Great Events in the History of North and South America

by Charles A. Goodrich

On taking the vote in the house of representatives, these two plans of Mr. Hamilton were lost by a majority of two; and, for a season, there was little prospect that a just financial system would be adopted, or that the respective parties could on any basis coalesce. But, fortunately, at this juncture, a question was exciting a deep interest, and with reference to which there was a wide difference, and deep feelings, between the northern and southern members, viz:

The Removal of the Seat of Government.—The debates on this subject were almost as exciting as on the fiscal project of Hamilton. A compromise, however, was at length effected in regard to the permanent location of the seat of government—the more important, as it led to a further compromise in relation to the assumption of the state debts. It was understood that should the seat of government be fixed for ten years at Philadelphia, and afterwards at a place to be selected on the Potomac, some of the members of the house of representatives, from the Potomac, would withdraw their opposition to Mr. Hamilton. This was accordingly done, and his plans were adopted. The debt funded amounted to a little more than seventy-five millions of dollars, upon a part of which an interest of three per cent. was paid, and upon the remainder six per cent.

National Bank.—During the third session of congress, Mr. Hamilton recommended the establishment of a national bank. To such an institution, the republican party were bitterly opposed, as aristocratical and unconstitutional. Besides, they considered banking institutions useless; the present bill, in several particulars, defective; but, more than all, it was maintained that the constitution had not vested the power in congress to charter a bank. The supporters of the measure, of course, held opposite doctrines, and were not less strenuous in maintaining them. The bill, however, at length passed both branches of the national legislature; but the different opinions entertained, and the asperity with which they had been expressed, led the president to give to the subject, as a constitutional question, more than ordinary attention. To aid him in his decision, he required opinions of his cabinet in writing. Mr. Jefferson and Mr. Randolph opposed—Mr. Hamilton and General Knox sanctioned the bill. After mature deliberation, the president became satisfied of the constitutionality and utility of the bill; upon which, he gave it his signature.

The capital stock of the bank was ten millions of dollars, two millions to be subscribed for the benefit of the United States, and the residue by individuals. One-fourth of the sums subscribed by individuals was to be paid in gold and silver, and three-fourths in the public debt. By the act of incorporation, it was to be a bank of discount as well as deposit; and its bills, which were payable in gold and silver on demand, were made receivable in all payments to the United States. The bank was located at Philadelphia, with power in the directors to establish offices of discount and deposit only wherever they should think fit within the United States.

The duration of the charter was limited to the 4th of May, 1811; and the faith of the United States was pledged that, during that period, no other bank should be established under their authority. One of the fundamental articles of the incorporation was, that no loan should be made to the United States for more than one hundred thousand dollars; or to any particular state for more than fifty thousand; or to any foreign prince or state, unless previously authorized by a law of the United States. The books were opened for subscription in July, 1791, and a much larger sum subscribed than was allowed by the charter; and the bank went into successful operation.[64]

The establishment of a national bank, in connexion with the assumption of the state debts, contributed to the more complete organization of two great parties, which had their origin in difference of views regarding the constitution at the time of its adoption.

Mr. Hamilton and Mr. Jefferson, both eminent for their talents, and each with his adherents, were now openly opposed on points which, as matters of policy, were deemed of vital importance. The former was viewed, not only as the author of the funding system, the bank, and other measures, deemed either unconstitutional, or highly injurious to the public interest, but was charged with hostility to republican principles and to state rights. Mr. Jefferson, on the other hand, was considered hostile to the constitution, and was accused of being opposed to the administration of which he was a member, and of taking measures to reduce the powers of the general government within too narrow limits. To Washington, this determined hostility of his two principal secretaries was truly afflicting; and the more so, when he found it so deep-rooted, as in no degree to yield to his affectionate remonstrance.

Indian War.—While the public councils were engaged thus in matters of great national importance, the hostile movements of the Indian tribes on the frontier began to excite the anxious solicitude of all reflecting minds, especially that of Washington himself. The Creeks at the South had been at war with Georgia; but in 1790, their chief, M'Gillivray, the son of a white man, had been induced to go to New York, and conclude a treaty. This terminated the war in that quarter; but pacific arrangements, which had been attempted by the president with the tribes on the north-western frontier, had proved ineffectual. The use of other means for their pacification, therefore, became indispensably necessary.

In 1790, congress, at the solicitation of Washington, authorized the raising of about fifteen hundred men, of whom three hundred were regulars, and the remainder Pennsylvania and Kentucky militia. The command of these was given to General Harmar, a veteran officer of the Revolution, whose instructions required him to penetrate to the Indian settlements on the Scioto and Wabash, and destroy them.