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An important historical deal forged at a Founding Fathers dinner party

July 16, 2014 by NCC Staff


Today marks the anniversary of one of the most-important moments in our early history, the creation of Washington, D.C, which came about after a deal cut at a Manhattan dinner party.


thomasjefferson320On July 16, 1790, an act of Congress authorized a federal district along the Potomac River as part of a grand compromise reached by three Founding Fathers at that dinner party. Today, we know the city as our nation’s capital, Washington, D.C.


Officially called “An Act for Establishing the Temporary and Permanent Seat of the Government of the United States,” what we now call the Residence Act is one of the key documents in American history.


It came from a deal reached by James Madison, Thomas Jefferson and Alexander Hamilton that allowed the southern part of the new nation to host the capital, in exchange for legislation mandating the assumption of all of the states’ debts by the Federal government.


The debt-assumption deal, the brainchild of Treasury Secretary Hamilton, established a foundation for stable trading conditions between states and nations that powered the fledgling nation’s financial system.


Link: See The Residence Act


The one-page Residence Act established that the federal government had the rights to the land on the Potomac and the power to raise money to build and equip a safe federal district (see below in the story) after a 10-year period where the capital would be in Philadelphia.


Hamilton’s debt deal wasn’t in the Residence Act, but it was the key factor in Philadelphia losing the capital to what was soon called Washington.


The Constitution written in 1787 gave the government the power to establish Washington, D.C.


Article I, Section 8 gave Congress the power to create a federal district to “become the Seat of the Government of the United States, and to exercise like Authority over all Places purchased by the Consent of the Legislature of the State in which the Same shall be, for the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful buildings.”


When Congress met in 1789, two locations were proposed for the capital: one near Lancaster, Pa., and another in Germantown, Pa. an area just outside Philadelphia.


However, Hamilton became part of a grand bargain to move the capital to an undeveloped area that encompassed parts of Virginia and Maryland, receiving some help from Jefferson along the way.


In a development that foreshadowed today’s Congress, lawmakers in 1790 were deadlocked (and gridlocked) over the assumption of debt that crippled some of the individual states, as well as the location of the capital falling in a pro-slavery state.


Hamilton’s efforts to get a debt-assumption deal in Congress led him to turn to Secretary of State Jefferson, who in turn invited Madison and Hamilton to dinner on June 20, 1790 at Jefferson’s residence in New York at 57 Maiden Lane (which is in today’s Financial District near Wall Street).


“It was observed, I forget by which of them, that as the [debt assumption] 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,” said Jefferson.


The sides had been in active negotiations for weeks, but the final deal was struck at the dinner, said Jefferson in later writings, after Virginia got a financial break in the bargain. Hamilton also agreed to move the capital from his beloved New York to Philadelphia and then to the Potomac.


The Residence Act passed on July 16 and Hamilton’s Assumption Bill passed 10 days later after Congressional members from the Potomac region switched their votes.


The Philadelphia part of the deal was negotiated by Robert Morris, who apparently believed that Congress could be convinced to not locate the national capital in a swamp. But Philadelphia had its own issues in the early 1790s and Hamilton, in particular, had a bad experience there earlier in the decade.


The Continental Congress was meeting in Philadelphia in June 1783 at what we now call Independence Hall, operating under the Articles of Confederation, when unpaid federal troops blocked the doors to the building, and demanded their money.


It was Hamilton who convinced the soldiers to free Congress so they could meet quickly and reach a deal about repaying the troops, and he then led lawmakers on a flight to Princeton, N.J., after he couldn’t get the support of Pennsylvania’s government to drive away the federal troops.


In September 1791, the area on the Potomac was named Washington in honor of President George Washington, a Virginia native.


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