On June 17th, Treasury Secretary Jack Lew shocked many, including former Chairman of the Federal Reserve Ben Bernanke, when he proclaimed that Alexander Hamilton (1755-1804) – the first and foremost Treasury Secretary – would be demoted and share the ten-dollar bill with a yet unnamed woman. Undaunted by wide-spread criticism, Secretary Lew continued to press his case at an event at the Brookings Institution on July 8th. Asked about the ten-dollar bill’s selection, Secretary Lew insipidly claimed that the ten-dollar bill was the “next up” for redesign to help combat forgery. The diminution of Hamilton, for whatever reason, is simply indefensible.
Just how great was Hamilton? A recent scholarly book by Robert E. Wright and David J. Cowen, Financial Founding Fathers: The Men Who Made America Rich, begins its pantheon of greats with a chapter on Alexander Hamilton. It is aptly titled “The Creator.”
After the Constitution was ratified and George Washington was elected President, the new federal government lacked credibility. Public finances hung like a threatening cloud over the government. Recall that paper money and debt were innovations of the colonial era, and that, once the Revolutionary War began, Americans used these innovations to the maximum. As a result, the United States was born in a sea of debt. A majority of the public favored a debt default. Alexander Hamilton, acting as Washington’s Secretary of the Treasury, was firmly against default. As a matter of principle, he argued that the sanctity of contracts was the foundation of all morality. And as a practical matter, Hamilton argued that good government depended on its ability to fulfill its promises.
Hamilton won the argument and set about digging the country out of its financial debacle. Among other things, Hamilton was – what would today be called – a first-class financial engineer. He established a federal sinking fund to finance the Revolutionary War debt. He also engineered a large debt swap in which the debts of individual states were assumed by the newly created federal government. By August 1791, federal bonds sold above par in Europe, and by 1795, all foreign debts had been paid off. Hamilton’s solution for America’s debt problem provided the country with a credibility and confidence shock.
Doesn’t the 76th Secretary of Treasury have better things to do than to diminish the presence of our 1st and most distinguished Secretary of Treasury?