Editing Alexander Hamilton (section)

==First U.S. secretary of the treasury (1789–1795)==
[[File:JEFraser Hamilton.jpg|thumb|A [[Statue of Alexander Hamilton (Washington, D.C.)|statue of Hamilton]] on the south patio of the [[Treasury Building (Washington, D.C.)|Treasury Building]] in [[Washington, D.C.]]]]

In 1789, Washington—who had become the [[List of presidents of the United States|first president of the United States]]—appointed Hamilton to be his cabinet's Secretary of the Treasury on the advice of [[Robert Morris (financier)|Robert Morris]], Washington's initial pick.<ref>Chernow, 2005, pp. 286–287.</ref> On September 11, 1789, Hamilton was nominated and confirmed in the Senate<ref>Chernow, 2005, p. 288.</ref> and sworn in the same day as the first [[United States secretary of the treasury]].<ref>White, 1944, [https://heinonline.org/HOL/P?h=hein.journals/bulr24&i=158 p. 156].</ref>

===Report on Public Credit===
{{main|First Report on the Public Credit}}

Before the adjournment of the House in September 1789, they requested Hamilton to make a report on suggestions to improve the public credit by January 1790.<ref name=Murray121>Murray, p. 121.</ref> Hamilton had written to Morris as early as 1781, that fixing the public credit will win their objective of independence.<ref name=Murray121/> The sources that Hamilton used ranged from Frenchmen such as [[Jacques Necker]] and [[Montesquieu]] to British writers such as [[David Hume|Hume]], [[Hobbes]], and [[Malachy Postlethwayt]].<ref name=chernow296-299>Chernow, [https://archive.org/details/alexanderhamilto00cher/page/n315 pp. 296–299].</ref> While writing the report he also sought out suggestions from contemporaries such as [[John Witherspoon]] and Madison. Although they agreed on additional taxes such as distilleries and duties on imported liquors and land taxes, Madison feared that the securities from the government debt would fall into foreign hands.<ref name=chernow121>Chernow, [https://archive.org/details/alexanderhamilto00cher/page/n136 p. 121].</ref><ref name=schachner />{{rp|244–245}}

Hamilton divided the debt into national and state, and further divided the national debt into foreign and domestic debt. While there was agreement on how to handle the foreign debt, especially with France, there was not with regards to the national debt held by domestic creditors. During the Revolutionary War, affluent citizens had invested in bonds, and war veterans had been paid with [[promissory notes]] and [[IOU]]s that plummeted in price during the Confederation. In response, the war veterans sold the securities to speculators for as little as fifteen to twenty cents on the dollar.<ref name=chernow296-299/><ref>Murray, p. 124.</ref>

Hamilton felt the money from the bonds should not go to the soldiers who had shown little faith in the country's future, but the speculators that had bought the bonds from the soldiers. The process of attempting to track down the original bondholders along with the government showing discrimination among the classes of holders if the war veterans were to be compensated also weighed in as factors for Hamilton. As for the state debts, Hamilton suggested consolidating them with the national debt and label it as federal debt, for the sake of efficiency on a national scale.<ref name=chernow296-299/>

In the report, Hamilton felt that the securities should be paid at full value to their legitimate owners, including those who took the financial risk of buying government bonds that most experts thought would never be redeemed. He argued that liberty and property security were inseparable, and that the government should honor the contracts, as they formed the basis of public and private morality. To Hamilton, the proper handling of the government debt would also allow America to borrow at affordable interest rates and would also be a stimulant to the economy.<ref name=chernow296-299/>

The last portion of the report dealt with eliminating the debt by utilizing a ''[[sinking fund]]'' that would retire five percent of the debt annually until it was paid off. Due to the bonds being traded well below their face value, the purchases would benefit the government as the securities rose in price.<ref name=chernow300-305>Chernow, [https://archive.org/details/alexanderhamilto00cher/page/n319 pp. 300–305].</ref>{{rp|300}} When the report was submitted to the House of Representatives, detractors soon began to speak against it. Some of the negative views expressed in the House were that the notion of programs that resembled British practice were wicked, and that the balance of power would be shifted away from the representatives to the executive branch. [[William Maclay (politician)|William Maclay]] suspected that several congressmen were involved in government securities, seeing Congress in an unholy league with New York speculators.<ref name=chernow300-305/>{{rp|302}} Congressman [[James Jackson (Georgia politician)|James Jackson]] also spoke against New York, with allegations of speculators attempting to swindle those who had not yet heard about Hamilton's report.<ref name=chernow300-305/>{{rp|303}}

The involvement of those in Hamilton's circle such as Schuyler, [[William Duer (Continental Congressman)|William Duer]], [[James Duane]], Gouverneur Morris, and [[Rufus King]] as speculators was not favorable to those against the report, either, though Hamilton personally did not own or deal a share in the debt.<ref name=chernow300-305/>{{rp|304}}<ref name=schachner />{{rp|250}} Madison eventually spoke against it by February 1790. Although he was not against current holders of government debt to profit, he wanted the windfall to go to the original holders. Madison did not feel that the original holders had lost faith in the government but sold their securities out of desperation.<ref name=chernow300-305/>{{rp|305}} The compromise was seen as egregious to both Hamiltonians and their dissidents such as Maclay, and Madison's vote was defeated 36 votes to 13 on February 22.<ref name=chernow300-305/>{{rp|305}}<ref name=schachner />{{rp|255}}

The fight for the national government to assume state debt was a longer issue and lasted over four months. During the period, the resources that Hamilton was to apply to the payment of state debts was requested by [[Alexander White (Virginia)|Alexander White]], and was rejected due to Hamilton's not being able to prepare information by March 3, and was even postponed by his own supporters in spite of configuring a report the next day, which consisted of a series of additional duties to meet the interest on the state debts.<ref name=schachner />{{rp|297–298}} Duer resigned as Assistant Secretary of the Treasury, and the vote of assumption was voted down 31 votes to 29 on April 12.<ref name=schachner />{{rp|258–259}}

During this period, Hamilton bypassed the rising issue of [[Slavery in the United States|slavery]] in Congress, after [[Quaker]]s petitioned for its abolition, returning to the issue the following year.<ref name=chernow307>Chernow, [https://archive.org/details/alexanderhamilto00cher/page/n326 p. 307].</ref>

Another issue in which Hamilton played a role was the temporary location of the capital from New York City. [[Tench Coxe]] was sent to speak to Maclay to bargain about the capital being temporarily located to Philadelphia, as a single vote in the Senate was needed and five in the House for the bill to pass.<ref name=schachner />{{rp|263}} Thomas Jefferson wrote years afterward that Hamilton had a discussion with him, around this time period, about the capital of the United States being relocated to Virginia by means of a "pill" that "would be peculiarly bitter to the Southern States, and that some concomitant measure should be adopted to sweeten it a little to them".<ref name=schachner />{{rp|263}} The bill passed in the Senate on July 21 and in the House 34 votes to 28 on July 26, 1790.<ref name=schachner />{{rp|263}}

===Report on a National Bank===
{{further|History of central banking in the United States}}
[[File:First Bank of the United States, Philadelphia, Pennsylvania LCCN2011633532 (edited).jpg|thumb|upright=1|The [[First Bank of the United States]] in [[Philadelphia]], commissioned by Hamilton when the nation adopted a single currency]]

Hamilton's ''Report on a National Bank'' was a projection from the first ''Report on the Public Credit''. Although Hamilton had been forming ideas of a national bank as early as 1779,<ref name=schachner />{{rp|268}} he had gathered ideas in various ways over the past eleven years. These included theories from Adam Smith,<ref>Kaplan, p. 21.</ref> extensive studies on the [[Bank of England]], the blunders of the [[Bank of North America]] and his experience in establishing the Bank of New York.<ref name=Cooke82/> He also used American records from [[James Wilson (Founding Father)|James Wilson]], Pelatiah Webster, Gouverneur Morris, and from his assistant treasury secretary Tench Coxe.<ref name=Cooke82/> He thought that this plan for a National Bank could help in any sort of financial crisis.<ref>{{Cite journal |last1=Sylla |first1=Richard |author-link1=Richard Sylla |last2=Wright |first2=Robert E. |last3=Cowen |first3=David J. |date=2009 |title=Alexander Hamilton, Central Banker: Crisis Management during the U.S. Financial Panic of 1792 |url=https://archive.org/details/sim_business-history-review_2009_spring_83_1/page/61 |journal=Business History Review |volume=83 |issue=1 |pages=61–86 |doi=10.1017/s0007680500000209 |s2cid=153842455 |issn=0007-6805}}</ref>

Hamilton suggested that Congress should charter [[First Bank of the United States|the national bank]] with a capitalization of $10&nbsp;million, one-fifth of which would be handled by the government. Since the government did not have the money, it would borrow the money from the bank itself, and repay the loan in ten even annual installments.<ref name=McDonald />{{rp|194}} The rest was to be available to individual investors.<ref>Cooke, p. 89.</ref> The bank was to be governed by a twenty-five-member board of directors that was to represent a large majority of the private shareholders, which Hamilton considered essential for his being under a private direction.<ref name=schachner />{{rp|268}} Hamilton's bank model had many similarities to that of the Bank of England, except Hamilton wanted to exclude the government from being involved in [[public debt]], but provide a large, firm, and elastic money supply for the functioning of normal businesses and usual economic development, among other differences.<ref name=McDonald />{{rp|194–195}} The tax revenue to initiate the bank was the same as he had previously proposed, increases on imported spirits: rum, liquor, and whiskey.<ref name=McDonald />{{rp|195–196}}

The bill passed through the Senate practically without a problem, but objections to the proposal increased by the time it reached the House of Representatives. It was generally held by critics that Hamilton was serving the interests of the Northeast by means of the bank,<ref>Cooke, p. 90.</ref> and those of the agrarian lifestyle would not benefit from it.<ref name=schachner />{{rp|270}} Among those critics was [[James Jackson (Georgia politician)|James Jackson]] of Georgia, who also attempted to refute the report by quoting from ''The Federalist Papers''.<ref name=schachner />{{rp|270}} Madison and Jefferson also opposed the bank bill. The potential of the capital not being moved to the Potomac if the bank was to have a firm establishment in Philadelphia was a more significant reason, and actions that Pennsylvania members of Congress took to keep the capital there made both men anxious.<ref name=McDonald />{{rp|199–200}} ''The Whiskey Rebellion'' also showed how in other financial plans, there was a distance between the classes as the wealthy profited from the taxes.<ref>{{Cite journal |last=Bogin |first=Ruth |date=July 1988 |title=Petitioning and the New Moral Economy of Post-Revolutionary America |url=https://archive.org/details/sim_william-and-mary-quarterly_1988-07_45_3/page/392 |journal=The William and Mary Quarterly |volume=45 |issue=3 |pages=392–425 |jstor=1923642 |issn=0043-5597}}</ref>

Madison warned the Pennsylvania congress members that he would attack the bill as unconstitutional in the House, and followed up on his threat. Madison argued his case of where the power of a bank could be established within the Constitution, but he failed to sway members of the House, and his authority on the constitution was questioned by a few members.<ref name=McDonald />{{rp|200–201}} The bill eventually passed in an overwhelming fashion 39 to 20, on February 8, 1791.<ref name=schachner />{{rp|271}}

Washington hesitated to sign the bill, as he received suggestions from Attorney General [[Edmund Randolph]] and Thomas Jefferson. Jefferson dismissed the [[Necessary and Proper Clause]] as reasoning for the creation of a national bank, stating that the enumerated powers "can all be carried into execution without a bank."<ref name=schachner />{{rp|271–272}} Along with Randolph and Jefferson's objections, Washington's involvement in the movement of the capital from Philadelphia is also thought to be a reason for his hesitation.<ref name=McDonald />{{rp|202–203}} In response to the objection of the clause, Hamilton stated that "Necessary often means no more than needful, requisite, incidental, useful, or conductive to", and the bank was a "convenient species of medium in which [taxes] are to be paid."<ref name=schachner />{{rp|272–273}} Washington would eventually sign the bill into law.<ref name=schachner />{{rp|272–273}}

Hamilton's push for a national bank was not an isolated event but a broader, long-running effort to establish a central banking system in the United States—one that would ultimately result in the [[Federal Reserve]].<ref>{{Cite web |last=Johnson |first=Roger |date=December 1999 |title=Historical Beginnings... The Federal Reserve |url=http://www.bos.frb.org/about/pubs/begin.pdf |archive-url=https://web.archive.org/web/20101225064903/http://www.bos.frb.org/about/pubs/begin.pdf |archive-date=December 25, 2010}}</ref> While Hamilton's vision laid the groundwork for a structured financial system, the concept of [[History of central banking in the United States|centralized banking]] has remained one of the most polarizing economic debates in American history, garnering both staunch [[Criticism of the Federal Reserve|criticism]] and fervent support from economists and the public alike.<ref>{{cite news |last=Taylor |first=John B. |date=2010-01-11 |title=Taylor: Federal Reserve Monetary and the Financial Crisis: A Reply to Chairman Ben Bernanke |url=https://www.wsj.com/articles/SB10001424052748703481004574646100272016422 |access-date=2025-03-23 |work=Wall Street Journal |language=en-US |issn=0099-9660}}</ref><ref>{{Cite web |title=Born of a Panic: Forming the Fed System {{!}} Federal Reserve Bank of Minneapolis |url=https://www.minneapolisfed.org/article/1988/born-of-a-panic-forming-the-fed-system |access-date=2025-03-23 |website=www.minneapolisfed.org}}</ref>

===Establishing the mint===
{{main|United States Mint}}
{{Css Image Crop|Image = NNC-US-1795-G$10-Turban Head (small eagle).jpg |bSize = 475|cWidth = 232|cHeight = 232|oTop = 3|oLeft = 3|Location = right|Description=The [[Turban Head eagle]] was one of the first gold coins minted under the [[Coinage Act of 1792]].}}
In 1791, Hamilton submitted the ''Report on the Establishment of a Mint'' to the House of Representatives. Many of Hamilton's ideas for this report were from European economists, resolutions from the 1785 and 1786 Continental Congress meetings, and people such as Robert Morris, Gouverneur Morris and Thomas Jefferson.<ref name=McDonald />{{rp|197}}<ref>Mitchell, p. 118.</ref>

Because the most circulated coins in the United States at the time were [[Spanish dollar|Spanish currency]], Hamilton proposed that minting a [[United States dollar]] weighing almost as much as the Spanish peso would be the simplest way to introduce a national currency.<ref>Engerman; Gallman, p. 644.</ref> Hamilton differed from European monetary policymakers in his desire to overprice gold relative to silver, on the grounds that the United States would always receive an influx of silver from the West Indies.<ref name=McDonald />{{rp|197}} Despite his own preference for a monometallic [[gold standard]],<ref name=Studentski>Studentski; Krooss, p. 62.</ref> he ultimately issued a bimetallic currency at a fixed 15:1 ratio of silver to gold.<ref name=McDonald />{{rp|197}}<ref name=nussbaum>{{cite journal |first=Arthur |last=Nussbaum |author-link=Arthur Nussbaum |title=The Law of the Dollar |journal=[[Columbia Law Review]] |volume=37 |number=7 |date=November 1937 |pages=1057–1091 |type=citing 2 Annals of Cong. 2115 (1789–1791) |jstor=1116782 |issn=0010-1958}}</ref><ref>Cooke, p. 87.</ref>

Hamilton proposed that the U.S. dollar should have fractional coins using decimals, rather than eighths like the Spanish coinage.<ref>Engerman; Gallman, pp. 644–645.</ref> This innovation was originally suggested by [[Superintendent of Finance of the United States|Superintendent of Finance]] [[Robert Morris (financier)|Robert Morris]], with whom Hamilton corresponded after examining one of Morris's [[Nova Constellatio]] coins in 1783.<ref>James Ferguson, John Catanzariti, Elizabeth M. Nuxoll and Mary Gallagher, eds. ''The Papers of Robert Morris'', University of Pittsburgh Press, 1973–1999 (Volume 7, pp. 682–713)</ref> He also desired the minting of small value coins, such as silver ten-cent and copper cent and half-cent pieces, for reducing the cost of living for the poor.<ref name=McDonald />{{rp|198}}<ref name="Cooke82">[[Jacob E. Cooke|Cooke]], p. 88.</ref> One of his main objectives was for the general public to become accustomed to handling money on a frequent basis.<ref name=McDonald />{{rp|198}}

By 1792, Hamilton's principles were adopted by Congress, resulting in the [[Coinage Act of 1792]], and the creation of the mint. There was to be a ten-dollar gold Eagle coin, a silver dollar, and fractional money ranging from one-half to fifty cents.<ref name=Studentski/> The coining of silver and gold was issued by 1795.<ref name=Studentski/>

===Revenue Cutter Service===
{{main|United States Revenue Cutter Service}}
[[File:USRC Massachusetts (1791).jpg|thumb|upright=1.2|A 19th-century portrait of a Revenue Marine cutter, which may be of either the [[USRC Massachusetts (1791)|USRC ''Massachusetts'']] or its replacement, the ''Massachusetts II'']]

Smuggling off American coasts was an issue before the Revolutionary War, and after the Revolution it was more problematic. Along with smuggling, lack of shipping control, pirating, and a revenue imbalance were also major problems.<ref name=Gibowicz07>Gibowicz, p. 256.</ref> In response, Hamilton proposed to Congress to enact a naval police force called [[Revenue Cutter Service|revenue cutters]] in order to patrol the waters and assist the custom collectors with confiscating contraband.<ref name=chernow340>Chernow, [https://archive.org/details/alexanderhamilto00cher/page/n359 p. 340].</ref> This idea was also proposed to assist in tariff controlling, boosting the American economy, and promote the merchant marine.<ref name=Gibowicz07/> It is thought that his experience obtained during his apprenticeship with Nicholas Kruger was influential in his decision-making.<ref name=chernow32>Chernow, [https://archive.org/details/alexanderhamilto00cher/page/n47 p. 32].</ref>

Concerning some of the details of the System of Cutters,<ref>Gibowicz, pp. 256–257.</ref> Hamilton wanted the first ten [[Cutter (boat)|cutters]] in different areas in the United States, from New England to Georgia.<ref name=chernow340/><ref>Storbridge, p. 2.</ref> Each of those cutters was to be armed with ten muskets and bayonets, twenty pistols, two chisels, one broad-ax and two lanterns. The fabric of the sails was to be domestically manufactured;<ref name=chernow340/> and provisions were made for the employees' food supply and etiquette when boarding ships.<ref name=chernow340/> Congress established the Revenue Cutter Service on August 4, 1790, which is viewed as the birth of the [[United States Coast Guard]].<ref name=Gibowicz07/>

===Whiskey as tax revenue===
{{see also|Whiskey Rebellion}}
[[File:Google Arts Project - Alexander Hamilton (1792 portrait) by John Trumbull.jpg|thumb|Hamilton in 1792, painted by [[John Trumbull]]]]

One of the principal sources of revenue Hamilton prevailed upon Congress to approve was an [[excise tax]] on whiskey. In his first Tariff Bill in January 1790, Hamilton proposed to raise the three million dollars needed to pay for government operating expenses and interest on domestic and foreign debts by means of an increase on duties on imported wines, distilled spirits, tea, coffee, and domestic spirits. It failed, with Congress complying with most recommendations excluding the excise tax on whiskey. The same year, Madison modified Hamilton's tariff to involve only imported duties; it was passed in September.<ref>Stockwell, p. 357.</ref>
In response of diversifying revenues, as three-fourths of revenue gathered was from commerce with Great Britain, Hamilton attempted once again during his ''Report on Public Credit'' when presenting it in 1790 to implement an excise tax on both imported and domestic spirits.<ref name=chernow342-343>Chernow, [https://archive.org/details/alexanderhamilto00cher/page/n361 pp. 342–343].</ref><ref name="Murray141">Murray, p. 141.</ref> The taxation rate was graduated in proportion to the whiskey proof, and Hamilton intended to equalize the tax burden on imported spirits with imported and domestic liquor.<ref name="Murray141"/> In lieu of the excise on production citizens could pay 60 cents by the gallon of dispensing capacity, along with an exemption on small stills used exclusively for domestic consumption.<ref name="Murray141"/> He realized the loathing that the tax would receive in rural areas, but thought of the taxing of spirits more reasonable than land taxes.<ref name=chernow342-343/>

Opposition initially came from Pennsylvania's House of Representatives protesting the tax. William Maclay had noted that not even the Pennsylvanian legislators had been able to enforce excise taxes in the western regions of the state.<ref name=chernow342-343/> Hamilton was aware of the potential difficulties and proposed inspectors the ability to search buildings that distillers were designated to store their spirits, and would be able to search suspected illegal storage facilities to confiscate contraband with a warrant.<ref name="Murray40">Murray, pp. 141–142.</ref> Although the inspectors were not allowed to search houses and warehouses, they were to visit twice a day and file weekly reports in extensive detail.<ref name=chernow342-343/> Hamilton cautioned against expedited judicial means, and favored a jury trial with potential offenders.<ref name="Murray40"/> As soon as 1791, locals began to shun or threaten inspectors, as they felt the inspection methods were intrusive.<ref name=chernow342-343/> Inspectors were also [[tarred and feathered]], blindfolded, and whipped. Hamilton had attempted to appease the opposition with lowered tax rates, but it did not suffice.<ref name=chernow468>Chernow, [https://archive.org/details/alexanderhamilto00cher/page/n503 p. 468].</ref>

Strong opposition to the whiskey tax by [[cottage industry|cottage producers]] in remote, rural regions erupted into the ''[[Whiskey Rebellion]]'' in 1794; in [[Western Pennsylvania]] and western [[Virginia]], whiskey was the basic export product and was fundamental to the local economy. In response to the rebellion, believing compliance with the laws was vital to the establishment of federal authority, Hamilton accompanied to the rebellion's site President Washington, General [[Henry Lee III|Henry "Light Horse Harry" Lee]], and more federal troops than Washington had usually commanded during the Revolution.<ref>[[#chernow|Chernow, 2005]], pp. 475–476.</ref> This overwhelming display of force intimidated the leaders of the insurrection, ending the rebellion virtually without bloodshed.<ref>Mitchell, I:308–331.</ref>

===Manufacturing and industry===
{{further|Report on Manufactures}}
[[File:Great Falls of Paterson 2016.jpg|thumb|upright=1.3|The Great Falls of the Passaic River in [[Paterson, New Jersey]], which Hamilton envisioned using to power new factories]]
Hamilton's next report was his ''Report on Manufactures''. Although he was requested by Congress on January 15, 1790, for a report for manufacturing that would expand the United States' independence, the report was not submitted until December 5, 1791.<ref name=schachner />{{rp|274, 277}} In the report, Hamilton quoted from ''[[The Wealth of Nations]]'' and used the French [[physiocrats]] as an example for rejecting [[agrarianism]] and the physiocratic theory, respectively.<ref name=McDonald />{{rp|233}} Hamilton also refuted Smith's ideas of government noninterference, as it would have been detrimental for trade with other countries.<ref name=McDonald />{{rp|244}} Hamilton also thought that the United States, being a primarily agrarian country, would be at a disadvantage in dealing with Europe.<ref>Cooke, p. 100.</ref> In response to the agrarian detractors, Hamilton stated that the agriculturists' interest would be advanced by manufactures, and that agriculture was just as productive as manufacturing.<ref name=McDonald />{{rp|233}}<ref name=schachner />{{rp|276}}

Hamilton argued for [[industrial policy]] to support a modern manufacturing industry in the United States.<ref>{{cite journal |last=Sylla |first=Richard |author-link=Richard Sylla |date=2024 |title=Alexander Hamilton's Report on Manufactures and Industrial Policy |url=https://www.aeaweb.org/articles?id=10.1257/jep.38.4.111 |journal=Journal of Economic Perspectives |volume=38 |issue=4 |pages=111–130 |doi=10.1257/jep.38.4.111 |issn=0895-3309}}</ref><ref name=Bairoch>{{cite book |last=Bairoch |first=Paul |author-link=:de:Paul Bairoch |title=Economics and World History: Myths and Paradoxes |url={{GBurl|LaF_cCknJScC |p=33}} |year=1995 |publisher=University of Chicago Press |isbn=978-0-226-03463-8 |page=33}}</ref> Among the ways that the government should assist manufacturing, Hamilton argued for government assistance to "[[infant industries]]" so they can achieve [[economies of scale]], by levying protective duties on imported foreign goods that were also manufactured in the United States,<ref name=Cooke101>Cooke, p. 101.</ref> for withdrawing duties levied on raw materials needed for domestic manufacturing,<ref name=schachner />{{rp|277}}<ref name=Cooke101/> and pecuniary boundaries.<ref name=schachner />{{rp|277}} He also encouraged immigration as a way to improve the American work force.<ref name=Cooke101/><ref>Mitchell, p. 145.</ref> Congress shelved the report without much debate, except for Madison's objection to Hamilton's formulation of the [[general welfare clause]], which Hamilton construed liberally as a legal basis for his extensive programs.<ref>Stephen F. Knott, ''Alexander Hamilton and the Persistence of Myth'' (2002), pp. 43, 54, 56, 83, 108.</ref>

In 1791, Hamilton, along with Coxe and several entrepreneurs from New York City and Philadelphia formed the ''[[Society for the Establishment of Useful Manufactures]]'', a private industrial corporation. In May 1792, the directors decided to examine the [[Great Falls (Passaic River)|Great Falls]] of the [[Passaic River]] in [[New Jersey]] as a possible location for a manufacturing center. On July 4, 1792, the society directors met [[Philip Schuyler]] at [[Abraham Godwin]]'s hotel on the Passaic River, where they led a tour prospecting the area for the national manufactory. It was originally suggested that they dig mile-long trenches and build the factories away from the falls, but Hamilton argued that it would be too costly and laborious.<ref name=Shriner>{{cite web |url=https://books.google.com/books?id=MtQwAQAAMAAJ&pg=PA59 |page=59 |title=Four Chapters of Paterson History |first=Charles Anthony |last=Shriner |date=1919 |publisher=Lont & Overkamp}}</ref>

The location at Great Falls of the Passaic River in New Jersey was selected due to access to raw materials, it being densely inhabited, and having access to water power from the falls of the Passaic.<ref name=McDonald />{{rp|231}} The factory town was named ''Paterson'' after New Jersey's Governor [[William Paterson (judge)|William Paterson]], who signed the charter.<ref name=McDonald />{{rp|232}}<ref name=Cooke103>Cooke, p. 103.</ref> The profits were to derive from specific corporates rather than the benefits to be conferred to the nation and the citizens, which was unlike the report.<ref name=Cooke102>Cooke, p. 102.</ref> Hamilton also suggested the first stock to be offered at $500,000 and to eventually increase to $1&nbsp;million, and welcomed state and federal government subscriptions alike.<ref name=schachner />{{rp|280}}<ref name=Cooke102/> The company was never successful, with numerous shareholders reneged on stock payments and some going bankrupt. [[William Duer (Continental Congressman)|William Duer]], the governor of the program, was sent to debtors' prison, where he died.<ref name=Matson>{{cite journal |last=Matson |first=Cathy |year=2010 |url=http://www.common-place-archives.org/vol-10/no-03/matson/ |title=Flimsy Fortunes: Americans' Old Relationship with Paper Speculation and Panic |journal=Common-place |volume=10 |issue=4 |access-date=May 2, 2018 |archive-url=https://web.archive.org/web/20160409230828/http://www.common-place-archives.org/vol-10/no-03/matson/ |archive-date=April 9, 2016 |url-status=dead}}</ref> In spite of Hamilton's efforts to mend the disaster, the company folded.<ref name=Cooke103/>

===Jay Treaty===
{{main|Jay Treaty}}

When [[War of the First Coalition|France and Britain went to war]] in early 1793, all four members of the Cabinet were consulted on what to do. They and Washington unanimously agreed to remain neutral, and to have the French ambassador who was raising privateers and mercenaries on American soil, [[Edmond-Charles Genêt]], recalled.<ref name="Elkins McK">{{cite book |first1=Stanley M. |last1=Elkins |first2=Eric |last2=McKitrick |title=The Age of Federalism: The Early American Republic, 1788–1800 |url=https://archive.org/details/ageoffederalism00elki |year=1994 |publisher=Oxford University Press |isbn=978-0-19-506890-0}}</ref>{{rp|336–341}} However, in 1794, policy toward Britain became a major point of contention between the two parties. Hamilton and the Federalists wished for more trade with Britain, the largest trading partner of the newly formed United States. The Republicans saw monarchist Britain as the main threat to republicanism and proposed instead to start a trade war.<ref name=schachner />{{rp|327–328}}

To avoid war, Washington sent Chief Justice John Jay to negotiate with the British, with Hamilton largely writing Jay's instructions. The result was a treaty denounced by the Republicans, but Hamilton mobilized support throughout the land.<ref>{{cite journal |first=Todd |last=Estes |title=Shaping the Politics of Public Opinion: Federalists and the Jay Treaty Debate |journal=Journal of the Early Republic |year=2000 |volume=20 |number=3 |pages=393–422 |jstor=3125063}}</ref> The Jay Treaty passed the Senate in 1795 by exactly the required two-thirds majority. The treaty resolved issues remaining from the Revolution, averted war, and made possible ten years of peaceful trade between the United States and Britain.<ref name="Elkins McK" />{{rp|Ch 9}} Historian George Herring notes the "remarkable and fortuitous economic and diplomatic gains" produced by the Treaty.<ref>{{cite book |first=George C. |last=Herring |title=From Colony to Superpower: U.S. Foreign Relations since 1776 |url=https://archive.org/details/fromcolonytosupe1776herr |url-access=limited |year=2008 |page=[https://archive.org/details/fromcolonytosupe1776herr/page/n98 80] |isbn=978-0-19-507822-0}}</ref>

Several European states had formed the [[Second League of Armed Neutrality]] against incursions on their neutral rights; the cabinet was also consulted on whether the United States should join the alliance and decided not to. It kept that decision secret, but Hamilton revealed it in private to George Hammond, the British minister to the United States, without telling Jay or anyone else. His act remained unknown until Hammond's dispatches were read in the 1920s. This revelation may have had limited effect on the negotiations; Jay did threaten to join the League at one point, but the British had other reasons not to view the alliance as a serious threat.<ref name="Elkins McK" />{{rp|411–412}}<ref>{{cite journal |last=Bemis |first=Samuel Flagg |title=Jay's Treaty and the Northwest Boundary Gap |journal=The American Historical Review |volume=27 |number=3 |date=April 1922 |pages=465–484 |url=https://books.google.com/books?id=3mMSAAAAYAAJ |jstor=1837800 |hdl=2027/hvd.32044020001764 |hdl-access=free}}</ref>

===Resignation from public office===
{{See also|Second Report on Public Credit}}

Hamilton's wife suffered a miscarriage<ref>{{cite web |last1=Knox |first1=Henry |title=Letter from Henry Knox to Alexander Hamilton, 24 November 1794 |url=https://founders.archives.gov/documents/Hamilton/01-17-02-0369 |website=Founders Online |publisher=National Archives |access-date=February 5, 2017 |archive-date=October 20, 2017 |archive-url=https://web.archive.org/web/20171020084259/https://founders.archives.gov/documents/Hamilton/01-17-02-0369 |url-status=live}}</ref> while he was absent during his armed repression of the Whiskey Rebellion.<ref name=Chernow478>Chernow, [https://archive.org/details/alexanderhamilto00cher/page/n513 p. 478].</ref> In the wake of this, Hamilton tendered his resignation from office on December 1, 1794, giving Washington two months' notice,<ref>{{cite web |last1=Hamilton |first1=Alexander |title=Letter from Alexander Hamilton to George Washington, 1 December 1794 |url=https://founders.archives.gov/documents/Hamilton/01-17-02-0392 |website=Founders Online |publisher=National Archives |access-date=December 24, 2019 |archive-date=September 22, 2022 |archive-url=https://web.archive.org/web/20220922135026/https://founders.archives.gov/documents/Hamilton/01-17-02-0392 |url-status=live}}</ref> Before leaving his post on January 31, 1795, Hamilton submitted the ''[[Report on a Plan for the Further Support of Public Credit]]'' to Congress to curb the debt problem. Hamilton grew dissatisfied with what he viewed as a lack of a comprehensive plan to fix the public debt. He wished to have new taxes passed with older ones made permanent and stated that any surplus from the excise tax on liquor would be pledged to lower public debt. His proposals were included in a bill by Congress within slightly over a month after his departure as treasury secretary.<ref name=chernow480>Chernow, [https://archive.org/details/alexanderhamilto00cher/page/n515 p. 480].</ref> Some months later, Hamilton resumed his law practice in New York to remain closer to his family.<ref>{{cite web |last1=Hamilton |first1=Alexander |title=Letter from Alexander Hamilton to Angelica Schuyler Church, 6 March 1795 |url=https://founders.archives.gov/documents/Hamilton/01-18-02-0181 |website=Founders Online |publisher=National Archives |access-date=December 24, 2019 |archive-date=September 20, 2022 |archive-url=https://web.archive.org/web/20220920225625/https://founders.archives.gov/documents/Hamilton/01-18-02-0181 |url-status=live}}</ref>

===Emergence of political parties===
{{further|Federalist Party|Democratic-Republican Party}}
[[File:T Jefferson by Charles Willson Peale 1791 2.jpg|thumb|upright=1|A 1791 portrait of Hamilton's political rival [[Thomas Jefferson]]]]

Hamilton's vision was challenged by Virginia agrarians [[Thomas Jefferson]] and James Madison, who formed the [[Democratic-Republican Party]]. They favored strong state governments based in rural America and protected by state militias as opposed to a strong national government supported by a national army and navy. They denounced Hamilton as insufficiently devoted to republicanism, too friendly toward corrupt Britain and the monarchy in general, and too oriented toward cities, industry and banking.<ref name=Henretta2011>{{cite book |first=James A. |last=Henretta |display-authors=etal |title=America's History, Volume 1: To 1877 |url=https://books.google.com/books?id=5PmY3sBubw8C&pg=PA207 |year=2011 |pages=207–208 |publisher=Macmillan |isbn=978-0-312-38791-4}}</ref>

The two-party system [[First Party System|began to emerge]] as political parties coalesced around competing interests. A congressional caucus, led by Madison, Jefferson, and [[William Branch Giles]], began as an opposition group to Hamilton's financial programs. Hamilton and his allies began to call themselves [[Federalist Party|the Federalists]].<ref>{{cite web |title=Madison to Jefferson |date=March 2, 1794 |url=http://memory.loc.gov/cgi-bin/ampage?collId=mjm&fileName=05/mjm05.db&recNum=591 |access-date=October 14, 2006 |quote=I see by a paper of last evening that even in New York a meeting of the people has taken place, at the instance of the Republican party, and that a committee is appointed for the like purpose |archive-date=November 14, 2017 |archive-url=https://web.archive.org/web/20171114125555/http://memory.loc.gov/cgi-bin/ampage?collId=mjm&fileName=05%2Fmjm05.db&recNum=591 |url-status=live}}</ref><ref name=Smith832>See also Smith (2004), p. 832.</ref>

Hamilton assembled a nationwide coalition to garner support for the administration, including the expansive financial programs Hamilton had made administration policy and especially the president's policy of neutrality in the European war between Britain and France. Hamilton publicly denounced French minister Genêt, who commissioned American [[privateer]]s and recruited Americans for private militias to attack British ships and colonial possessions of British allies. Eventually, even Jefferson joined Hamilton in seeking Genêt's recall.<ref name=Young2011>{{cite journal |last1=Young |first1=Christopher J. |s2cid=144349420 |date=Fall 2011 |title=Connecting the President and the People: Washington's Neutrality, Genet's Challenge, and Hamilton's Fight for Public Support |journal=Journal of the Early Republic |volume=31 |issue=3 |pages=435–466 |doi=10.1353/jer.2011.0040}}</ref> If Hamilton's administrative republic was to succeed, Americans had to see themselves first as citizens of a nation and experience an administration that proved firm and demonstrated the concepts found within the Constitution.<ref name="Cook2014">{{cite book |first=Brian J. |last=Cook |title=Bureaucracy and Self-Government |url=https://books.google.com/books?id=AUxjBAAAQBAJ&pg=PA56 |date=2014 |publisher=JHU Press |isbn=978-1-4214-1552-9 |pages=56–57}}</ref> The Federalists did impose some internal direct taxes, but they departed from most implications of Hamilton's administrative republic as risky.<ref>Balogh 2009, 72–110</ref>

The Republicans opposed banks and cities and favored the series of unstable revolutionary governments in France. They built their own national coalition to oppose the Federalists. Both sides gained the support of local political factions, and each side developed its own partisan newspapers. [[Noah Webster]], [[John Fenno]], and [[William Cobbett]] were energetic editors for the Federalists, while [[Benjamin Franklin Bache]] and [[Philip Freneau]] were fiery Republican editors. All of their newspapers were characterized by intense personal attacks, major exaggerations, and invented claims. In 1801, Hamilton established a daily newspaper, the ''[[New York Evening Post]]'', and brought in [[William Coleman (editor)|William Coleman]] as its editor.<ref name=Nevins1922>Allan Nevins, ''The Evening Post: A Century of Journalism'' (1922) [https://archive.org/details/eveningpostacen00nevigoog ch. 1 online]</ref> Hamilton's and Jefferson's incompatibility was heightened by the unavowed wish of each to be Washington's principal and most trusted advisor.<ref>Cooke, pp. 109–110</ref>

An additional partisan irritant to Hamilton was the [[1791 United States Senate election in New York]], which resulted in the election of Democratic-Republican candidate [[Aaron Burr]] over Federalist candidate Philip Schuyler, the incumbent and Hamilton's father-in-law. Hamilton blamed Burr personally for this outcome, and negative characterizations of Burr began to appear in his correspondence thereafter. The two men did work together from time to time thereafter on various projects, including Hamilton's army of 1798 and the [[Manhattan Water Company]].<ref>Lomask, pp. 139–140, 216–217, 220.</ref>