Episode 10: The $10 Founding Father…Hamilton
Honor the Debt, Don’t Deny It
Thomas Jefferson and Alexander Hamilton were on completely opposite ends of the political spectrum, but when they were engineering the three branches of government, both had George Washington in mind as the first president. His deferment to state’s rights, respect for equal branches of government, and his ability to meet challenges head-on framed their view of the powers and execution of the office.
Upon election, Washington created the president’s cabinet, and his first appointee was Alexander Hamilton, aged thirty-four, for the position of Secretary of the Treasury. Jefferson was appointed Secretary of State. There were tensions immediately between the two that threatened to wreck the first term of the country’s first president.
In Washington and Hamilton, Tony Williams writes: Hamilton wanted to remake the economy so that the United States would be independent of the old world powers for the necessities of war. In fact, he hoped to create an integrated economy capable of surpassing the European powers. In order for this to happen, he first had to stabilize the perilous fiscal situation that confronted the new nation.
He needed to confront the war debt head-on, not just dismiss it, which was often the practice for newly established governments. Jefferson wanted to keep control of taxation and commerce powers in the hands of the states, but Hamilton had a card to play.
Williams writes: Hamilton proposed that the U.S. government assume all the debts contracted by the states during the American Revolution, and while Congress passed this plan, it did so only after it was agreed to move the nation’s capital to the banks of the Potomac River in exchange for Southern support of the plan. The deal would later prompt Jefferson to believe Hamilton had hoodwinked him into accepting a plan that enhanced the power of the central government: “I was duped into it by the Secretary of the Treasury, and made a tool for forwarding his schemes..and of all the errors of my political life this has occasioned me the deepest regret.”
Williams details Hamilton's machinations: Next Hamilton proposed that a national bank be established to facilitate the economic policies of the federal government and to serve as a catalyst for national growth. It would allow the federal government to conduct four constitutionally specified powers: to collect taxes, to borrow money, regulate trade among states, and raise and support fleets and armies.
With the national bank in place, Hamilton proposed that the federal government should pursue policies, including protective tariffs and government bounties, that would assist in the development of American manufacturing capability. Hamilton linked political independence to economic independence. Almost all of the manufactured goods essential for national defense and for the nation’s overall economic security were made in Europe, a situation that put the United States in a vulnerable position. True American independence required the creation of domestic sources of manufactured goods.
By introducing a national bank, centralizing debt to the federal government, and pushing for domestic manufacturing, Hamilton looked beyond the political fights of now and imagined a strong, self-reliant country that could tap the limitless resources of the North American landscape. Washington shared these views and was a big proponent in ensuring the success of these policies.
When Hamilton became Treasury secretary, the country was bankrupt and American debt was selling for 10-15 cents on the dollar. By the time he left five years later, the country’s credit was as good as any other major international player.
But Hamilton’s success would be short-lived, and a tawdry tale would mar his rising political career. It was also the country’s first major political sex scandal.
According to Willard Randall in Alexander Hamilton: A supposed widow named Maria Reynolds approached Hamilton and begged him for financial support. She played on his heartstrings by claiming that her husband James Reynolds had abandoned her.
After delivering monetary aid to Reynolds for the first time at the house where she was lodging, the two began an illicit affair. It was not long before Maria’s husband, the very much alive James, found out about the affair and used his knowledge to blackmail Hamilton, who paid him to remain silent.
After James Reynolds was arrested for counterfeiting, he informed investigators that Hamilton had been using government funds as hush money. When confronted with this, Hamilton admitted to the affair, but he also insisted that he had used his own personal funds to cover it up, even showing James Monroe his love letters from Maria Reynolds as proof.
Monroe gave the letters to his close friend Thomas Jefferson, one of Hamilton’s fiercest political enemies. Jefferson passed them on to publisher James Callender, already notorious as the pre-eminent 19th-century peddler of political gossip, and in 1797 the scandal was news around the country.
Most men would retire from the public eye, but Hamilton knew he must remain a prominent national figure if he hoped to regain his credibility and reputation. Over the next few years, he built his New York law practice and was called to serve as Inspector General of the U.S. Army, where he oversaw its organization, training, armament, and, working with his Treasury successor, its funding.
As a founding father and engineer of the country’s financial architecture, he retained his influence in New York and national politics. That clout, however, would ultimately lead him to the shores of the Hudson River and deliver a bullet into his spine.
