Hamilton establishes a modern financial system

Image: The First Cabinet, by Thomas Phillibrown and Alonzo Chappel, Meyers Collection, Redwood Library & Athenaeum. Click on the image to view the object record in Newportal.

In 1789 George Washington appointed Alexander Hamilton as first Secretary of the Treasury. After the Revolutionary War, the United States was under tremendous debt to European allies and banks, much of which was not being repaid. To address this problem, the Federal legislature passed the Tariff Act of 1789, which imposed duties on imported goods, thereby raising federal revenue and protecting domestic industry and trade from foreign competition. Furthermore, in 1790 Hamilton recommended federal assumption of all state debt to be paid at a common rate, regardless of the creditor. Later that year, Hamilton proposed creating a national bank to manage federal funds and debt, issue loans, and to regulate the national supply of money. These proposals lead to the establishment of federally enforced trade regulations and a modern economic infrastructure, which laid the groundwork for American capitalism in the centuries to follow.

Newport Connection

Prior to the Revolution, Newport was an epicenter of colonial trade. Its long history collecting duties on foreign goods dates back as early as 1641. Newport’s first Customs House, established in 1682, was responsible for collecting duties on behalf of the British Crown. When Rhode Island ratified the Constitution in 1790, Congress passed an act that extended provisions of the Tariff Act of 1789 over Rhode Island. Newport and Providence were designated ports of entry, and the Treasury assigned each port a Collector of Customs, Naval Officer, and Surveyor. Newport’s Customs House was at that point under federal jurisdiction, and William Ellery was appointed Collector of Customs. This April 11, 1791 letter from Hamilton to Ellery illustrates the new federal influence in trade regulation. Hamilton clarifies the law regarding payment of drawbacks (duties remitted for goods exported) and admits that it poses an “inconvenience to trade,” but he suggests “[it is] not improbable the legislature will provide a remedy in some future act.”

Read the letter below: