The Panic of 1791: Hamilton's Reports and the Rise of Faction (a)

24 Pages Posted: 20 Nov 2017 Last revised: 30 Nov 2018

See all articles by Robert F. Bruner

Robert F. Bruner

University of Virginia - Darden School of Business

Scott Miller

University of Virginia - Corcoran Department of History


On December 5, 1791, Secretary of the Treasury Alexander Hamilton presented to Congress his “Report on the Subject of Manufactures,” which proposed significant government support for nascent American industry through tariffs, subsidies, and other incentives. It seemed that Hamilton's politico-economic vision for America had substantial political momentum, yet James Madison and his circle viewed Hamilton's proposals with alarm, and a financial panic in August–September, 1791, raised new anxieties about the rapid political and economic changes occurring in the United States. In the face of these concerns, would Congress sustain its support for Hamilton's vision?



Rev. Jul. 27, 2018

The Panic of 1791: Hamilton's Reports and the Rise of Faction (A)

On December 5, 1791, Secretary of the Treasury Alexander Hamilton presented his “Report on the Subject of Manufactures” (Report on Manufactures) to the US Congress. Hamilton's third in a series of policy proposals, the Report on Manufactures proposed tariffs to raise revenue and protect the fledgling American manufacturing industry, provide state subsidies to grow domestic industry, and fund internal improvements such as roads and canals. Above all, Hamilton sought to strengthen the independence of the new nation, now free from economic control by foreign governments. Congress had approved Hamilton's two previous reports. To succeed in gaining the endorsement for the third, Hamilton would need to frame a compelling argument in the face of a rising faction of opponents, called “Republicans,” led by Thomas Jefferson and James Madison. How should Hamilton frame his arguments?

The nation's first financial crisis in August and September 1791 complicated Hamilton's task by forcing him to intervene in the fledgling US capital markets. To do so, the Treasury Department used the money from a special sinking fund to buy US notes and shares of the Bank of the United States (BUS), which had been plummeting in price. Hamilton instructed his agents to purchase the securities at par value rather than market value. This action stabilized the market and restored confidence. However, political opponents viewed Hamilton's intervention as a bailout of the speculators and financial elites whom opposition leaders like Jefferson and Madison held responsible for the crash.

The fact that the United States had only recently emerged from nearly two decades of economic disruption only heightened tensions around Hamilton's Report on Manufactures. These tensions emanated from two distinct visions of American political economy. The first, championed by Jefferson and the Republicans, envisioned an agricultural “empire of liberty” in which virtuous yeoman farmers cultivated the means of independent “competency.” The second vision, advocated by Hamilton and the Federalists, saw the country as a dynamic commercial republic. Hamilton's famous reports to Congress put his vision for a modern fiscal-industrial state into a comprehensive policy plan featuring a funded national debt, a national banking system, and government support for industrial development. Needless to say, Hamilton's economic program galvanized both sides of an American polity that bore the scars of war, political division, and economic devastation.

. . .

Keywords: financial crisis, crisis intervention, financial system, civic reaction, systemic instability, First Bank of the United States, Alexander Hamilton, central bank, Report on the Subject of Manufactures, policy entrepreneurship, historical finance, political finance

Suggested Citation

Bruner, Robert F. and Miller, Scott, The Panic of 1791: Hamilton's Reports and the Rise of Faction (a). Darden Case No. UVA-F-1783. Available at SSRN:

Robert F. Bruner (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-3823 (Phone)
434-924-0714 (Fax)


Scott Miller

University of Virginia - Corcoran Department of History ( email )

Randall Hall
Charlottesville, VA 22904
United States

Register to save articles to
your library


Paper statistics

Abstract Views
PlumX Metrics