So it was Hamilton who emerged as secretary of the treasury on September 11, 1789, and he wheeled into action, selecting five assistant secretaries to serve him. The most notable was the skillful but dubious William Duer, who’d served on the previous Board of the Treasury under the Articles. Hamilton’s staff would soon swell to thirty-nine, more than War and State combined. (At War, Henry Knox had just two.) When the government moved to Philadelphia the next year, the Treasury would cover an entire city block. Even as a military man, Washington could see that America would never be established by military power, but, as Hamilton would have it, by flourishing ports, fluid interstate commerce, ever-expanding markets, reliable currency, manageable debt, good credit, and the stout faith all of this would convey on both sides of its borders. At thirty-three, Hamilton made his youth an advantage, as he wasn’t confined by tradition or pretense, was indefatigable, refused to stand on ceremony, and was as keen on the details of proper accounting as on the broadest principles of economic theory.
The first order of business was revenue, needed to stave off looming bankruptcy. That meant building a proper customs service at all American ports to collect the duties due the government. Remembering the deceptions of sea captains in Saint Croix harbor, Hamilton made sure his customs officers compared the ship’s manifests to the actual cargo and reported any discrepancies to the local district attorney. To limit smuggling, he had cutters built to patrol the coast for illegal cargo drops.* He had his men census all of America’s lighthouses, beacons, and buoys and record their state of repair. And he tallied the full value of all of the nation’s exports.
Such a clear-minded approach could push away the inherent gloom of economics in the minds of most congressmen. As Massachusetts congressman Fisher Ames told his colleagues, the subject “presents to the imagination a deep, dark, and dreary chaos; impossible to be reduced to order without the mind of the architect is clear and capacious, and his power commensurate to the occasion; he must not be the flitting creature of the day.” Hamilton would certainly not be that. When a newspaperman spotted Hamilton on a New York street one evening, he was struck by how much the secretary’s normally brisk pace was slowed, his head tipped down; he was obviously deep in thought.
His step was heavier when Betsey and the children were away in Albany, as they often were in those first fall months, and it was heavier still when the delightful Angelica left that October. A decade into knowing her, his ardor burned as fiercely as ever, and his letters to her conveyed his desire with stunning openness that Angelica never quite matched. Declaring that her husband’s “head was full of politics,” having just been elected a member of the British Parliament, Angelica flirtatiously told Hamilton she wished her husband “possessed your eloquence.”
Angelica returned alone to New York just before Washington’s inauguration, and Hamilton could scarcely contain his excitement. At a ball, a garter of hers slid down from her thigh and onto the floor as she was dancing, and Hamilton gallantly swept it up in his fingers and then held it out before her. Angelica teased him that he must be a “Knight of the Garter,” to which Angelica’s sister Peggy wickedly added, “He would be a Knight of the Bedchamber if he could.”
Hamilton was crushed that fall when one of Angelica’s children fell sick back in London, and she felt obliged to immediately book passage home. He was at the wharf to see her off. “We gazed, we sighed, we wept,” he wrote her afterward. “Amiable Angelica, How much you are formed to endear yourself to every good heart,” he continued wistfully. “How deeply you have rooted yourself in the affections of your friends on this side of the Atlantic! Some of us are and must continue inconsolable for your absence.”
Betsey loyally seconded her husband’s sentiments in her own letter. “I have seated myself to write to you,” she began, “but my heart is so saddened by your absence that it can scarcely dictate, my eyes so filled with tears that I shall not be able to write you much.” She, too, longed for her sister’s return, but she wanted her to broaden her attention. “Tell Mr. Church for me,” Betsey wrote her sister, “of the happiness he will give me in bringing you to me, not to me alone, but to fond parents, sisters, friends, and to my Hamilton, who has for you all the affection of a fond own brother.”
Next, Hamilton turned to the country’s prodigious debt. It had already led to that frightening citizens’ revolt, Shays’ Rebellion, in the hill country of Massachusetts. That one had finally been crushed by the state militia, and the leaders sentenced to be hanged, only to be pardoned by Washington. (One conspirator was forced to stand at the gallows with a noose tight about his neck, awaiting a drop that never came.) But it wasn’t just Massachusetts that was buried in debt. Ever exacting, Hamilton calculated the existing national debt (foreign and domestic) to the penny—54,124,464.56 dollars, with an annual interest of 2,239,163.09 dollars. The map of insolvency across the states was a patchwork, but it lay mostly to the north, with the two largest states, New York and Pennsylvania, on the verge of bankruptcy. Southern states had a much lighter load, as they saw less of the war, and many had paid off their debt completely. The divisions threatened to tear the country apart, as it pitted large states against small ones, North against South, the investment class against the working class, city against countryside, and shrewd bond buyers against gullible soldiers who’d unwisely sold their war bonds.
Hamilton had been contemplating this issue since the war, when he was appalled that it was so underfunded by the government waging it. He’d read that, a century before, England had nationalized its debt through the Bank of England and then used the credit to create the imperial navy that built a vast empire. Might not the United States use credit to do the same? Not to build warships, but to construct canals, ports, roads, all the elements needed for America’s commercial development. To show this debt would not be held in perpetuity, he would add “sin taxes” on stimulants like Madeira wine (thirty cents a gallon) and distilled spirits (twenty).
Just three months into his tenure Hamilton wrote his epochal Report on the Public Credit—forty thousand words long, dense with statistics, and overflowing with argument—and did it, as usual, by himself in his tidy longhand. Knowing the report was likely to be momentous, speculators had besieged him for advance word of his plans, and friends waylaid him for inside information, but he said not a word. Still, bond values soared by fifty percent in a matter of weeks on a prairie fire of rumors. Following protocol, the lengthy report was finally read out by a clerk to the congressmen jammed into the lower chamber of Federal Hall, the gallery stuffed with rapt spectators. In the report, the author—Hamilton—referred to himself as “he,” or “the Secretary of the Treasury,” creating a royal penumbra that he may not have minded. As ever, he relied heavily on the rhetoric of certainty. “States,” he intoned, “like individuals, who observe their engagements are respected and trusted, while the reverse is the fate of those who pursue opposite conduct.” Or, “In proportion as the mind is disposed to contemplate, in the order of Providence, an intimated connection between public virtue and public happiness, will be its repugnancy to a coalition of those principles.” Burr’s public speaking was always conversational—personal and colloquial. Hamilton’s was oratorical—universal and timeless, if occasionally rather dense. It was a style he’d first tapped into publicly at nineteen for “A Full Vindication of the Measures of the Congress”—when he took on a loyalist’s economic arguments against the war—and had been growing into ever since, but at points it still seemed one size too large.
The dead certainty in such complex matters was as reassuring to his friends as it must have been exasperating to his enemies, but impossible to dismiss either way. Throughout the reading, the congressmen remained silent, scarcely stirring, as they strained to make sense of all the abstruse economics that, for all of Hamilton’s efforts at clarity, still seemed slightly out of reach. When the clerk was finished, there was a long, meditative pause before anyone spoke, but then
the hall broke into a buzz that didn’t stop for months. Several members of Congress emerged from the hall stupefied, incredulous at what seemed to them to be black magic.
They weren’t completely wrong. For Hamilton was proposing a kind of alchemy that would transform a debt that had been a cause of shame and anxiety in the states into a public resource that could instill pride and confidence in the nation. The nation would assume the debt left over from the revolution, add its own international debt, and create a new fiscal entity, the public credit, that would issue bonds that could be bought and sold like stock—or pigs, or whiskey, or lumber, or anything else. Debit became credit; something owed became something owned. Nothing became something. It was head spinning. And most dramatically of all, that nothing would become the foundation of the new nation, the rock on which its future would be built.
It was almost too much. Benjamin Rush, the physician who had a second life in politics, reported himself “sicken[ed] at such vile notions.” Debt was a pox on the nation, as it “begets debt, extravagance, vice and bankruptcy.” Whatever the doubts of congressmen, speculators believed, and they quickly bid up the price of the bonds that made up this financial bedrock. One congressman claimed that three boatloads of speculators had immediately sailed south to scoop up the paper of the unsuspecting. It was Daniel Webster who came closest to grasping the truth of the matter, as he observed much later: “The fabled birth of Minerva from the brain of Jove was hardly more sudden or more perfect than the financial system of the United States as it burst forth from the conception of Alexander Hamilton.” If the Declaration created the spirit of America, and the Constitution its laws, Hamilton’s report created its system of finance. Further, if power is the ability to create and destroy wealth, his report made Hamilton the most powerful man in America. It unleashed a speculative frenzy, a bloodlust of greed that pushed America into the future and, arguably, has never stopped.
But of course it was one thing to bring forth a department report, and another to convert it into a law that would clear both houses of Congress. The political obstacles were nearly overwhelming. The bill of assumption, as it was called, was to turn the Report on the Public Credit into policy. In doing so, it ran into some heavy politics, as it inevitably favored northern states over southern ones, since the southern states had largely paid off their debts. And it favored the reviled speculators who’d bought the notes from the patriotic soldiers who had originally received them for their service to their country—or so went the rhetoric. While the bill was meant to unify the country by making the debt that went to creating the nation a national obligation, it was divisive in most other ways, underscoring the growing tensions between Federalists and Anti-Federalists by exposing what lay underneath: a yawning divide between the classes. For the first time, the nation had to see that every economic development made winners and losers. Assumption would heap joy on those who’d bought bonds and drop ashes on those who’d sold them.
By creating the economic basis for a strong central government, Hamilton’s report made real the federalism evoked by the Constitution. And it created a party that believed in it—and made Hamilton that party’s leader. Washington might be the apolitical king, but Hamilton was the highly political prime minister, and he would wield the greater power both to design policy and to execute it. Typically, Washington voiced no opinion on assumption, preferring to let his surrogates in the cabinet hash it out. He’d already suffered from a “malignant carbuncle” that had to be gouged out. The surgeon’s knife plunged deep below the skin as Washington sat utterly immobile—a procedure so agonizing that Mayor Duane had hay strewn on the sidewalk to muffle any irritating clatter of passersby. Now, at this critical juncture, Washington fell gravely ill with pneumonia, drawing all the deeper into the silence that nearly always engulfed him. He was a majestic figure, but a remote one.
That left Hamilton to lobby frantically for the measure largely alone, buttonholing one congressman after another. “Mr. Hamilton is very uneasy,” the gossipy Pennsylvania congressman William Maclay reported in his diary, “about his funding system. He was here early to wait on the Speaker and I believe spent most of his time running from place to place among the members.” Hamilton knew the stakes. On the other side was Madison, his onetime confidant who was now, to Hamilton, a shocking apostate who would sacrifice the national prosperity for crass political advantage. Hamilton complained that Madison had become “personally unfriendly” to him and had conveyed “unfavourable impressions” to others. Then he added: “The opinion I once entertained of the candour and simplicity and fairness of Mr. Madison’s character has, I acknowledge, given way to a decided opinion that it is one of a peculiarly artificial and complicated kind.” Translation: Our friendship is dead.
Madison had his reasons. He argued that the original bondholders shouldn’t be deprived of the profits after unscrupulous speculators outwitted them. “There must be something wrong, radically and morally and politically wrong,” he declared, “in a system which transfers the reward from those who paid the most valuable of all considerations, to those who scarcely paid any consideration at all.” But Hamilton argued it wasn’t up to the government to save those luckless original bondholders from their misfortune, or to compensate them afterward, if indeed those owners could ever be found. If investors weren’t allowed to keep their winnings, who would ever invest? When Madison forced a vote on that portion of the issue, he lost thirty-six to thirteen. He had not distinguished himself. “A creature of French puffs,” Adams called him. But Hamilton didn’t have the votes either. It made for an anxious time.
TWENTY-SIX
Another Long Nose
IN THESE YEARS of power, Hamilton had a protean ability not just to make enemies, but to create them out of that swirl of contradictory emotions that defines most politicians. As the New York attorney general, Burr was still outside Hamilton’s ken. To Burr, the fight for assumption might as well have been occurring in China. For now, it was Madison who embodied all evil in Hamilton’s mind. Soon it would be Jefferson, the secretary of state. Jefferson was maddeningly difficult to define when he joined the government in 1790. Washington was fairly desperate to have him, but Jefferson was standoffish and, when he finally agreed, took months actually to show up in New York, a year into the presidency, arriving at his abode on Maiden Lane with eighty-six crates jam-packed with French furniture and other pieces of European high culture. Jefferson never did fully declare himself on the subject of the Constitution, saying vaguely that he approved of some parts but not others, and, although the topic of the assumption raged across the country, he didn’t offer an opinion on it, either.
Writer, architect, aesthete, scholar, Francophile, faux commoner, slaver, spendthrift, sensualist, he was so multifaceted as to disappear into a dazzling blur, like a French chandelier. He was a sharp writer, but one who was as good at expressing what he did not believe as what he did. Thus he could pen a sublime tribute to liberty and equality in the Declaration and be an unrepentant slaveholder who allowed an eleven-year-old black child to be whipped for failing to give good service in his Monticello nailery. He could be even more enigmatic in person. He rarely spoke “three sentences together,” as John Adams complained about him in Philadelphia in 1776, or ever looked anyone in the eye. Rather than shake hands in the new custom, he bowed, avoiding physical contact, like Washington. And there was something disdainful about the way he lounged on a sofa, his long torso contorted, his gangly legs askew, as if he wasn’t inclined to give others room, or care what they thought. He sucked out the secrets of the voluble, like Hamilton, to deploy later to their disadvantage. Like Burr, he craved being in the know. “We must fall on some scheme of communicating our thoughts to each other, which shall be totally unintelligible to everyone but to ourselves,” he once wrote his friend John Page. He hoarded gossip but was so fanatical about preserving his privacy that his relationship with his slave Sally Hemings remained unconfirmed for two centuries.
And there was this: Hamilton sang only for others; Jefferson sang for himself, lightly, even when he was reading.
War of Two : Alexander Hamilton, Aaron Burr and the Duel That Stunned the Nation (9780698193901) Page 22