A School History of the United States

by John Bach McMaster

%216. The Congress Lottery.%—The loan office having failed to bring in as much money as was needed, Congress, toward the close of 1776, was driven to seek some other way, and resorted to a lottery. A certain number of tickets were sold, after which a drawing took place, and all who drew prizes were given certificates payable at the end of five years.

%217. More Bills of Credit.%—But the sale of tickets went off so slowly that Congress had to go back to the issue of bills of credit. In 1777, therefore, the printing press was again put to work, and issues were made in rapid succession, till more than $200,000,000 in Continental paper were in circulation.

%218. The "New Tenor".%—Then the Continental bills ceased to circulate, and in March, 1780, Congress called in the old money and offered to exchange it for a new issue, giving one dollar of the new paper money, or "new tenor," for forty dollars of the old. But the attempt to restore credit by such means was a failure, and by the end of the year 1781 all paper money ceased to circulate.

%219. Certificates.%—Long before this time officials had been forced to pay debts contracted in the name of Congress with other kinds of paper, called certificates, and known as treasury, commissary, quartermaster, marine, and hospital certificates, according to the department issuing them. To these must be added the "final settlements," or certificates given to the soldiers at the end of the war in payment of their services.

%220. Foreign Debt.%—Besides the debt thus contracted at home, Congress had borrowed a great sum in Europe.

%221. The National Debt in 1790.%—Thus the debt contracted by the Continental Congress consisted of two parts. 1. The foreign debt, due to France, Holland, and Spain, and amounting, Hamilton found, to $11,700,000. 2. The domestic or home debt, of $42,000,000. But the states had also fallen into debt because of their exertions in the war. Just how great the state debts were could not be determined, but they were estimated to be $21,500,000.

%222. Assumption and Funding.%—For the redemption of this debt Hamilton prepared two measures,—the funding, or, as we should say, the bonding, of the foreign and Continental debt, and the assuming and funding of the state debts. This was done, and Congress ordered stock bearing interest to be issued in exchange for the old debts, and so established our national debt, which in 1790 amounted to $75,000,000.

%223. The National Capital.%—Funding the state debts was strongly opposed by many congressmen, and was not carried till a bargain was made by which it was agreed that if enough members from Virginia and Pennsylvania would support the measure to secure its passage through the House of Representatives, the national government should be removed from New York to Philadelphia for ten years, and after that to a city to be built on the Potomac. This was faithfully carried out, and in the summer of 1790 the government offices were removed to Philadelphia, where they remained till the summer of 1800, when they were removed to Washington in the District of Columbia.

%224. The Bank of the United States.%—The troublesome questions of funding and assumption thus disposed of, Congress called on Hamilton for a report on the further support of public credit, and when it met in the session of 1790-91, received a plan for a great National Bank, with a capital of $10,000,000. The United States was to raise $2,000,000; the rest was to be subscribed for by the people. The bank was to keep the public revenues, was to aid the government in making payments all over the country. To do this, power was given to the parent bank (which must be at Philadelphia) to establish branches in the chief cities and towns, and to issue bank bills which should be received all over the United States for public lands, taxes, duties, postage, and in payment of any debt due the government. Great opposition was made; but the charter was granted for twenty years, and in 1791 the Bank of the United States began business.

The effect of these two measures, funding the debt and establishing a bank, was immediate. Confidence and credit were restored. Money that the people had long been hiding away was brought out and invested in all sorts of new enterprises, such as banks, canal companies, manufacturing companies, and turnpike companies.