only one of many steps which remained to be taken before the new government was in working order. Hamilton hurried back to the Federal Congress, and carried an ordinance fixing the dates and the place for putting the new government in operation. When he returned to New York, he was beaten for reëlection to Congress, and Governor Clinton and his party retained such a firm grip upon the legislature that a deadlock occurred between the Federalist House and the opposition Senate. New York was unrepresented in the first electoral college, and had no senators at the meeting of the First Congress. The state elections which followed resulted in defeat for the Federalists in the election of the governor, but they carried the legislature and elected two senators,—General Schuyler and Rufus King. King had recently come from Massachusetts, and Hamilton's insistence that he should be chosen caused a breach with the Livingstons, which contributed to the defeat of Schuyler two years later and the election of Aaron Burr. Hamilton's course in this matter was one of many cases in which he showed that he was not an astute politician, nor an adept at dealing with men. His highest qualities were those more distinctly intellectual, which led him to drive straight towards a desired object, with little patience for smaller men or the obstacles which stood in his way.

III
ESTABLISHING THE PUBLIC CREDIT

The great work of Hamilton, which was to stamp his name forever upon American history and our frame of government, was yet before him. Washington was inaugurated in April, 1789, but it was not until September 2 that an act passed Congress establishing the Treasury Department. Hamilton was the selection of Washington for the new post. It was a selection so well approved by all who were familiar with Hamilton's great abilities as an organizer and financier that the nomination was confirmed on the day that it reached the Senate. The studies of many years, the programme which had been outlined in letters to Morris and in the newspapers, were now to bear fruit under the directing genius of Hamilton. Only ten days passed after his appointment before Congress requested him to prepare a report upon the public credit. Then came calls for reports on the collection and management of the revenue; estimates of receipts and expenditures; the regulation of the currency; the navigation laws; the post-office, and the public lands. Money had to be found at once for the pressing needs of the new government before the more elaborate projects of the young minister of finance could be put in operation. But Hamilton did not delay long even for the more important and permanent work. When Congress met in January, he submitted his celebrated report "On Public Credit," which laid the corner-stone of American finance under the Constitution.

This report of Hamilton's on the public credit has long stood out as one of the master state papers of American history. Read to-day in the light of the economic progress of more than a century, its conclusions are not entirely novel, but are in the main clear and sound. To obtain a proper perspective regarding their value, the mind should be projected back to the beginning of 1790, when political economy as a science had barely been born, and the work of Adam Smith, although about fourteen years old, was probably known to but few in America. Many public men of to-day with the proper preliminary training might evolve as sound a report as that of Hamilton, but no ordinary man could have done it a hundred and ten years ago, and few men could do it to-day with the force of diction, precision and directness of statement, the grasp of principles, and the mastery of detail which marked the work of Hamilton.

He seemed to gather in his hands all the tangled threads of the disordered finances of the Continental Congress and of the states and show how they could be woven into a band of strength and symmetry, holding together by the motive of enlightened self-interest all the parts of the new Union. He proposed to plant the public credit upon a firm foundation, satisfy the public creditors, and put the nation on the high road to industrial and financial progress. The difficulties which Hamilton confronted were not merely a bankrupt Treasury and a loose system of finance under the federal government, but large expenditures by the states for carrying on the Revolutionary War, for which reimbursement was demanded by the states which had spent the most and was opposed by those which had spent the least. Hamilton endeavored to show that all would gain by the assumption of these debts by the federal government. Although a thinker rather than a tactician, he was shrewd enough to make an appeal early in his report to all men engaged in industry by pointing out the importance of public credit upon the volume and profits of private business. He endeavored first to make clear the benefit to any government of a sound fiscal system. He said upon this point:—

"As, on the one hand, the necessity for borrowing in particular emergencies cannot be doubted, so, on the other, it is equally evident that to be able to borrow upon good terms, it is essential that the credit of a nation should be well established. For, when the credit of a country is in any degree questionable, it never fails to give an extravagant premium, in one shape or another, upon all the loans it has occasion to make. Nor does the evil end here; the same disadvantage must be sustained upon whatever is to be bought on terms of future payment. From this constant necessity of borrowing and buying dear, it is easy to conceive how immensely the expenses of a nation, in the course of time, will be augmented by an unsound state of the public credit."

Taking up the demonstration how closely the public credit is linked with the fortune of the individual, Hamilton points out that public securities are a part of the medium of exchange, that sound credit will extend trade by preventing the export of money, and that agriculture and manufactures will be promoted because "more capital can be commanded to be employed in both," and that the interest of money will be lowered.

Hamilton took up and punctured in his report several fallacies regarding the treatment of the debt which had obtained lodgment in the public mind and threatened to influence the action of Congress. One of these was that a distinction should be made between those holders of the debt to whom it was originally issued and those who had acquired it by purchase. As the latter holders had bought the debt in some cases at a mere fraction of its face value and for speculative purposes, the specious argument was made that they were entitled in the settlement with the government only to what they had paid the original holders. Hamilton set himself to dissipate this prejudice by showing that the man who had been willing to purchase the public debt might be quite as patriotic as the man who had parted with it for a price. He suggested that if the debt was thus purchased in the confidence that it would rise to par, the act was a proof of the patriotism of the purchaser, and it would be a sorry return for this confidence to make it a reason for discrimination against him.

But much more important from the public point of view, he pointed out, was the sanctity of contracts guaranteed by the new Constitution, and absolutely required to give a stable character to the securities of the