Hamilton and National Finances


Settling the DebtPres. Washington appoints Alexander Hamilton as Secretary of Treasury

Hamilton and National FinancesI. Hamilton has to pay off the national

debt (amount of money owed by the U.S. to its lenders)

i. The government owes $11.7 million to other countries (mainly France)

Hamilton and National Financesii. The government owes its citizens

$40.4 million

Debt in the form of bonds- certificates that represent $ owed

Hamilton and National FinancesGovt. promised to buy bonds back with interest so that citizens would profit

Govt. could NOT buy back bonds from Revolutionary War right away

Hamilton and National Financesiii. people worried and sell their bonds to speculators – people who buy items at low prices in the hopes that value will rise to make a profit


II. The States’ Debtsa. States owed $25 mill from Rev. War

b. Hamilton wants federal government to pay for $21.5 million of it. Why?

Hamilton and National FinancesIII. Hamilton’s Plan

a. Pay back foreign debt from Rev. War immediately

b. Pay back debt to U.S. citizens in full over time (speculators will profit)

Hamilton and National Financesi. Rationale

1. Maintain the reputation of the new nation (International trade)

2. Gain the trust of the citizens3. States would have more resources ($)

to focus on developing business and trade

Hamilton and National FinancesIV. Opposition to the Plan

Jefferson believes paying bonds back in full to speculators is not fair to original bondholders

“Immense sums were flinched [stolen] from the poor and ignorant.”

- Jefferson

Hamilton and National FinancesIV. Opposition

a. Large southern states had little to no war debt remaining

b. Jefferson and others found it unfair those states should repay debts of other states

Hamilton and National FinancesV. Compromise

1. Hamilton knows he needs help of Southern states to get plan approved

2. Southern states will agree to plan if the nation’s capital from NY to along Potomac River (present day DC)

Lets Get Ready to Rumble!!!!

VSThomas Jefferson Alexander Hamilton

Hamilton and National FinancesC. Hamilton vs. Jefferson

1. Hamilton and Jefferson disagree about authority of central govern

a. Hamilton – strong central govern to balance

power1. little faith in common

man


b. Jefferson – protect power of states

1. defends right of people to rule country


2. Hamilton & Jefferson disagree over how America should grow

a. Hamilton – new forms of economic growth

1. promote manufacturing and business


2. pass protective tariff – tax on imported goods- force Americans to buy

U.S. goods


b. Jefferson – does not want to depend too much on business and manufacturing

1. Farmers good example – they don’t depend too

much on others to make living


D. The Debate Over the Bank1. Hamilton wants national bank so

govern. could deposit moneya. also build national mint –

place where coins are made

Hamilton and National Financesb. asks for 20 year charter –

evaluate progress after 20 years

c. Each state should start own bank as well

Hamilton and National Finances2. Madison and Jefferson do not like

national bank idea

3. Hamilton says “elastic clause” of Constitution gives govern power to react to new situations


“to make all laws which shall be necessary and proper”

Article I, Section 8


a. Hamilton’s view known as loose construction – federal govern can take any reasonable actions that the Constitution does not

specifically forbid it from taking


4. Jefferson does NOT agree with Hamilton again

a. Necessary and proper clause

only for special cases


b. Jefferson’s view known as strict construction – federal govern should do only what Constitution specifically says


5. Washington and Congress agree with Hamilton – security for

economya. Bank of United States opened

in February 1791

Hamilton and National Finances

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