Who was the first secretary of the treasury

Toward the end of 1788, New Yorkers elected Alexander Hamilton to represent them in the national Congress once again, and so Hamilton moved his family from New York to the capitol in Philadelphia. This particular Congress was the last to ever meet under the authority of the Articles of Confederation, and there was little for Hamilton to do in the area of national legislation. Instead, Hamilton focused his attention on convincing General George Washington to accept the nomination to become the first President of the United States under the Constitution. Washington accepted the nomination, but Hamilton was not satisfied because he feared that another candidate might try and campaign against Washington. To prevent this from happening, Hamilton waged a counter- campaign by asking to his political friends and colleagues to encourage their representatives in the Electoral College to vote for Washington. Hamilton's fears, however, proved to be unfounded. In April 1789, the Electors unanimously voted for Washington to be the first President, with Hamilton's political foe John Adams as his Vice President.

President Washington looked to people he knew and trusted to fill his small cabinet. Washington named Thomas Jefferson as his Secretary of State, Henry Knox as his Secretary of War, and Hamilton as his Secretary of the Treasury. Although Hamilton came to be known as the most important Secretary of the Treasury in U.S. history, he spent only five years in that position. Hamilton began his tenure as Secretary of the Treasury by drafting a report on the future of American economic stability entitled [A] Report on the Public Credit. This was the first of two such reports; the second was published just before Hamilton resigned from the cabinet in 1795. This first report outlined Hamilton's recommendation to the President and to Congress concerning the best methods to eliminate the national debt. By the time the Constitution came into effect in 1792, the United States had borrowed nearly forty million dollars from other countries and from individual speculators, and in addition to this principal, owed an additional fifteen million in interest. During the early years, some states had paid off their debts, but the majority of them had not. This accumulation of debt was a huge problem for the new nation.

New governments often try to cancel debts, but Hamilton stepped forward instead to encourage the U.S. Government to assume the debts of all the states and to pay them off in full along with the interest. Hamilton argued that if the new government did not pay its creditors in full, the United States would never be seen as a stable and reliable nation. His report said that the country must establish its trustworthiness and earn respect if it were ever to borrow money again. To pay off the debts, Hamilton planned to raise taxes throughout the country. Many politicians protested Hamilton's proposals, and states that had paid off their own debts resented that they had help pay the debt of other states. Other politicians felt only the principle should be paid, while still others cried out against the new taxes.

James Madison, who had once collaborated with Hamilton in authoring the Federalist Papers, lead the opposition Hamilton's proposals, and for several months their respective camps were deadlocked. Finally, Hamilton struck a bargain with Madison that changed history. At the time, the capitol of the United States had just moved from Philadelphia to New York City. Hamilton offered to convince Congress and the President to move the capitol south to a designated area near Virginia known as the District of Columbia. Hamilton believed that moving the capitol to a more southern location would allay Southern fears of tyranny from the North. Madison, Congress, and Washington accepted the proposal to relocate the seat of government, and arrangements were made to carry out the agreement. In exchange, Hamilton's policies on debt were enacted. For his work on the matter, the new Secretary of the Treasury was awarded an honorary law degree from Dartmouth College.

After he succeeded in clearing his program on the national debt through Congress, Hamilton turned to the urgent matter of the banking problem. Since his early days as a New York Assemblyman, Hamilton had advocated that a new national bank should be created to control the nation's wealth and finances. Now, as the head of the national treasury, Hamilton had more political weight, and in 1790 he presented a proposal to Congress to create a National Bank with one central branch and several regional branches throughout the country. The total initial worth of the bank would be ten million dollars, and capital would be exchanged for shares sold to the public. Although the National Bank would be independent from the government, Hamilton's plan also stipulated that the federal government would hold one fifth of the bank's total stock. Furthermore, the directors of the bank would be required to submit weekly transaction reports to the Secretary of the Treasury.

Congress liked Hamilton's proposal, but Secretary of State Thomas Jefferson and his political ally Madison stepped forward to argue that a national bank would be unconstitutional since the Constitution made no explicit provisions for such an entity. Immediately, a new and very serious problem concerning the interpretation of the Constitution emerged. Jefferson and the strict constructionists argued that the Constitution forbade whatever it did not expressly permit. Hamilton and the loose constructionists, on the other hand, argued that what the Constitution permitted whatever it did not expressly forbid. In the end, President Washington settled the dispute. Washington conceded that the Constitution had to be interpreted loosely at times in order to promote national well-being, and approved Congress's and Hamilton's desire to establish the national bank. Even though there were no true political parties at this point in time, the philosophical rift between Hamilton and Jefferson was clearly widening.

Hamilton then turned to writing his report On the Establishment of a Mint. Several currencies still floated throughout the country, some printed from the individual states, some from private banks, and others from the old government outlined by the Articles of Confederation. Hamilton convinced Congress to pass the Mint Act of 1791 to create a standard national currency. This proposal was met with almost no opposition.

The Department of Treasury is a cabinet department within the United States Executive Branch. It is managed by a secretary that is appointed by the president. The Department of Treasury was officially formed by the Treasury Bill (HR-9), passed on July 2, 1789. The bill was signed into law by President George Washington on September 2, 1789. The department’s mission is to improve, regulate and provide reports to Congress on the United States’ revenue, expenditures and public credit. 

During the Revolutionary War, the Continental Congress performed the essential responsibilities of the Treasury Department, by receiving funds from foreign loans and state contributors. However, without the power to tax, the currency received and printed by Congress quickly depreciated in value.

Robert Morris played a vital role in Treasury during and immediately after the war. A former merchant, Morris served in the Continental Congress and was appointed Superintendent of Finance in the spring of 1781. In this position, he compiled reports and accounts in order to restore public credit. Shortly after taking office, Morris proposed a Bank of North America, hoping the institution would oversee loans, treasury notes, and discounts on notes in the new American republic. While Congress approved Morris’ Bank of North America, he was unable to raise the $400,000 in capital necessary to start operations.  By the end of the war, Morris faced criticism for both Congress falling behind on its payments to Continental Army soldiers and his solution to the problem, collecting mandatory federal taxes from the states. In 1784, Morris resigned amidst accusations that he used his position for profiteering.

After Washington’s election as the first president, the First Federal Congress debated whether to have the Treasury controlled by a board or one secretary. Congress determined that a secretary should be appointed by the president in the Treasury Bill of 1789. Even before Congress had created the position, Washington offered Robert Morris the opportunity to be the first secretary of Treasury.  Morris declined the position, but recommended Alexander Hamilton. At first, Washington hesitated to appoint Hamilton because of his polarizing personality, but eventually decided on his appointment because of Hamilton’s financial expertise. During the Revolutionary War, Hamilton had advocated for a national bank and foreign exchange to strengthen the economy. On September 11, 1789, the Senate confirmed Hamilton as the first secretary of the Treasury. Under Hamilton, the Department of Treasury was the largest department in government with thirty-nine full-time employees.

The Bank Bill faced widespread opposition, including from Thomas Jefferson, then secretary of state, and James Madison, who served in the House of Representatives. Madison wrote to President Washington expressing his opposition to a National Bank because it provided power to the federal government not mentioned specifically in the Constitution. Washington would not support the Bank Bill until Hamilton responded to the arguments of Jefferson and Madison. Hamilton grounded authority for the bank in the “necessary and proper” clause of Article I, Section 8 of the Constitution: “to make all Laws which shall be necessary and proper for carrying into execution the foregoing powers and all other powers vested by this Constitution...
” Washington sided with Hamilton’s argument and signed the Bank Bill into law on February 25, 1791.

The debate over the National Bank ultimately fractured the government into the first political parties, the Democratic-Republicans led by Jefferson and Madison and the Federalist led by Hamilton. Despite this and later controversies, the Department of Treasury has played a vital role in ensuring the financial stability of the United States. Today, the Treasury works closely to regulate the economy with America’s modern central bank, the Federal Reserve, created by the Federal Reserve Act on December 23, 1913. For over two centuries, the Treasury Department has remained committed to improving and regulating the revenue and public credit of the United States, allowing the country to become the foremost financial power in the world.

Jonathan Adams

George Washington University

Links:

1. “Treasury Bill [HR-9]” last modified 1998;  “Act of Congress Establishing the Treasury Department,” U.S. Department of Treasury.

2. James Madison to George Washington,  21 February 1791,”The Papers of George Washington Digital Edition, ed. Theodore J. Crackel. Charlottesville: University of Virginia Press, Rotunda, 2008.

3. Alexander Hamilton, “Opinion on the Constitutionality of an Act to Establish a Bank,” February 23, 1791, enclosed in Alexander Hamilton to George Washington, 23 February 1791, The Papers of George Washington Digital Edition, ed. Theodore J. Crackel. Charlottesville: University of Virginia Press, Rotunda, 2008.

Bibliography:

 “Act of Congress Establishing the Treasury Department.” U.S. Department of Treasury. Accessed  November 18, 2015.

Chernow, Ron. Washington. New York: The Penguin Press, 2010.

Ellis, Joseph J. His Excellency: George Washington. New York: Alfred A Knopf, 2004. 

Elkins, Stanley and Eric McKitrick. The Age of Federalism. New York: Oxford University Press, 1993.

Ferguson, E. James. The Power of the Purse. Chapel Hill. The University of North Carolina Press, 1961.

“The Senate Passes the Federal Reserve Act,” The U.S. Senate  Accessed November 20, 2015, 

“Treasury Bill [HR-9].” last modified 1998, Accessed November 12, 2015

“Treasury History Overview.” U.S. Department of The Treasury. Accessed November 27, 2010