Unleashing Hamilton’s Financial Revolution

In Broadway’s hit musical “Hamilton,” playwright Lin-Manuel Miranda highlights a famous compromise struck between America’s founding fathers. The song, “The Room Where It Happens,” focuses on Alexander Hamilton’s backroom deal to get the federal government to assume the Revolutionary War debts owed by the states.

“Hamilton, of course, viewed this assumption of debt as a key part of a full economic puzzle,” said Niel Willardson, senior vice president and general counsel at the Federal Reserve Bank of Minneapolis.

This assumption of debt was part of what historians now describe as Hamilton’s financial revolution, explained Willardson, who spoke about the founding father’s economic plan and his vision of a central bank during a recent Dialogue with the Fed event presented via Zoom.

The components of Hamilton’s specific financial plan were:

• Government assumption of war debts
• Funding for running the government
• Focus on commerce and industry
• Low inflation
• Form a national bank with some central bank characteristics

“This was really one of the real skills of Alexander Hamilton,” Willardson said. “He was a great strategic thinker but also dug into the administrative details in terms of how this would actually work.”

A key component of Hamilton’s financial plan was this concept of a central bank, he observed.

Another component was the concept of a U.S. currency, something not envisioned until Hamilton’s Bank of the United States, Willardson noted.

“Of course, that is something that continues to this day, with Hamilton on the $10 bill,” he said.

Additional Resources

• Dialogue with the Fed: Hamilton's Central Bank–Then and Now
• Open Vault: How Hamilton Laid the Foundation for the Fed
• On the Economy: Why the Federal Reserve Was Founded