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Revolutionary War soldiers had been paid for their service with paper IOUs whose postwar value plummeted in the 1780s as it seemed increasingly unlikely that the Articles of Confederation government would ever redeem them. Strapped for cash in the hard economic times, many desperate veterans sold off their notes to speculators - principally urban merchants well stocked with hard coin - who snapped them up for as little as ten cents on the dollar. These speculators well knew that plans were afoot to strengthen the federal government, thus enhancing its capacity to (among other things) pay its debts. Many were themselves key participants in these initiatives, which came to fruition with ratification of the Constitution.

Speculation in the debt accelerated with the establishment of a new government, and again with Hamilton's appointment as its Treasury Secretary, as he was determined to fund the outstanding obligations - issue new notes to replace the old - at full face value plus accumulated interest, handing a massive windfall profit to those who'd bought on the cheap. One of the biggest speculators was William Duer, Hamilton's number two at the Treasury, who passed along to his cronies (and foreign backers) what Chernow calls "the sort of priceless insider gossip that moves markets". Another market emerged in notes issued by the individual states, which Hamilton intended to have the federal government assume. Amid [Chernow again] an "atmosphere of contagious greed," speculators in the know dispatched agents to backwoods areas to scoop up depreciated state paper from those out of the loop.

Hamilton formally presented his Report on Public Credit to Congress in 1790, precipitating a firestorm of opposition, led by Jefferson and James Madison, precisely on the grounds that his funding and assumption plan was not "fair". Madison thought speculation in the debt was "wrong, radically & morally & politically wrong." Jefferson believed "speculators had made a trade of cozzening [notes] from the holders by the most fraudulent practices," and that "immense sums were thus filched from the poor and ignorant...." Both urged splitting the windfall profits between current and original holders.

Hamilton responded that veterans who had sold out were entitled to nothing further, having shown insufficient faith in the country's future, while speculators, having risked their capital, should be rewarded accordingly. He knew full well that their risk had been minimal (especially in the case of insiders), and that many were [in Chernow's words] "mercenary scoundrels." But Hamilton was dead set on rehabilitating the fledgling country's battered credit rating, and regaining access to local and foreign capital markets. He believed this required guaranteeing "security of transfer" - the right of those who bought government paper to all subsequent profit or loss.

Hamilton's position is a defensible one, especially if one uses a Leninist moral calculus that privileges the systemic over the individual, the long range over the short term, but that doesn't mean his opponents' claims to superior "fairness" can simply be ignored. Nor can his critics be dismissed out of hand as financial pre-moderns, fearful of money and credit, not least because their reservations were as much political as economic. As Chernow notes, "Jefferson did not exaggerate Hamilton's canny capacity to clothe political objectives in technical garb. There were hidden agendas buried inside Hamilton's economic program, agendas that he tended to share with high-level colleagues but not always with the public."

Those who denounced Hamilton's funding and assumption proposals, as well as his establishment of a national bank, feared he was out to forge a class of "paper aristocrats" - a financial elite, tightly linked to a powerful Treasury. (As Adams argued, "paper wealth has been the source of aristocracy in this country, as well as landed wealth, with a vengeance.") And they were right. Hamilton's goal was to grapple to government a phalanx of the new nation's wealthiest citizens, by giving them a powerful stake in its success and longevity. Again, an understandable strategy, but again, the fear of Jefferson and many others - that the government-backed rich might prove a menace to republican government - was equally understandable and should be acknowledged.

Finally, the claim that Hamilton's financial program saved the country from becoming a backward banana republic is untenable. Yes, funding and assumption had important ramifications, particularly in opening the way for new foreign loans, though their immediate legacy was a mountain of debt that would soon have become unsupportable had revenues not arrived. Revenues - the byproduct of prosperity and economic growth - did arrive beginning in the mid 1790s, increasing dramatically in the late '90s and early 1800s. But the influx was the result, not of Hamiltonian wizardry, but of the outbreak of the Napoleonic Wars in 1793, which generated a massive European demand for neutral America's grain, and of England's burgeoning industrialization, which generated a massive demand for American (slave-produced) cotton. Booming agricultural exports made growing imports possible, and with them an abundant flow of tariff-generated funds to the Treasury (customs duties constituted 94% of federal income in 1795). Here and elsewhere, the exhibit misleads by focusing too myopically on Hamilton's Life, and paying insufficient attention to his Times.3