This settlement had another interest as being one of the perennial geographical compromises by means of which the Union was for so long preserved. The support of Hamilton's policy came mainly from the North; the opposition to it from the South. It so happened that coincidentally North and South were divided on another question, the position of the projected Capital of the Federation. The Southerners wanted it to be on the Potomac between Virginia and Maryland; the Northerners would have preferred it further north. At Jefferson's house Hamilton met some of the leading Southern politicians, and a bargain was struck. The Secretary's proposal as to the State debts was accepted, and the South had its way in regard to the Capital. Hamilton probably felt that he had bought a solid advantage in return for a purely sentimental concession. Neither he nor anyone else could foresee the day of peril when the position of Washington between the two Southern States would become one of the gravest of the strategic embarrassments of the Federal Government.
Later, when Hamilton's policy and personality had become odious to him, Jefferson expressed remorse for his conduct of the occasion, and blamed his colleague for taking advantage of his ignorance of the question. His sincerity cannot be doubted, but it will appear to the impartial observer that his earlier judgment was the wiser of the two. The assumption of State debts had really nothing "monocratic" or anti-popular about it--nothing even tending to infringe the rights and liberties of the several States--while it was clearly a statesmanlike measure from the national standpoint, tending at once to restore the public credit and cement the Union. But Jefferson read backwards into this innocuous and beneficent stroke of policy the spirit which he justly perceived to inform the later and more dubious measures which proceeded from the same author.
Of these the most important was the creation of the first United States Bank. Here Hamilton was quite certainly inspired by the example of the English Whigs. He knew how much the stability of the settlement made in 1689 had owed to the skill and foresight with which Montague, through the creation of the Bank of England, had attached to it the great moneyed interests of the City. He wished, through the United States Bank, to attach the powerful moneyed interests of the Eastern and Middle States in the same fashion to the Federal Government. This is how he and his supporters would have expressed it. Jefferson said that he wished to fill Congress with a crowd of mercenaries bound by pecuniary ties to the Treasury and obliged to lend it, through good and evil repute, a perennial and corrupt support. The two versions are really only different ways of stating the same thing. To a democrat such a standing alliance between the Government and the rich will always seem a corrupt thing--nay, the worst and least remediable form of corruption. To a man of Hamilton's temper it seemed merely the necessary foundation of a stable political equilibrium. Thus the question of the Bank really brought the two parties which were growing up in the Cabinet and in the nation to an issue which revealed the irreconcilable antagonism of their principles.