Hamilton Financial Plan

5 Key excerpts on "Hamilton Financial Plan"

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  eBook - ePub

  Founding Finance

  How Debt, Speculation, Foreclosures, Protests, and Crackdowns Made Us a Nation

  • William Hogeland(Author)
  • 2022(Publication Date)
  • University of Texas Press

    (Publisher)

  7

  IT’S HAMILTON’S AMERICA . . . WE JUST LIVE IN IT (1789–1791)

  A lexander Hamilton has rightly gone down in history for his comprehensive founding plan of national finance. He intended to realize a grand, integrated vision of strong nationhood in a series of big steps, and the first step, not surprisingly, was financial. Hamilton’s efforts in the early 1790s as the nation’s first Treasury secretary brought the nationalists’ efforts of a decade earlier to a climax.

  The first federal government was located temporarily in New York, Hamilton’s town, and the federal domestic debt, to whose care and feeding Morris, Hamilton, and other nationalists had devoted themselves in the 1780s, had grown to $54 million. But states had been trying to pay off their own obligations, and economic egalitarians in Pennsylvania and Massachusetts, as we’ve seen, had been demanding devaluing public bonds and equalizing public finance. When Hamilton took over, the debt was in trouble.

  So in an office on Broadway, near Wall Street, Hamilton worked up an integrated plan not only to fund the domestic debt—reliably paying the bondholders, now including the officer class, their 6 percent interest—but also to assume in the federal debt all debts of the states. “Assumption,” as that idea is known, would add about $25 million to the federal debt, an astonishing proportion for a small, new, untried nation, which would now have a debt of nearly $78 million. The audacity and enthusiasm involved in that plan were characteristically Hamilton, and now he had real power. England’s debt had reached £78 million only in 1748, but with that debt, Hamilton knew, the small island nation, always strapped for cash, managed a European empire.

  Assuming state debts wasn’t original with Hamilton. Morris had always hoped for federal assumption. Making all significant public investment an investment in national government would liberate the country’s commercial energy by yoking high finance to national projects. War, of course, was the original founding project. Gouverneur Morris had actually called for deliberately extending the war in order to keep the country unified, and war’s influence on grand national thinking would never go away.

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  The Founders and Finance

  How Hamilton, Gallatin, and Other Immigrants Forged a New Economy

  • Thomas K. McCraw(Author)
  • 2012(Publication Date)
  • Belknap Press

    (Publisher)

  Hamilton and his successors needed (and, because of his reforms, received) reliable schedules for the receipt and disbursement of funds, solid data on a variety of other economic matters, and accurate reports on changing conditions—all delivered by a corps of dependable subordinates. This was a singular accomplishment, without which the funding and assumption plans, the Bank of the United States, and the entire fiscal system could not have worked well. 25 Had Hamilton been less brilliant, less intrepid, or less persistent in pursuing these goals, we would likely never have heard of him. Certainly he would not be ranked among the major founders, alongside Franklin, Washington, Adams, Jefferson, and Madison. He possessed supreme talents and honed them with constant study and dedication. He seemed able to outwork any of his contemporaries and to elicit the best efforts from the Treasury’s civil servants. The political scientist Leonard D. White, an eminent scholar not given to overstatement, wrote in 1948 that Hamilton was “the greatest administrative genius of his generation in America, and one of the great administrators of all time.” 26 In pursuit of his goals, which could hardly have been more ambitious, Hamilton had exerted almost superhuman effort for more than twenty years. He had filled many roles: as a teenaged pamphleteer justifying strong action against Britain; as a captain of artillery and as Washington’s aide-de-camp during the War of Independence; as a moving spirit behind the Constitutional Convention of 1787; and as the principal author of The Federalist Papers, whose purpose was to get the Constitution ratified. Once he became secretary of the treasury, he had devised a comprehensive and audacious economic program for the new nation and had persuaded Congress to enact it. Almost from the moment of his arrival from St. Croix, he had composed reams of letters, pamphlets, essays, speeches, and reports—of compelling persuasive power

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  Fiscal Politics

  • Vitor Gaspar, Sanjeev Gupta, and Carlos Mulas-Granados(Authors)
  • 2017(Publication Date)
  • INTERNATIONAL MONETARY FUND

    (Publisher)

  The history of financial politics in the early stages of U.S. history can provide insights into what can be done to build a robust and resilient European financial system and to establish the credibility of sovereign debt as safe assets. The U.S. federal government has never defaulted on its debt and the U.S. is a well-integrated monetary union of continental dimension. Alexander Hamilton was the first secretary of the U.S. Treasury, from 1789 to 1795. He managed successfully the transition from a bankrupt federal government to a situation where the U.S. Treasury became the issuer of the ultimate safe asset. In the process, Alexander Hamilton laid the foundations for a modern financial system able to finance innovation and growth.

  Alexander Hamilton appears as a rare combination of theoretical and practical reason; strategic and tactical thinking; and of audacity and realism. Building a Continental financial system in the aftermath of sovereign debt crises in the euro area is a priority in Europe. The aim of this article was to find out whether we can learn Hamilton’s recipe for building a continental financial system in Europe.

  The comparison of the challenges of Europe today and the early U.S. is the theme of Thomas Sargent Nobel Lecture (Sargent, 2013 ) that provided the inspiration for this article. Sargent draws on the general lessons from U.S. financial history, focusing on two episodes: the origin of the U.S. fiscal constitution in the late 1780s and the state debt crisis of the 1840s. James (2014) and Kincaid (2014) also interpret a much longer period of U.S. financial history. This article instead concentrates on a very specific period from late 1789 to early 1795 and looks at broader dimensions of finance. By concentrating on a briefer period, it is possible to examine in more detail how it was done. The paper closest to this one in scope is Sylla (2014) .

  The Hamilton moment illustrates the very strong threefold cord constituted by politics, fiscal policy and financial activities. As emphasized by Sargent (2013)

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  America's Founding and the Struggle over Economic Inequality

  • Clement Fatovic(Author)
  • 2016(Publication Date)
  • University Press of Kansas

    (Publisher)

  Hamilton also made the pragmatic political argument that the specific plan he proposed was absolutely necessary to win the support of financial and commercial elites. The need to engage moneyed men in any plan to restore the credit of the United States was a theme Hamilton sounded early and often in his career. 20 The attachment of “that description of Men, who are in every society the only firm supporters of government” was so critical at this delicate juncture in the country’s history that it outweighed any concerns about the inequality, unfairness, or vices his plan might stimulate. 21 The treasury secretary conceded that the funding plan “fosters a spirit of gambling,” but he believed these tendencies were limited to those actually engaged in “jobbing in the funds.” However, he rejected as “malignant and false” the notion that investment and trading in public securities “furnished effectual means of corrupting.” 22 To be sure, there were spectacular profits to be made, but it was a “strange perversion of ideas, and as novel as it is extraordinary, that men should be deemed corrupt & criminal for becoming proprietors in the funds of their Country.” 23 Hamilton did not deny that those who already possessed substantial wealth in financial instruments would reap the lion’s share of benefits from his funding plan. In fact, the prospect of huge profits for investors was critical to the success of his program

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  The Hypomanic Edge

  The Link Between (A Little) Craziness and (A Lot of) Success in America

  • John D. Gartner(Author)
  • 2008(Publication Date)
  • Simon & Schuster

    (Publisher)

  121 Here is a partial list of leading economic indicators to consider: (1) The government was bankrupt and had no source of revenue. (2) Both the federal government and the state governments were defaulting on the massive debts incurred to win the Revolution, driving American credit down. (3) There was no viable currency. The $200 million in paper money the Continental Congress had printed was worthless. “Not worth a Continental” had become a popular expression. (4) Although the economy had been on the upswing since the Constitution had been adopted in 1787, it had a long way to go. The country was just recovering from a depression.

  Alexander Hamilton solved all of these problems by the time he left office in 1795. For good reason, New York Times economics columnist Paul Krugman once praised President John F. Kennedy’s council of economic advisers by saying that “they were the greatest collection of economic minds to sit in one room since Alexander Hamilton pondered alone.”

  Establishing America’s Credit

  Much was accomplished through the scheme for a national debt that Hamilton had tried to explain to Robert Morris by letter during the Revolution. Immediately upon taking office, Hamilton threw himself into a fury, producing his forty-thousand-word Report on Public Credit in a three-month “surge of desperate speed.”122 As always, “his capacity for hard work was almost superhuman.”123

  Hamilton could not endure watching America become a shameful bankrupt, as his father had been. He moved quickly to prop up the nation’s plummeting credit. All the states had war debts, but few had ideas about how to repay them. The federal government had no means to repay the $67 million the Continental Congress had borrowed from French and Dutch bankers. Thousands of revolutionary soldiers sent home with government IOUs in lieu of pay weren’t going to get paid anytime soon either, and some of the veterans’ protests were becoming violent. The government even had a lottery to raise money and then didn’t pay the winner.

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