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Formation of the Union By Albert Bushnell Hart Characters: 3513

Updated: 2017-12-06 00:02

[Sidenote: The debt funded.]

The third part of Hamilton's scheme was to fund the national debt into one system of bonds, and to pay the interest. When he assumed control of the Treasury he found, as nearly as could be calculated, ten millions of foreign debt with about two millions of accrued interest, and twenty-nine millions of domestic debt with eleven millions of accrued interest,-a total of more than fifty-two millions. So far as there was any sale for United States securities they had fallen to about twenty-five per cent of their par value. Jan. 14, 1790, Hamilton submitted one of a series of elaborate financial reports; it called on Congress to make such provision for principal and interest as would restore confidence. By this time an opposition had begun to rise against the great secretary, and Madison proposed to inquire in each case what the holder of a certificate of debt had paid for it; he was to be reimbursed in that amount, and the balance of the principal was to be paid to the original holder. Hamilton pointed out that in order to place future loans the Treasury must assure the public that bonds would be paid in full to the person holding a legal title. Congress accepted Hamilton's view, and an act was passed by which the interest was to be promptly paid, and an annual sum to be set apart for the redemption of the principal. The securities of the United States instantly began to rise, and in 1793 they were quoted at par. The credit of the government was reestablished.

[Sidenote: Assumption proposed.]

Now came a fourth part of Hamilton's scheme, upon which he laid great stress: he proposed that the outstanding State debts should likewise be taken over by the general government. The argument was that the

States had incurred their debts for the common purpose of supporting the Revolution. There was strong opposition, particularly from States like Virginia, which had extinguished the greater part of their own debt. The House showed a bare majority in favor of the assumption project; on the appearance of members from North Carolina, which had just entered the Union, that majority was, on April 12, 1790, reversed.

[Sidenote: The seat of government.]

[Sidenote: Compromise.]

Meanwhile the old question of the permanent seat of the federal government had been revived, and, as in the days of the Confederation, it seemed impossible to agree. It was expected that the capital would lie somewhere in the Northern States; at one time Germantown was all but selected. The Virginia members suddenly took fire, and Lee declared that "he was averse to sound alarms or introduce terror into the House, but if they were well founded he thought it his duty;" and Jackson of Georgia declared that "this will blow the coals of sedition and injure the Union." The matter was laid over until the middle of 1790. It was evident that the friends of assumption were in a small minority, and the friends of a Northern capital in a small majority. Hamilton worked upon Jefferson to secure a compromise. The matter was adjusted at Jefferson's table: a few Northern votes were obtained for a Southern capital, and two Virginia members agreed to vote for assumption. By very narrow majorities it was therefore agreed that the national capital should be placed on the Potomac River, and that State debts amounting to $21,500,000 should be assumed. A few months later the President selected the site of the present national capital, and in due time the debts were taken up.

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