George Washington
National Bank

Washington's first term was largely devoted to economic concerns. Establishment of public credit became a primary challenge for the federal government. Hamilton submitted a report to a deadlocked Congress, and he, Madison, and Jefferson reached the Compromise of 1790 in which Jefferson agreed to Hamilton's debt proposals in exchange for moving the nation's capital temporarily to Philadelphia and then south near Georgetown on the Potomac River. The terms were legislated in the Funding Act of 1790 and the Residence Act, both of which Washington signed into law. Congress authorized the assumption and payment of the nation's debts, with funding provided by customs duties and excise taxes.

Hamilton caused controversy in Cabinet by advocating for the establishment of the First Bank of the United States. Madison and Jefferson objected to the idea, but legislation creating the bank easily passed Congress. Jefferson and Randolph insisted the federal government was going beyond its constitutional authority. Hamilton argued the government could charter the bank under the implied powers granted by the constitution. Washington sided with Hamilton and signed the bank legislation on February 25, 1791. The rift between Hamilton and Jefferson, meanwhile, became openly hostile.

The nation's first financial crisis occurred in March 1792. Hamilton's Federalists exploited large loans to gain control of U.S. debt securities, causing a run on the national bank; the markets returned to normal by mid-April. Jefferson believed Hamilton was part of the scheme, despite Hamilton's efforts to ameliorate.
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