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HistoryCentral.com > American History > New Nation > Major Events > 1790 Assumption of Debt
The federal government agreed to redeem the debts of individual states. Debt assumption was supported by Hamilton, but opposed by Madison, who said it rewarded speculators. It was also opposed by a number of key states, such as Virginia, who had repaid all their debts. In order to put the new Federal government on sound footing, Hamilton felt it necessary to redeem the federal debt. He proposed that the federal government take over all of the federal debt, a debt totaling $52 million. In addition, Hamilton suggested that the United States also repay the states' debts, which totalled $25 million. There were substantial objections to Hamilton's proposals. First, Madison and many others claimed that federal repayment of debts would only help the speculators, since much of the original debt had been sold to them below par. Madison suggested that the debt be paid in full only to those who had originally issued the debt and that speculators be paid only 50% of face value. Second, many of the Southern states opposed the repayment of states' debts, since they had already repaid their own debts. A compromise was reached when Hamilton agreed to support the movement of the nation's capital from Philadelphia, which was considered a Northern city, to Washington, D.C., a southern location on the border of Virginia. |
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