Hamilton & Madison & Jefferson: Money, Money, Money!

Money generated heated debate and became the source of America’s first “cut-it-with-a-knife” political division. How to pay for the debts from the Revolution? How to stabilize the young economy and who, if anyone, would be willing to pay to make it so? Money–how to get it, how to grow it, and how to spend it–divided Americans politically in the 1790s (more complicated today with millions more people, billions more dollars, and trillions more debt).

In the Federalist Papers, which Hamilton and Madison wrote together to gain support for the Constitution in 1788, Madison signaled an opening for a central bank. But upon reflection, he denied that the Constitution granted the federal government powers not specifically enumerated there–like a national bank.

Hamilton felt confident that the Constitution DID grant Congress the right to pass any legislation deemed “necessary and proper,” including a central bank. In Article 1, Section 8, of the Constitution continues to be the go-to language Congress relies upon when it sees a need. Madison’s ire rose and he charged Hamilton and Congress with exploiting this power and “leveling all the barriers which limit the powers of the general government and protect those of state governments.”

Madison saw the vote for the national bank as marking Hamilton’s takeover of the delicate balance between executive and legislative power. First Chief Justice John Marshall marked this debate as the beginning of the “complete organization of those distinct and visible parties which in their long and dubious conflict for power have. . .shaken the United States to their (sic) center.”

Fearing Hamilton’s ability to turn a phrase and remembering the intellect of his Federalist partner, Madison swiftly moved to become a strict constructionist when interpreting the Constitution–allowing Congress to assume nothing not strictly mentioned in the Constitution.

The idea of a national bank experienced rough sledding, particularly among Southern legislators. Then the rural population composed 95 percent of the nation, according to the 1790 records. One Virginia planter said he would “no more get caught going into a bank than into a house of ill repute.”

Madison saw the role of the Secretary of the Treasury as a staff role to Congress, not as someone making reports, then drafting legislation to bolster weaknesses or solve deficiencies brought to light in the reports. Under Hamilton’s perspective, as part of the executive branch, he saw his role as being a proactive problem solver, able to give direction and propose policies.

Bank of United States: Opens Deep Rifts

Alexander Hamilton, Secretary of the Treasury under President Washington

Despite this division, the House approved Hamilton’s legislation 39-20, but it was lopsided with votes from most all congressmen north of the Potomac River with votes in opposition from the Southern contingent. The Senate had already approved it, so the Bank of the United States legislation went to President Washington’s desk.

Madison sought out the President to lobby him to veto the bill. Washington reached out to cabinet members Jefferson and Reynolds, seeking their opinions, which were negative. Washington questioned whether their responses were complete. He did what any self-respecting chief executive would do, he asked Hamilton for a full report. Of course Jefferson and Randolph did provide papers for Washington, but these weren’t nearly as comprehensive. Hamilton took ten days to complete a thesis-sized resonse.

Jefferson amended his criteria to expand the powers of Congress from what he called “just convenient” to truly “necessary.” He didn’t just disagree with the Bank and its central authority, he went much further and did not recognize the supremacy of the federal law over state law, a basic tenant of the U.S. Constitution.

A man who would become the President of the United States in 1801 and who was the prime author of the Declaration of Independence recommended to the chief architect of the Constitution, Madison, that ANY Virginia bank functionary who cooperated with Hamilton’s bank should be found guilty of TREASON and EXECUTED.

Hamilton’s Position Paper: 15,000 Words

” The power of erecting banks and corporations was not given to the general government: it remains then with the state itself. For any person to recognize a foreign legislature (Jefferson referred to the U.S. Congress as a “foreign legislature” to support his position of state supremacy) is an act of treason against the state. And whosoever shall do any act under color of the authority of a foreign legislature whether by signing notes, issuing or passing them, acting as director, cashier or in any other office relations to it, shall be adjudged guilty of high treason and suffer death, accordingly by the judgment of the state courts.”

Hamilton didn’t play. He met with Philadelphia’s leading lawyer, William Lewis, to review his work, then recruited Mrs. Hamilton to stay up with him the ninth and final night to recopy his writing. Hamilton provided Washington with the ammo for a positive response. His Treasury Secretary no less brilliant than when he joined the General’s military staff at 21, but wiser now in the ways of politics and certainly finance. Washington realized the need to address the economic issues facing his nation if America would rise to fulfill its promise. It’s unlikely he read all 40 pages, but he read enough to feel confident in his support for the National Bank.

He explained how the central bank would enable the federal government to:

  1. Collect taxes;
  2. Borrow money;
  3. Regulate trade among the states;
  4. Support fleets and armies.

Another sore point for Jefferson: he did not want the federal government to have authority to create corporations, possibly thinking it would hamper Virginia’s rural agrarian economy. Hamilton pointed out that well-structured corporations were stronger and more adventageous than the private partnerships then in vogue. By limiting manufacturing opportunities, the new nation could be held hostage by more mature economies, like existed in Europe, depending on them for finished goods.


On July 4, 1791, the public forgot about the earlier controversy with the opening of subscriptions to stock in Hamilton’s central bank. Stock sold out in an hour as a money-hungry mob formed in Philadelphia.

As sales moved to New York, where Madison experienced the bedlam of speculation, he reported to Jefferson by mail, “The bank shares have risen as much in the market here as at Philadelphia,” terming it a “mere scramble for so much public plunder.”

This fever for money, like America had never seen before, took hold. To broaden ownership, Hamilton agreed to sell bank shares in the form of script in major East Coast cities. To broaden ownership, Hamilton agreed to sell bank shares in the form of script. Investors made a $25 down pament and were given a script entitling them to buy a set of shares, paying them off in 18 months. Trading went so well that many doubled their money in a few days–lending to the term–“scriptomania”–long before social media promoted such ideas.

Not every American banking venture in the last 230 years has gone flawlessly and a portion of Americans do not experience the full benefit of the economic engine, but the nation has led the world in gross national product because of the ingenuity of its people and the availability of working capital that got a jump start with Alexander Hamilton. The quest continues.

Come back next Friday to see how Hamilton immersed himself in personal quicksand while competing another massive visionary piece for President Washington.


“Reviewing the Constitution. . .it was not possible to discover in it the power to incorporate a bank.” Broadus Mitchell, Alexander Hamilton: The National Adventure, 1788-1804. New York: MacMillian, 1862, p.9

“necessary and proper” “Leveling all the barriers which limit the powers of the general government. . .” Papers of Alexander Hamilton, Ed Harold C. Syrett et al. vol. 8, p. 113, “Opinions on Constitutionality of an Act to Establish a Bank,” February 23, 1791.

“Complete organization of those distinct and visible parties which in their long and dubious conflict for power have. . . shaken the United States to their (sic) center.”The Reynolds Pamphlet, vol. 10, p. 253, August 1797

“no more get caught goiong into a bank than into a house of ill reprute.” John C. Miller, Alexander Hamilton: Portrait in Paradox. New York: Harper and Brothers, 1959, p. 727.

Madison saw the Secretary of the Treasury more in a staff role. Ron Chernow, Alexander Hamilton, New York: The Penguin Group, 2004. p. 351. Chernow noted that history has come to support Hamilton’s take on this.

Jefferson did not recognize the supremacy of the federal law over the state law. Chernow, p. 353. See next note for continuation. Papers of Alexander Hamilton, vol 12, p. 85, Letter from Thomas Jefferson to James Madison, October 1, 1791

“and whosoever shall do an act under the color of the authority of a foreign legislature (in this case the U.S. Congress) whether by signing (bank) notes, issuesing or passing them. . . shall be adjudged guilty of high treason and suffer death “Papers of Alexander Hamilton, vol 12, p. 85, Letter from Thomas Jefferson to James Madison, October 1, 1791

Mrs. Hamilton’s role and size of the report. Chernow, p. 353.

Work performed by the Bank, Papers of Hamilton, vol. 8, p. 97

“every power vested in a government is in its nature sovereign. . . Ibid.

A fever for money. . .Hamilton agreed to sell bank shares in the form of script. Chernow, p. 357.

“The bank shares have risen. . . a mere scramble for so much public plunder.”New York Historical Society Quarterly, October 1948, uncovered correspondence between Madison in New York and Jefferson in Virginia.

Hamilton and Burr before the Duel

Alexander Hamilton, Secretary of the Treasury to Washington, set up the Bank of America, stares out from the five dollar bill, leaving his imprint across America more than two hundred years later.

In the four years since “Hamilton” hit the New York stage, Lin-Manuel Miranda’s Tony and Grammy-winning tale of this Founder’s rise to power and dramatic death dominated Broadway, the London stage, and now moves around the country, creating a hunger for more.

Hamilton and Burr’s political differences became American tragedy in1804, after years spent glaring across the political Federalist vs. Republican-Democrat divide– except for a brief time early in their careers when they both worked to limit slavery in New York.

A little Hamilton background–the pen saved him

Arriving in Boston in 1772, Hamilton entered a country preparing to severe ties with England and win its freedom. He came from the British West Indies, the illegitimate son of a woman of French and British ancestry and a Scottish Laird, who lived together but never married. Essentially an orphan after his father left and his mother died of smallpox, Hamilton went to work in the export-import business, making himself and his language skills essential to the trade.

As a teenager his break comes with the furry of the 1772 Chistiansted hurricane, which he chronicles for the Royal-Danish-American Gazette and writes his ticket off the island. Hamilton biographer Ron Chernow found the letter in his research, astonished a self-educated boy could write with such “verve and gusto” and equate the hurricane as a “divine rebuke to human vanity and pomposity.” On the basis of the essay, influential members of the community gathered funds to send him to New York to be educated.

Hamilton brings with him never-to-be-forgotten images of 250 scarecrow-like creatures struggling out of the depths of a Dutch Trader after traveling from West Africa’s Gold Coast to St. Croix, squeezed together like human sardines. His nostrils would remember for years the stench of the mass of humanity that had been held tightly in chains for months, bathing in each other’s bodily fluids. Working for the import-export firm, one of his responsibilities was to help inspect, house, groom and put a price on each one about to be auctioned. He shaved bodies and smeared them with palm oil until their muscles glistened in the sun. Some slave merchants came with their own branding irons to mark their purchases, adding the smell of burning flesh to auction sites.

While later Hamilton gained the highest rung of New York society by winning the hand of Eliza Schuyler and stepped up onto the ladder of national notority as the very young aide to General Washington, deep inside he carried a memory of man’s inhumanity. With it came a cry for freedom, equality, and fair play. He held close a parallel fear of the anarchy that can rise from undisciplined race to achieve that freedom. This may explain how Hamilton became such a strong Federalist, eager for an organized central government to unite the states.

A decade after coming to New York, he passed the New York bar after graduation from King College (Columbia University). Hamilton shuffled law practice as he served in the New York militia, then joined General Washington’s staff. After the Revolution, he gained position as a representative to the Congress of the Confederacy (before the Constitutional Convention).

His pen and organizing principles were applied to The Federalist Papers, making a case for New York to accept the Constitution. This lays the groundwork for America’s capitalist revolution, which he plans will operate at full-tilt using free labor.

A man of ideas and passion, battles with the mighty

Known as a faithful friend to his close circle of friends, Hamilton’s hair-trigger ego response could pull him into feuds of historic proportions with leaders and rivals, including Jefferson, Madison, Adams, Monroe, and finally, Burr. The question arose: would Hamilton embrace a glittering American future and neglect his impoverished West Indian roots once the war ended?

Early on his preference for the British cause (after the war, obviously not before) stood him up against strong Federalists and seemed to place Hamilton squarely on the side of the monied class, what we’d call the one-percenters. Which side would Hamilton take on the issue of slavery? Could his marriage to the ravishing, wealthy, and well-connected Eliza Schuyle sway his decision? Her father held twenty-seven slaves at his Albany mansion and his fields and mills near Saratoga.

Contrary to popular belief, in the 18th century wealthy families in New Jersey and New York retained slaves to serve as cooks, maids and butlers, even to serve as status symbols. New York City held slave auctions in the 1750s and by the 1790s one in five New York City households had slaves or indentured servants.

Slaves and free blacks were being stolen off the streets of New York when on January 25, 1785 when a group of concerned citizens gathered at the home of innkeeper John Simmons to form the New York Manumission Society. Prominent New Yorker John Jay was voted chair, even though he owned five slaves. He authored five of The Federalist Papers with fifty-nine completed by Hamilton and Madison, to promote New York ratification of the U.S. Constitution. Jay believed unless gradual abolition of slavery became law in the U.S., “her prayers to heaven for liberty would be impious.”

Hamilton attended a meeting of the Manumission Society in July as the organization developed a campaign against slavery with lectures, essays, and a registry to prevent free blacks from being dragged back into slavery. The Society also established an African Free School to teach older boys carpentry and navigation, and dressmaking and embroidery to older girls. The school’s goal: to keep slaves from “running into practices of immorality or sinking into habits of idleness,” taking the era’s paternalistic and judgmental approach to slavery.

By February Hamilton took an active role forming the Society’s Ways and Means committee to produce answers concerning how to address New York’s slave population. The conclusions seemed abrupt to the slave owners in the group, but lacked the speedy conclusion people of color prayed for. The proposal to members: slaves under twenty-eight should gain their freedom on their thirty-fifth birthday; those between twenty eight and thirty-eight should be freed seven years hence; and those above forty-five should be freed immediately.

Truth be told, Burr kept four or five household slaves. As he moved politically towards the Republican-Democratic party of Jefferson, Burr no longer spoke like an abolitioinist. According to Chernow, by 1831 Burr tried to discourage William Lloyd Garrison, the publisher of the Liberator, from persisting in his antislavery crusade. Garrison, who went on to become an advisor to Abraham Lincoln, said of Burr: “His manner was patronizing. . .As he revealed himself to my moral sense, I saw he was destitute of any fixed principles.”

Hamilton’s committee’s proposal did not gain the support of the Society since half its members were slaveowners. They feared members would “withdraw their servies and gradually fall off from the Society,” This did not stop Hamilton. In February 1786, he became a member of the Society’s standing committee lobbying the New York State Legislature to halt the export of slaves from New York, using a pamphlet, “a Dialogue on the Slavery of Africans etc.” Then he signed a petition reinforcing this position, deploring the conditions for blacks exported “like cattle and other articles of commerce to the West Indies and the southern states.” The petition didn’t mince words, calling the practice “so repugnant to humanity and so inconsistent with the liberality and justice which should distinguish a free and enlightened people.”

An illustrious list of Founders and Revolutionary leaders signed this petition just three years after the Revolution ended. Many in the Society would be friends of Hamilton since he came to America, like Robert Trout, his roommate at Kings College (Columbia University); Nicholas Fish, New York Revolutionary warrior and ancestor of generations of politicians; Hercules Mulligan, Irish- American tailor and secret agent for General Washington; William Livingston, signer of the Declaration of Independence and Governor of New Jersey (1776-1790); John Jay, first Chief of the U.S. Supreme Court and second Governor of New York. Governor Jay signed the legislature’s watered-down version of the Society’s bill permitting slave owners to free their slaves between the ages of 35 and 50.

While this permissive language insults America’s slaves, some whose ancestors were West Africans who arrived on the first ship to Jamestown in the 16th century, saw the promise of freedom postponed yet another century. The hopeful moment in the 1780s, marking the end of the slave trade in New York and slow emancipation of slaves, would be eclipsed by the need to placate the Southern states during the Constitutional Convention.

Hamilton, often criticized as an elitist, showed himself a friend to the oppressed, despite his links to power and wealth. Whether this reflects the perils his French-British mother faced, possibly as a woman of mixed race, may never determined. His drive and ambition served him well and pulled him out of the crowd. He used his hard-earned skills to write and speak on behalf of those locked into a life of slavery after he blazed his name across the Revolutionary era. Hamilton’s talent for genius tempered by a stubborn, take-no-prisoners ego could have has an even greater impact on America were it not for his knack to wreck promising personal alliances.

Stay tuned for more about this clever man of adventure and a look at Aaron Burr’s life turned after the duel.


1772 Christainsted hurricane. Ron Chernow. Alexander Hamilton (New York: Penguin Group, 2004) p. 32

Her father held twenty-seven slaves at his Albany mansion and his fields and mills. Ibid., 210.

Slaves and free blacks were being stolen off the streets. Chernow, p. 214.

Jay believed unless gradual abolition…”her prayers to heaven for liberty…” Richard Brookhiser, Gentleman Revolutionary. New York: Free Press, 1999. p. 34

The school’s goal to keep slaves from “running into practices of immorality…” Edwin Burrows and Mike Wallace, A History of New York City to 1898, New York: Oxford University Press, 1999, p. 286.

Hamilton’s motion. . .A subsequent committee said its adoption would cause members to “withdraw their services and gradually fall off from the Society. NYHS-NYCMS, reel 2 (ca. August-September 1786)

“a practice so repugnant to humanity and so inconsistent with liberty. . .” Chernow, p. 214

“His manner was patronizing…” destitude of any fixed principles. Milton Lomask, Aaron Burr: The Conspirac and Years of Exile. New York: Farrar Straus Giroux, 1980.p. 403.

Hamilton’s committee proposal, Chernow, p. 214.

The petition didn’t mince words, “so repugnant to humanity and so inconsistent… NYHS-NYCMS March 1786.

An illustrious list of Founders. Chernow, p. 216.