Financial History Issue 113 (Spring 2015) | Page 19

Alexander Hamilton By Thomas Fleming In 1791, Secretary of the Treasury Alexander Hamilton submitted two new proposals in his ongoing plan to restore America’s ruined credit at home and abroad. Secretary of State Thomas Jefferson and Congressman James Madison, leader of the House of Representatives, had quarreled angrily with Hamilton about the first stage of his program — the government’s redemption of all outstanding debts, both state and federal, without any attempt to discriminate in favor of those who had George Washington held the original notes and sold them from financial necessity. The first of these new proposals — a tax on whiskey — aroused little or no acrimony. Most people, including Jefferson and Madison, seemed to think it was a relatively painless way to increase the flow of revenue into federal coffers. Hamilton’s argument that the money would enable the government to pay its current expenses and make regular payments on the national debt had considerable appeal. There was a fair amount of debate on the subject. Albert Gallatin, a newly- elected Congressman from western Pennsylvania, joined other spokesmen for this region in warning that the measure would someday lead to violent protests. But the whiskey tax passed the House and Senate with comfortable majorities early in 1791. Secretary Hamilton’s second proposal, A Bank of the United States, was another matter. There was nothing in the Constitution empowering Congress to launch a bank. Nevertheless, President George Washington favored the idea. He had not mastered all the intricacies of Hamilton’s bank, but he was a believer in banks as  |  Spring 2015  |  FINANCIAL HISTORY  17