THE victory of the Federalists in
securing ratification of the Constitu-
tion assured them dominance, for a time
at least, in all branches of the Federal
Government. Finance was bound to be
a major interest of this group of men who
had set themselves to build the United
States into a great commercial power.
Before ever the Treasury Department
was organized, Congress was discussing
a revenue measure. A large proportion
of the major items of legislation enacted
during the twelve years spanned by
Washington's and Adams's administra-
tions was concerned with financial mat-
ters. Policies of national finance were
laid down during these years that colored
American financial history for three-
quarters of a century. Only the Civil
War era, the World War era, and the
administration of Franklin D. Roosevelt
can be compared to it for the rapid
tempo of financial evolution. . . .

Federal assumption, by Constitutional
provision, of Continental and Confedera-
tion debts was an obligation taken seri-
ously by the Federalists, for its political
as well as its financial aspects. Congress
called upon Hamilton to prepare a re-
port on the status of American debt out-
standing and on the possibilities of its
assumption by the new Federal Govern-
ment. On January 9, 1790, Hamilton
submitted his "Report on Public Credit,"
to Congress.

HAMILTON'S DEBT PLAN. The "Report
on Public Credit" divided the public debt
outstanding into three main categories --
the Continental and Confederation for-
eign debt, the Continental and Confed-
eration domestic debt, and the Revolu-
tionary state indebtedness. The total, as
of December 1789, was $77,000,000, di-
vided as shown in the following table.

Hamilton's plan for disposing of this
indebtedness was brief but comprehen-
sive. The Federal Government should
assume as its own obligation all items of
this debt. In substitution for the various
elements of the earlier debt, it should
issue its own bonds, or "stock" as govern-
ment debt certificates were then called.
It should make such provision for the
payment of interest on the federal debt
created, and for its eventual retirement,
that there would be no depreciation.

Reprinted by permission from Financial Development of the United States by William J. Shultz
and M. R. Caine, pp. 92, 96-103, 112-116. Copyright 1937 by Prentice-Hall, Inc., New York.

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