by Ron Chernow
Friends cautioned him against heading the Treasury Department, the activities of which would arouse latent memories of British rule. When Gouverneur Morris assured him that the treasury secretary would be exposed to special calumny, Hamilton replied that “it is the situation in which I can do most good.”67 In debating the Constitution, Hamilton knew that the issue of federal taxation and tax collectors had provoked the biggest brouhaha. As chief tax collector, he would be the lightning rod for inevitable discontent. In fact, everything that Hamilton planned to create to transform America into a powerful, modern nation-state—a central bank, a funded debt, a mint, a customs service, manufacturing subsidies, and so on—was to strike critics as a slavish imitation of the British model.
After chatting with Washington, Hamilton informed Robert Troup of the momentous news and asked if he would assume his legal business. Troup was glad to oblige but thought Hamilton was committing a serious error. He noted the financial sacrifice entailed by the annual salary of $3,500, far less than Hamilton was then earning as a lawyer. Troup recalled he remonstrated with Hamilton “on the ground of the serious injury his quitting the practice of the law would work to his family. At that time [Hamilton’s] fortune was very limited and his family was increasing.” Hamilton told Troup that he understood the financial sacrifice, but “he thought it would be in his power in the financial department of the government to do the country great good and this consideration outweighed with him every consideration of a private nature.”68 A man of irreproachable integrity, Hamilton severed all outside sources of income while in office, something that neither Washington nor Jefferson nor Madison dared to do.
Later on, Hamilton acknowledged that the Treasury job was the logical culmination of his long campaign for the Constitution. Having been part of the system’s gestation, “I conceived myself to be under an obligation to lend my aid towards putting the machine in some regular motion. Hence I did not hesitate to accept the offer of President Washington to undertake the office of Secretary of the Treasury.”69 Hamilton kept his appointment secret from all but a few friends while rivals maneuvered for the post. In late May, Madison told Jefferson that Robert R. Livingston coveted the Treasury job, but that Hamilton was “perhaps best qualified for that species of business” and stood a better chance.70 After losing the Treasury job, Livingston lobbied to become chief justice of the Supreme Court and lost that battle to John Jay. When he added in his family’s loss of the New York Senate seat, Livingston must have believed that Hamilton and Schuyler, if not the entire Washington administration, were unalterably hostile to his ambitions. In July, Hamilton recommended to Washington that Livingston be sent to negotiate a European loan, but this olive branch did not heal the breach between the two men.71
Throughout the summer, as word spread that Hamilton’s appointment was imminent, it caused a flurry of excitement among admirers in New England and elsewhere. But the official announcement was deferred until Washington signed the bill creating the Treasury Department on September 2. Then, on Friday, September 11, 1789, thirty-four-year-old Alexander Hamilton was officially nominated for the job. The appointment was confirmed by the Senate the same day. Hamilton hit the ground running: the very next day, he arranged a fifty-thousand-dollar loan for the federal government from the Bank of New York. The day after that, a Sunday, he worked all day at the Treasury’s new office on Broadway, just south of Trinity Church. He dashed off a plea to the Bank of North America in Philadelphia, asking for another fifty thousand dollars. Hamilton knew the symbolic value of rapid decision making and phenomenal energy. As he wrote during the Revolution, “If a Government appears to be confident of its own powers, it is the surest way to inspire the same confidence in others.”72 With support for the Constitution still tentative in some states, Hamilton knew that designing enemies lay in wait to destroy it. To succeed, the government had to establish its authority, and to this end he was prepared to move with exceptional speed. Alexander Hamilton never seemed to wander around in a normal human muddle. With preternatural confidence, he discerned clear solutions to the murkiest questions.
From the beginning, he faced pressure as wary creditors waited to see if the young treasury secretary could miraculously resurrect American credit. Only ten days after Hamilton was confirmed, the House of Representatives asked him to prepare a report on public credit, giving him a scant 110 days to respond. With this wind at his back, Hamilton took a giant, running leap in staking out his claim to leadership in Washington’s administration.
No other moment in American history could have allowed such scope for Hamilton’s abundant talents. The new government was a tabula rasa on which he could sketch plans with a young man’s energy. Washington’s administration had to create everything from scratch. Hamilton was that rare revolutionary: a master administrator and as competent a public servant as American politics would ever produce. One historian has written, “Hamilton was an administrative genius” who “assumed an influence in Washington’s cabinet which is unmatched in the annals of the American cabinet system.”73 The position demanded both a thinker and a doer, a skilled executive and a political theorist, a system builder who could devise interrelated policies. It also demanded someone who could build an institutional framework consistent with constitutional principles. Virtually every program that Hamilton put together raised fundamental constitutional issues, so that his legal training and work on The Federalist enabled him to craft the efficient machinery of government while expounding its theoretical underpinnings.
Because the Constitution made no mention of a cabinet, Washington had to invent it. At first, this executive council consisted of just three men: Hamilton as secretary of the treasury, Jefferson as secretary of state, and Henry Knox as secretary of war. The first attorney general, thirty-six-year-old Edmund Randolph of Virginia, had no department and received an annual retainer of $1,500 for an essentially consultative role. Viewed as the government’s legal adviser, the tall, handsome Randolph was expected to retain private clients to supplement his modest salary. Vice President John Adams was largely excluded from the administration’s decision-making apparatus, a demotion in power that could only have sharpened his envy of young Hamilton.
The concept of a cabinet took some time to mature. During his first three years as president, Washington seldom assembled his secretaries for meetings—as Hamilton later told the British minister, “We have no cabinet and the heads of departments meet on very particular occasions only”—and preferred to solicit their views separately.74 With only three executive departments, each secretary wielded considerable power. Moreover, departmental boundaries were not well defined, allowing each secretary to roam across a wide spectrum of issues. This was encouraged by Washington, who frequently requested opinions from his entire cabinet on an issue. It particularly galled Jefferson that Hamilton, with his keen appetite for power, poached so frequently on his turf. In fact, Hamilton’s opinions were so numerous and his influence so pervasive that most historians regard him as having been something akin to a prime minister. If Washington was head of state, then Hamilton was the head of government, the active force in the administration.
As in the Revolution, Hamilton and Washington had complementary talents. Neither could have achieved alone what they did together. Sometimes emphasizing the ceremonial side of his job, Washington wanted to be a figure above the partisan fray, retaining his aura as an embodiment of the Revolution. His detached style left room for an assertive managerial presence, especially in financial matters, where Hamilton stepped willingly into the breach. If Washington lacked the first-rate intellect of Hamilton, Jefferson, Madison, Franklin, and Adams, he was gifted with superb judgment. When presented with options, he almost invariably chose the right one. Never a pliant tool in Hamilton’s hands, as critics alleged, he often overrode his treasury secretary.
Washington and Hamilton also made an exceptional team because they offset each other’s personal weaknesses. Washington could be hypersensitive to cr
iticism and never forgot snubs, but he had learned to govern his emotions, making him a valuable foil to the volatile Hamilton. Hamilton could be needlessly tactless and provocative, while Washington was conciliatory, with an innate sense of decorum. Adams said that Washington possessed “the gift of taciturnity.”75 Hamilton’s mind was so swift and decisive that it could lead him into rash decisions. Washington’s management style was the antithesis of this. “He consulted much, pondered much, resolved slowly, resolved surely,” Hamilton later said of the president.76 Washington could weigh all sides of an issue and coolly appraise the political repercussions. “Perhaps the strongest feature in his character was prudence, never acting until every circumstance, every consideration, was maturely weighed; refraining if he saw a doubt, but, when once decided, going through with his purpose whatever obstacles opposed,” said Jefferson.77 Such a man could be counted on to temper his treasury secretary’s excesses.
Perhaps the main reason that Washington and Hamilton functioned so well together was that both men longed to see the thirteen states welded into a single, respected American nation. At the close of the war, Washington had circulated a letter to the thirteen governors, outlining four things America would need to attain greatness: consolidation of the states under a strong federal government, timely payment of its debts, creation of an army and a navy, and harmony among its people. Hamilton would have written the identical list. The young treasury secretary gained incomparable power under Washington because the president approved of the agenda that he promoted with such tireless brilliance. Jefferson had it wrong when he charged that Hamilton manipulated Washington. On fundamental political matters, Washington was simply more attuned to Hamilton than he was to Jefferson. For that reason, Washington willingly served as the political shield that Alexander Hamilton needed as he became America’s most influential and controversial man.
FIFTEEN
VILLAINOUS BUSINESS
As Alexander Hamilton began to stitch together his grand plan for a vigorous central government, the executive branch was still tiny and embryonic. On his first day at Treasury, Hamilton likely wandered through
a set of empty rooms; he soon installed an elegant mahogany desk with caryatids— female figures—carved into its spindly legs. He was to perform an amazing amount of work on that desktop. Hamilton employed no ghostwriters for his countless speeches, articles, and reports, and almost all of his letters have come down to posterity in his own hand.
As master of Mount Vernon, George Washington presided over a larger staff than he did as president. From the outset, Hamilton supervised the biggest department, which soon had thirty-nine employees, compared to five for State, generating instant fears that he was building a large bureaucracy as his personal power base. The pace at Treasury was positively torrid compared to that at War. “When [Henry] Knox arrived in New York City and took up his official duties,” notes biographer North Callahan, “he found little to do at first but become acquainted with his one secretary and one clerk, who at that time constituted the entire personnel of the War Department.”1 As the first treasury secretary, Hamilton had to devise rudimentary systems for bookkeeping, checking, and auditing, many of which endured for generations. Hamilton threw himself into the most mundane tasks, as if glorying in the managerial challenge. To pedestrians passing him in the street, the treasury secretary could seem an aloof, cerebral man, shut up inside his thoughts, seldom making eye contact with strangers. One New York newspaper joked that anyone hoping to be treasury secretary should “appear in the streets but seldom and then let him take care to look down on the pavement, as if lost in thought profound.”2
Few intervals of leisure relieved the work pressure of these first months. After Angelica left for England, Eliza and the children retreated to Albany, leaving Hamilton alone in New York, trapped beneath piles of work. “I am a solitary lost being without you all,” he wrote to Eliza, “and shall with increasing anxiety look forward to our reunion.”3 When Eliza returned later in the month, she and Alexander had the thrilling experience of going with George and Martha Washington to the John Street Theater to see Richard Brinsley Sheridan’s comedy The Critic. As the politicians entered, the orchestra struck up the “President’s March,” and the audience gave them a standing ovation. Eliza always remembered with amusement another time when a Miss McIvers showed up at one of Martha Washington’s receptions sporting an enormous headdress of ostrich feathers. When this fashion accessory caught fire from the chandelier, Major William Jackson, then an aide to the president, leaped to her side and extinguished the blaze by clapping the feathers between his hands.
Such outings were rare during Hamilton’s harried first days in office. He had to create a customs service on the spot, for customs duties were to be the main source of government revenue. During his second day in office, he issued a circular to all customs collectors, demanding exact figures of the duties accumulated in each state. When they sent back suspiciously low numbers, Hamilton, who knew something about smuggling from St. Croix, suspected that it must be rife along the eastern seaboard, leading him to the next logical step. “I have under consideration the business of establishing guard boats,” he told one correspondent in perhaps the first recorded allusion to what would turn into the Coast Guard.4
Hamilton’s appetite for information was bottomless. To his port wardens, he made minute inquiries about their lighthouses, beacons, and buoys. He asked customs collectors for ship manifests so he could ascertain the exact quantity and nature of cargo being exported. The whole statistical basis of government took shape under his command. In a significant decision, he decided that customs revenues could be paid not just in gold and silver but with notes from the Bank of New York and the Bank of North America, an innovation that began to steer the country away from use of coins and toward an efficient system of paper money.
Hamilton had always been punctual—“I hate procrastination in business,” he once said—and lost no time assembling a first-rate staff, imbued with a sense of public service.5 On the day he was nominated, five assistants, including auditor Oliver Wolcott, Jr., of Connecticut, were confirmed as well. When Samuel Meredith of Pennsylvania was appointed treasurer, the hard-driving secretary lectured him, “I need not observe to you how important it is that you should be on the ground as speedily as possible.”6
For his first assistant secretary, Hamilton picked his witty, elegant, vivacious friend William Duer, who had married Lord Stirling’s daughter, Lady Kitty. The choice of Duer was to have grievous consequences for Hamilton, for he was an inveterate speculator, and his later scandals besmirched Hamilton’s reputation. Duer had grown up in England and studied classics at Eton. After his father’s death, he worked as a teenager for the East India Company in Bengal, where the climate injured his health. After spending time on a family plantation in Antigua, he bought land in upstate New York, not far from the Schuyler property in Saratoga, and sold lumber to the British Navy. Because he had befriended Myles Cooper in England, Duer came to know Hamilton while he was still studying at King’s College.
The association with Duer became so supremely damaging to Hamilton that it later mystified many friends. But the two men were compatible in their political opinions and ebullient style, and Duer’s résumé amply qualified him for the job. While still in England, he had been an outspoken Whig who championed the colonists’ grievances and plumped for reforms to avert a revolt. During the Revolution, he supplied goods to the Continental Army, served in the Continental Congress, and attended the convention that drafted the New York State Constitution. He was smart enough that Hamilton had recruited him to write essays for The Federalist, only to reject his two submissions. At the time Hamilton picked him, Duer had just completed three years as secretary to the old Board of Treasury. In 1789, Hamilton cajoled him into staying on by creating the assistant secretary post expressly for him.
Unfortunately, William Duer suffered from a severe case of moral myopia and always found rather blurry the l
ine between public service and private gain. That autumn, Hamilton was about to make decisions that would dramatically affect the value of outstanding government securities, so secrecy and integrity were obligatory among his colleagues. It later turned out that Duer had been assembling a huge stake in government securities for several years. Among other faults, the indiscreet Duer babbled to his cronies about Hamilton’s scheme for funding government debt—the sort of priceless insider gossip that moves markets. Just a week after Hamilton took office, Noah Webster sent to a speculator in Amsterdam secret details of the treasury secretary’s funding scheme, attributing them to “the outdoor talk of Col. Duer, the Vice-Secretary.”7 Senator William Maclay, a tireless if dyspeptic diarist, recorded rumors of congressmen speculating in state debt and said that “nobody doubts but all commotion originated from the Treasury. But the fault is laid on Duer.”8
Unfortunately, Duer’s actions fed unjust scuttlebutt that the new Treasury Department was a sink of corruption. In reality, as soon as he took office, Hamilton established high ethical standards and promulgated a policy that employees could not deal in government securities, setting a critical precedent for America’s civil service. Hamilton divested himself of any business investments that might create conflicts of interest. Even later, as a private citizen, he said that his own “scrupulousness” had prevented him from “being concerned in what is termed speculation.”9 This made his blindness to Duer’s shameless machinations the more bewildering. Hamilton was an extremely perceptive judge of character, and William Duer was one of the few cases in which his acute vision seems to have been blinkered.