political and economic realities for both countries had changed, and both countries wanted to settle their differences. Ellsworth’s delegation succeeded in doing just that but at a cost. Ellsworth’s health deteriorated so badly on the voyage back home on the Atlantic that he had to resign from the Supreme Court on the same day that the Treaty of Mortefontaine was signed — Sept. 30, 1800.

The Quasi War was clearly driven, in part, by French anger over the failure of the United States to honor its debt obligations to France. Claiming that the changeover from monarchy to a different form of government nullified the debt obligation to the French, the U.S. government made a conscious decision to default. The consequences were dire: hundreds of American ships were lost to French privateers; thousands of American sailors were lost or displaced, at least twenty died and over 40 were wounded, and millions of dollars worth of goods were lost at sea.

Notes, Sources, and Links:

1. http://www.fjc.gov/history/home.nsf/page/tu_sedition_hd_debate.html

2. USS Connecticut by Mark Albertson (2006)

3. http://www.napoleon-series.org/research/government/diplomatic/c_quasi.html

4.  “The Quasi War: America’s First Limited War” by Donald R. Hickey

5.  Oliver Ellsworth; see bioguide.gov

6.  The sister ships Constellation and Constitution also patrolled  the coast during the Quasi War. The cannon on both were made with Connecticut iron ore from Salisbury.