The financial policies of the Federalist administration were dominated by
its first Secretary of the Treasury, Alexander Hamilton. He was the archi-
tect of the new national financial system, and some of his policies were
permanently adhered to while others were reverted to from time to time
during the succeeding 160 years.

Long before coming to office, Hamilton had developed the philosophy
which was to determine his activities as Secretary. His outlook was aristo-
cratic rather than democratic, capitalistic rather than agrarian, mercanta-
listic rather than laissez-faire. His whole program was dedicated to the
achievement of a strong government which would be closely allied with
the merchant and financial groups. The individual parts of the program,
being intermeshed, formed a consistent fiscal, monetary, economic, and
political system.

To establish the national credit and to rally all public creditors to the
support of the national government, Hamilton proposed to fund the
national debt, i.e., to convert it into long-term bonds and provide suffi-
cient revenue to pay its interest charges and ultimately to retire it. He also
proposed that the Federal government assume the obligations of the state
debts under a similar funding system. The funding was also intended to
create a supply of readily marketable bonds, which investors could use
to subscribe for capital in large-scale business ventures, such as the Bank
of the United States. Created by government authority but controlled
privately, the Bank was to be an instrument through which government
and business could function in unison in fostering the development of
national commerce by extending commercial credit in addition to facilitat-
ing government fiscal operations.

Hamilton projected a revenue system based on import duties supple-
mented by internal taxes. He proposed a protective tariff to accelerate
the country's industrial development and to make it self-sufficient in time
of war as well as to tie business interests more closely to the national gov-
ernment. Finally, he proposed to sell public lands in large parcels and on
credit in order to attract large "investors," to increase revenue, and to
keep administrative selling expenses low.

The Organization of the Treasury. When the First Congress convened
on the first Wednesday of March, 1789, the immediate financial tasks were
to organize the Treasury, to establish a revenue system, to straighten out

-45-