Jefferson and Hamilton

by Claude G. Bowers

It was not until in early January that the ‘Report’ was read in House and Senate. His wish to present it personally was denied, not by his political enemies as his partial biographers contend, but by the supporters of his plan.[200] In the galleries of the House eager speculators were closely packed. They overflowed and filled the lobbies. Some were drawn by mere curiosity, some were the original creditors who had waited long for their reward, but the greater number were speculators, who, in anticipation of such a recommendation, had bought freely of the skeptical holders at ridiculously low prices. Not a few of these poured forth into Wall Street at the conclusion with the exhilarating knowledge that a fortune was within their grasp.

In the Senate the ‘Report’ was heard in secret and in ‘awful silence,’ for the elder statesmen met behind doors closed and locked. Most of these listened with approval, but the rheumatic Maclay, who had been puzzled for some time with ‘the extraordinary rise in public securities,’ wrote that night in his journal that Hamilton ‘recommends indiscriminate funding, and, in the style of the British Minister, has sent down his bill.’ There were some complaints that ‘a committee of speculators in certificates could not have formed it more to their advantage.’ In truth, ‘it occasioned many serious faces,’ and Maclay himself was ‘struck of a heap.’[201] But the prevalent note was one of jubilation. In New York, enthusiasm in the coffee-houses; in Boston, ‘great applause’;[202] in other commercial cities, Philadelphia, Charleston, Baltimore, approbation, with reprobation for objections.[203]

All men of honor sympathized with the purpose of discharging the debt. The repudiationists were among the ignorant and the vicious. Few at the moment found fault with the funding system, though some would have preferred a speedy liquidation through the sale of the public lands. Then—suddenly—a low murmur of protest, followed by acrimonious attacks. Thousands of the original creditors had been ‘swindled’ out of their certificates for a song—were these, who rendered Revolutionary services, to be taxed to ensure exorbitant profits to the speculators? Why should the Federal Government assume the debts contracted by the separate States—debts unevenly distributed? And what was the purpose of the proposal that the Government should be prohibited from paying more than two per cent of the principal a year? The indignation of the insurgents, at first a glimmer, became a flame. The greater part of the certificates were in the hands of the prosperous who had taken advantage of the necessities of the original holders—Revolutionary soldiers, small farmers, hard-pressed country merchants. The funding system would tax all the people to pay to the rich a hundred cents on the dollar for evidence of debts that had cost them fifteen and twenty. With the people taxed to pay the interest—it was proposed to perpetuate the debt. Thus, for generations, perhaps, as many reasoned, the Government would operate for the enrichment of the few already rich, and the masses would pay the piper.

Had Hamilton been disposed to frankness, he would have smiled his acknowledgment of the charge. One of his biographers has conceded that through this system he hoped to ‘array property on the side of the Government,’ by giving it a financial interest in the Government, and ‘to assure to the property of the country a powerful influence upon the Government.’[204] Having ‘been unable to introduce a class influence into the Constitution by limiting the suffrage ... with a property qualification,’ he hoped through his financial system to accomplish his purpose in another way.[205]

There was nothing diabolical in the plan—coming from one who looked upon the masses as lawless and unfit for self-government. His obsession was a strong, stable government—and to sustain it he required the interested devotion of the propertied class. The astonishing thing is that the comparatively crude Maclay from the wilds of Pennsylvania and the leather-lunged James Jackson from sparsely settled Georgia should have caught the full significance of it all before it dawned on Jefferson and Madison. The latter thought the ‘Report’ ‘well digested and illustrated,’ and ‘supported by very able reasoning,’ but after a while he, too, was depressed with the injustice to the original creditors who ‘were most instrumental in saving their country,’ and concluded there was something ‘radically wrong in suffering those who rendered a bona fide consideration to lose seven eighths of their dues, and those who had no particular merit toward their country to gain seven or eight times as much as they advanced.’[206]

II

Meanwhile, speculation was manifesting itself with incredible audacity and mendacity. The greater part of the securities in the hands of original creditors were in the hands of soldiers, farmers, and merchants in the remote interior. To most of these, they had come to mean so much worthless paper. No telegraph could flash the news into the back country of Georgia and North Carolina that Congress was about to legislate to par the promises to pay. Weeks or months would pass before the proceedings in New York could be known and comprehended by holders of the paper living in the woods of the Carolinas or on the banks of the Savannah. Poor, and mostly ignorant, they had no correspondents in the coffee-houses to write them of the activities at Federal Hall; and even if they had, it required weeks for a letter to reach them.

But members of Congress knew what to expect—for they were the actors in the drama; and their friends, the capitalists and merchants of the cities, knew—for they had been informed. The unscrupulous and adventurous soldiers of fortune on the scene comprehended the opportunity at a glance. The day after the ‘Report’ was read, the city buzzed with the gossip of the speculators. One Senator, making calls in the congressional circle, found it almost the sole topic of conversation. He heard that Robert Morris of the Senate, who had been consulted by Hamilton, ‘must be deep in it, for his partner ... had one contract for $40,000 worth.’ It was whispered that ‘General Heister had brought over a sum of money for Mr. Morris for this business.’ Senator Langdon, it was noted, was living with a Mr. Hazard ‘who is an old and intimate friend of Mr. Morris,’ and he admitted that he had followed buying certificates for some time past.’ ‘Ah,’ said the visiting Senator, ‘so you are one of the happy few who have been let in on the secret’—and Mr. Hazard seemed abashed. It was understood that Representative Fitzsimons of Philadelphia was likewise concerned in the business.

Four days after the ‘Report’ was read, ‘expresses with very large sums of money on their way to North Carolina for purposes of speculation in certificates’ splashed and bumped over the wretched winter roads, the drivers lashing the straining horses. Two fast-sailing vessels, chartered by a member of Congress who had been an officer in the war, were ploughing the waters southward on a similar mission—and this scandalous proceeding was to be mentioned frequently in the subsequent debates. ‘I really fear,’ wrote Maclay, ‘the members of Congress are deeper in this business than any others.’[207] Whether they were deeper or not, they were deep enough, and numerous enough to hold the balance of power in the body that legislated the certificates to par. These ranged from Robert Morris, the chief legislative agent of Hamilton in the Senate, to Fisher Ames, who was his most eloquent defender in the House.[208] In later years Jefferson was to record in justice to Ames that his speculative activities had been greatly exaggerated and that he had acted as an agent in the enterprises of his Boston friends, Gore and Mason.[209]

So thoroughly did this money-madness take possession of the minds of men that even the puritanic John Quincy Adams was to write his father, without a homily, that by September of 1790, Christopher Gore, the richest lawyer in Massachusetts, and one of the strongest Bay State members of Hamilton’s machine, had ‘made an independent fortune in speculation in the public funds’; and that other leaders of the bar[210] had ‘successfully engaged in speculation’ by playing at ‘that hazardous game with moneys deposited in their hands’ by clients at a distance. They took the chance of becoming ‘masters of sums to an equal amount before they have been called upon for payment.’[211] Maclay thought ‘there is no room to doubt but that a connection is spread over the whole continent on this villainous business.’[212] Everywhere men with capital—and a hint—were feverishly pushing their advantage by preying on the ignorance of the poor. Thus, paper held for years by the private soldiers was coaxed from them for five, and even as low as two, shillings on the pound by speculators, including leading members of Congress, who knew that provision for the redemption of the paper had been made.