First Bank of the United States
Philadelphia, PA, USAWashington's first term was largely devoted to economic concerns, in which Hamilton had devised various plans to address matters. The establishment of public credit became a primary challenge for the federal government. Hamilton submitted a report to a deadlocked Congress, and he, Madison, and Jefferson reached the Compromise of 1790 in which Jefferson agreed to Hamilton's debt proposals in exchange for moving the nation's capital temporarily to Philadelphia and then south near Georgetown on the Potomac River. The terms were legislated in the Funding Act of 1790 and the Residence Act, both of which Washington signed into law. Congress authorized the assumption and payment of the nation's debts, with funding provided by customs duties and excise taxes.
Hamilton created controversy among Cabinet members by advocating establishing the First Bank of the United States. Madison and Jefferson objected, but the bank easily passed Congress. Jefferson and Randolph insisted that the new bank was beyond the authority granted by the constitution, as Hamilton believed. Washington sided with Hamilton and signed the legislation on February 25, and the rift became openly hostile between Hamilton and Jefferson.
The nation's first financial crisis occurred in March 1792. Hamilton's Federalists exploited large loans to gain control of U.S. debt securities, causing a run on the national bank; the markets returned to normal by mid-April. Jefferson believed Hamilton was part of the scheme, despite Hamilton's efforts to ameliorate, and Washington again found himself in the middle of a feud.