Compromise of 1790

Southerners had been blocking the assumption of state debts by the Department of the Treasury, thereby destroying the Hamiltonian program for building a fiscally strong federal government.

A number of clandestine meetings and political dinners were held in New York City, then serving as the nation's temporary capital, in the summer of 1790.

[3] Shortly after the Assumption Bill failed for a second time in June in the House, Hamilton, despairing that his financial plan would be scuttled, appealed to the newly appointed Jefferson to apply his influence on the matter.

Jefferson described the encounter between the men at his lodgings in New York City: "It ended in Mr. Madison's acquiescence in a proposition that the question [i.e., assumption of state debts] should be again brought before the house by way of amendment from the Senate, that he would not vote for it, nor entirely withdraw his opposition, yet he would not be strenuous, but leave it to its fate.

It was observed, I forget by which of them, that as the pill would be a bitter one to the Southern states, something should be done to soothe them; and the removal of the seat of government to the [Potomac] was a just measure, and would probably be a popular one with them, and would be a proper one to follow the assumption.

Jefferson originally approved the scheme, but Madison had turned him around by arguing that federal control of debt would consolidate too much power in the national government.