Hamilton’s proposed funding system was heavily criticized. Because most government bonds had been sold off to speculators, critics like James Madison believed that the original holders, mainly Revolutionary War veterans, were being cheated out of their fair reward.
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Madison's Argument:
Madison's Speech to Congress, February 11, 1790
one of three things must be done; either pay both, reject wholly one or the other, or make a composition between them on some principle of equity ...[7] |
A composition, then, is the only expedient that remains; let it be a liberal one, in favor of the present holders; let them have the highest price which has prevailed in the market; and let the residue belong to the original sufferers. This will not do perfect justice; but it will do more real justice, and perform more of the public faith, than any other expedient proposed.[8] |
Madison's Defeat:
Hamilton thought that any attempt to repudiate the debt or discriminate between its original and present holders would be not only unjust to those who had taken the risk of purchasing the securities but ruinous to the honor and credibility of the nation.[9]
[James] Madison's matter was over before I came down, and a poor show his party made. The obstinacy of this man has ruined the opposition. The Secretary's report will now pass through, perhaps unaltered.[10] |
the motion for a discrimination was negatived by a great majority - the subject of assuming the State debts is now under discussion. |