Mr. Merrill to Mr. Bayard.
Honolulu , October 19, 1886. (Received November 6.)
Sir: Referring to my dispatch, No. 78, of September 2,1886, in which I inclosed an act to authorize a national loan, I have the honor to inform you that Mr. Macfarlane, referred to in the same dispatch as interesting himself in negotiating the bonds in London, returned here on the 9th instant. On the 12th instant the attorney-general, as an amendment to section 4 of the loan act, offered the following: Provided,That hereafter no bonded debt shall be incurred, nor any bonds issued prior to the maturity of the bonds issued hereunder, unless provision [Page 561] be first made for the payment of bonds issued under and in accordance with the provisions of this act,” which was earnestly supported by the ministry, except the minister of finance, but was defeated on a division by a majority of 10, and caused the change of ministry as stated in my dispatch, No. 84, of the 14th instant.
One peculiar feature of the vote by which the amendment was defeated, was that nearly all the members of what is known as the opposition party, who have constantly opposed borrowing and advocated the limitation of the expenditure of money to the lowest possible sum, suddenly changed, and not only voted against the amendment offered by the attorney-general, but supported other amendments, which were adopted, and which I inclose, whereby the bonds can be negotiated for 98 per cent, of their nominal par value, while the consolidated revenue of the Kingdom is pledged for the payment of the interest.
In the discussion of the amendment in the Legislature it was charged that it was offered in the interest of Spreckels & Co., American bankers, doing business in Honolulu, to whom the Hawaiian Government now are indebted in the sum of about $700,000, while a counter-charge was made that those opposing were acting in the interest of an English syndicate.
I am reliably informed and it is well understood here that in the event the amendment to section 4 was adopted not only Spreckels & Co. would, if desired, take the total amount of bonds at par, but that Bishop & Co., American bankers of Honolulu, were willing to advance a portion, at least, of the $2,000,000 on the bonds at par. Even under the law as amended it is probable a portion if not all the bonds could be negotiated either here or in San Francisco if an opportunity was offered.
The defeat of the amendment offered by the attorney-general and the adoption of those inclosed, as well as the evident intention not to offer the bonds here, doubtless means the placing of the bonds in London, or, at least, endeavoring to do so before offering them in any other market.
I have, etc.,