author gregory may talks about albert gallatin. explores gallatin's early political career in the overhaul of alexander hamilton's financial system. and his work on the peace treaty that ended the war of 1812. mr. may is the author of jefferson's treasure: how albert gallatin saved the new nation from debt. the the museum of american finance posted this event. it is about 45 minutes. >> welcome everyone. the museum of american finance is still the only mission in america with a mission to preserve and teach our financial history. today we are going to discuss the nation's fourth secretary of the treasury albert gallatin,.

while he does not have a broadway musical about him, he was incredibly influential in his day. when lewis and clarke were on their expedition and they get to a fork of the mississippi river, they named one after gallatin. but his name does not get a lot of headlines in our history. gregory may has set out to change that. he has written a terrific and very well researched book. 672 footnotes, many of the richly detailed. that book was a tour de force. i think gregory has been channeling albert gallatin the last two years. gregory did his undergraduate work at william and mary. then he went to harvard law school.

he clerked on the supreme court and practice for 30 years. he calls himself an independent really enjoy, i which means he brought no pre-existing bias to the topic and has shed new light on a very amazing man. gallatin is buried right up the street at trinity church. and i do try to pay my respects often. but he is buried on the opposite side of the cathedral of alexander hamilton. it is my pleasure now to introduce gregory may. [applause] mr. may: thank you very much. it is great to be here at the museum of american finance to talk to an audience interested in financial history. alexander hamilton's worst enemy was not who broadway thinks it was. aaron burr may have shot the man, but it was albert gallatin

who destroyed his life's work, the financial system that he had created for the new federal government. hamilton was proud of that system. he thought that the federal government's ability to borrow vast amounts of money would allow the united states to become a great nation. gallatin disagreed. he thought that endless public borrowing was a drag on the private sector and a prescription for economic failure. in the first great fight over how to pay for the federal government, it was gallatin who won. when jefferson appointed albert gallatin to be the secretary of the treasury, the federalists who had controlled the government were worried. they braced for the worst. they had just lost the insidency for the first time

an election so bitterly contested that it took 36 ballots in the house of representatives to make jefferson president. they had also lost the majority in congress. now jefferson was putting this charge of then largest and most powerful department of the government. that timery at employed well over 90% of the federal civilian payroll. a controlled everything from taxes and spending to light houses and public hospitals and the coastal service. it had agents in every seaport. the man in charge of all of that to do a lot of damage. the federalists knew this man gallatin all too well. he was a foreigner with a bad accident. a tax rebel. and a dangerously clever man. it was objections to hamilton's financial systems that had sparked the republican

opposition in the first place. gallatin had emerged as hamilton's most vocal critic. his resistance to taxes, federal spending, public debt was relentless. now he was in a position to turn those objections into policy. at the very least, he would starve the military in order to repay the debt. their federalist vision of a vigorous new american nation state would simply fade away. much of what the federalists were saying about gallatin was actually sure. he was a 40-year-old immigrant from geneva. he had come to america when he was 19 to seek his fortune, just a year before the battle at yorktown. by that time, the revolutionary war had destroyed much of the

american economy. american incomes had fallen by 20 or 30% during the war. and economic depression after the war, which is probably deeper than the great depression, lasted for almost a decade. gallatin struggle to find footing under the circumstances. he eventually settled on a frontier south of pittsburgh. a place so remote that they settlers petition called at the ends of the american earth. he speculated land and farmed a little. he cap to store and he tried to manufacture guns and class. none of that have brought in the fortune that he came seeking. none of that has really put him on his path in america. but his talents have not gone unnoticed. and aristocrat by birth and education, gallatin became a radical republican by convention.

one of those freedom loving anti-federalists who thought that the federal government was going to be too strong and too remote from the people. he was sent to the pennsylvania legislature, and there he showed a rare aptitude for public finance. a prodigious appetite for hard work. and a neck for getting along with people of different political persuasions. icholson,d hannah n the daughter of a feisty navy commodore who have become one of the writ leading republican organizers here in new york city. it was indeed a tax or vaults that brought gallatin to national attention. six years before jefferson became president, thousands of men and the pennsylvania backcountry took up arms against andlton's tax on distilling what we now remember as the

whiskey rebellion. burned the local tax collector's house, robbed the mail, and marched on pittsburgh. to theh gallatin opposed violence, hamilton blamed him and his anti-federalist friends for the protests that had sparked it. washington called out the militia, and hamilton led these troops into gallatin's home district. he slipped away to safety in philadelphia. neighbor wrote to tell him that there was never more industry made than that set of men that was here to get a hold of you. violenceition to the won him and election to congress. once in congress, he quickly proved his worth to the republican opposition. gallatin gave real bite to their objections to hamilton's system

for funding federal deficits. there was nothing innovative about that system. hamilton had borrowed it from the british. but from the perspective of republicans like madison and jefferson, that was exactly the problem. they thought hamilton system was tainted with tierney. ordinary pay obnoxious taxes to sustain a mounting federal debt and the cost of the defensive -- expensive military establishment. thing that hadhe let americans to revolt against the british in the first place. it at already per -- provoked rebellion in pennsylvania. the republicans in congress did not know enough about finance to resist hamilton. butatin's grasp on finance

the republican opposition on equal terms with the treasury for the first time. madison soon reported to jefferson that gallatin was a real treasure. from the virginia hilltop or he had retired after leaving washington, jefferson wrote back will meritin immortal honor if he can reduce hamilton scales to order and present us with a clear view of our finances. the accounts of the u.s. ought to be as simple as those of a common farmer. probably few farmers read it, but gallatin wrote a book to explain where hamilton the go wrong. the book was partisan, but it was not like the other republican political tracts of the time. it did not sling typical republican slogans about political corruption and closets monarchists. and stay, he used the liberal

economic ideals that he found in adam smith's wealth of nations to make the case for fiscal reform. he started with adam smith's governmentthat private retards activity. military spending, which at that time accounted for almost everything the federal government spent, besides to enter some public debt, was particularly wasteful, because war destroys capital. argued that hamilton's system for funding the debt was a menace. that hamilton system had two major problems.

may federal borrowing too easy, because the government did not have to pay anything except the interest on its that. borrowing on those easy terms made spending too easy. and military spending made the government more likely to get into a wasteful war. in the second place, interest payments on the federal debt were shifting money from productive taxpayers to wealthy speculators. they were more likely to waste the money on imported luxuries rather than spend it on the domestic economy. the country could not achieve its potential unless the federal government cut public spending and repaid the national debt. it was political brawls that really mattered. the biggest brawl in which gallatin was involved in his

first year in congress was the one over john jay jay's treaty with the british. sent jayshington had to london to negotiate a settlement of the differences that threatened to drop in the nation into a war with britain that the infant country could not have afforded. wastreaty that j sent home so unbearable that washington managed to get its ratified by the washing -- senate without ever disclosing the terms to the public. finally leaked, and a republican senator leaked them, all hell broke loose. crowds up and on the country burned john jay in effigy. they eliminated their houses at night and protests. to the door of a federalist house that had no lights in the window read, " damnjohn jay! and

everyone who won't damn john jay!!" the angry crowds in new york's stone hamilton when he tried to defend the treaty. gallatin's father in law openly insinuated that hamilton must be a british agent. when hamilton did not deny it, nicholson called him a coward. that left hamilton no option but to challenge nicholson to a dual. their friends managed to work things out before anybody got shot. but mickelson continued to despise him until the day he died. gallatin called on the house of representatives to block jay's treaty even though the senate had already ratified it by refusing to appropriate the

money that would be required to enforce it. the constitution, he said, had given the house the power of the personal it could stop the wheels of government when the government is going astray. it was a bold position. intison gave a long speech which he dithered over whether it was right. but jefferson enthusiastically embraced it. he wrote a letter to madison 's speechat gallatin should be printed at the end of the book called the federalist. gallatin lost that fight. the house stood appropriate the money for jay's treaty. but his spirited opposition made his political reputation. it also attracted endless abuse from the federalists. aey routinely called him frenchman. they mocked his attempts to stop the wheels of the government.

in a federalist cartoon that was pretty -- printed here in new york, it showed him clinging to the wheels of washington's chariot while jefferson shouts directions behind him and french cannibals invade on the left side. criticsallatin's complaints that it was all of this abuse that actually turned gallatin into a celebrity. by the time the next congress convened, madison had retired to virginia with a new wife. john adams had been elected president. jefferson was vice president. and gallatin was the leader of the republican opposition in congress. washington condescended to invite gallatin to dinner one cold winter evening before he stepped aside for john adams. had donned his only good coat

for the occasion. washington's dinners with congressman for -- were notoriously solemn affairs. often eaten in virtual silence. this one was no exception. mrs. washington continues to be a nice person. but not her husband. the next four years were tents. -- tense. administration got into a low grade war with france, and they used it for expensive additions to the army and navy. they called washington back to command the army. and the republican

minority tried to resist this military buildup. but it was very easy for the federalists to paint them as unpatriotic. partisan mobs actually came to blows in the streets. federalist prosecutors locked up a vermont congressman whose newspaper had criticize the administration. high in congress that some of the republican members got physically ill and others actually went home. this reign of witches, as jefferson called it, welded a firm bond between gallatin and jefferson. late in life, jefferson would vividly remember that gallatin alone remained in the house and i and the senate to bid defiance to the brow beatings and insults with which they assailed us. but jefferson never despaired. the war fever would soon pass,

he reassured a friend back in virginia. the doctor is now on his way to cure it in the guise of a tax collector. jefferson was right about that. the heavier taxes needed to pay for the federalist military buildup did change the political climate. and jefferson squeaks two victory in the next presidential election. fiscal reform was at the top of the agenda when jefferson took office. it was clear to everyone that gallatin was going londonnorton told gallavinand madison --

where jefferson's rivals. he would dominate because he was more decisive than madison, more capable of getting things done. jefferson can handle foreign affairs by himself but he needed him to manage the treasury. gallatin was different from the other two in important ways. he was 18 years younger than jefferson and 10 years younger than madison. he was a small manufacturer. his experience in pennsylvania politics was different from their experience in the lesser gentry who had taken over virginia in the revolution. madison and jefferson had worked

closely with gallatin during the years in opposition and treated him as a political equal. madisonn, gallatin, and -- jefferson made his own decisions and the other two conferred. the three of them rarely met as a separate group. gallatin placed a special competence -- jefferson place competence in gallatin and madison and consulted them earlier and more often than he consulted anyone else. it was clear to everyone they had influence in the government. by the time the war of 1812 revealed the flaws in republican policy, it was plausible for a federalist congressman from boston to lay the blame on a cabinet proposed for all practical purposes of two

virginians and a foreigner. this is where the story usually ends. there was a big battle between hamilton and jefferson over physical a pairs -- physical affairs and it was madison and gallatin who did most of the fighting in congress. we know the jeffersonians ultimately one. jefferson was elected. what then? what did they do with their victory? did they manage to get rid of hamilton's system? did they have something better to replace it with? we cannot answer those questions without taking a closer look at gallatin. he tackle the problems that hamilton left behind. the changes he made were profound. hamilton never promised to pay anything except interest on government debt. gallatin committed to repay a

fixed amount of debt each year. he gave the payment priority. he also insisted the government should never spend more than it receives except during wartime. he put the brakes on federal spending. he got rid of the whiskey tax. he abolished the internal revenue system. he paid for the government with revenue from import duties. import duties had been the primary source for federal revenue from the beginning. ordinary citizens tolerated them better than i tolerated internal taxes. at a time when the economy in most parts of the country was largely a rural subsistence economy, only the wealthy wanted imported goods. hamilton was irate. he wrote a series in the news -- a series of newspaper articles

where he bashed gallatin and republicans for pandering to the people and destroying a financial system. politicianstical knew the government should use their fiscal powers to encourage national prosperity. s of sessionallatin' with a debt repayment would sink the government and slow down economic development. gallatin's reforms would not have been possible if he had not already stabilize the government's finances. the reforms, he said, were -- measures of little politicians who enjoy benefits of a policy which they had neither the wisdom to plan not the spirit to adopt. jefferson was delighted with what gallatin had done.

the financial path was smooth, he wrote to a friend. we have scarcely anything to propose to congress. said, thatcarp, he they raised the money to make it possible for us to pay the debt. we never charge them with failing to raise money, only with the misapplication of it. after giving back the surplus, we can do more with the parts than they did with the whole. gallatin continued to manage the government's money well. during his first 11 years as the treasury, keep repaid nearly half of public debt. he financed the louisiana purchase. he put things on a steady keel. economy, and riddance of the public debt was a jefferson's mantra and gallatin

turned that into a reality. gallatin's frugality had a heavy price. the u.s. was a week and a young nation on the fringe of an atlantic world dominated by britain and france. for the first 25 years of the nation's existence under the powersution, those great were at war with each other. the war lasted and tell napoleon's defeat of waterloo. it was one of the largest military conflicts in human history. america's distance from europe to the u.s. breathing room but not enough. the u.s. had a long and indefensible coastline, a vast and largely ungoverned interior and an economy that depended on export of raw materials and food to europe.

once britain and france decided to use trade disruption as a way , theakening each other collateral damage to america's interests were inevitable. despite that threat, gallatin insisted on repaying public debt over military preparations. when damage to american interests finally pushed the with britain in 1812, the government was not prepared. there were 7000 men in the army and 17 ships in the navy. the federal revenue depended across the trade atlantic, which war would shatter. 'sngress rejected gallatin call to reimpose internal taxes like the one on whiskey because

they thought taxes would make the war unpopular. lenders, many of whom opposed to the war, hesitated to give gallatin the enormous loans he needed to pay for it because they did not believe he could collect the taxes necessary to repay them. the consequences were predictable. the american attacks on british canada in the first year of the war, failed miserably. tax revenue limited. the treasury started to run out of money. gallatin left for europe to seek peace with britain. after he left, congress imposed the taxes he requested. it was too late. british troops invaded washington and burned public buildings. american defenders on lake champlain and in the harbor of baltimore were able to drive

back british attacks but the american forces elsewhere made little headway. invasions, thesh federal government's fiscal situation finally became worse than the military prospects. the treasury ran out of money and the government defaulted on its bonds. apps, chairman of the committee and a jefferson's defaultaw reported the to the house of representatives who were huddled together in a small room in the british spared. when he finished reading the report, he flung it on the table and turning to a federalist congressman near him, asked whether he and his party wanted to take back the federal government. no, sir, replied the man.

us inless you give it to the same condition we gave it to you. who had been close to gallatin put the problem in place. -- disgrace and taxes will not suit a nation. the peace treaty that gallatin sent home said not a war about the grievances -- not a word about the grievances that led to the war. the treaty got to washington days after the news of andrew jackson's victory over the british in new orleans. it seemed to americans they had won the war. rejoice when he is not a european? -- who is notoud proud to be an american, our wrongs of revenge and rights recognized. none of that was true.

in the surge of relief after the war, if all true. younger members of the republican party such as henry took a sober lesson from the war. they wanted congress to spend money on measures to make the country stronger. they pushed for a larger peacetime army, roads and canals into the interior, and national bank, and higher terrorist -- higher tariffs to encourage domestic manufacturing. the measures poor if i'd gallatin -- measures horrified gallatin's friends. gallatin supported some of them. during jefferson's administration, he wrote a detailed plan for building federal roads and canals when the country could afford them. before the war, he tried to

convince the republican majority the government urgently needed to recharter the banks of the u.s.. he thought the experience of the war shared the wisdom of the measures. under the austere republican system, he wrote, we were becoming too selfish, too much at task to making money and too confined in our political feelings to state and local objectives. the war had renewed the national feelings that waned after the revolution. he thought that was a good thing. in 1819 gaveanic the progressive republican postwar programs a blow. the economy crumbles. money was short. voters got testy. republicans in congress reverted to gallatin's old ways to balance the budget and keep the

political support of hard-pressed farmers throughout the country. andrew jackson's presidential victory nine years later clinched the switch back and policy. jackson ran for office as a man of the people, committed to the old republican policies of fiscal reform. jackson meant what he said. tos -- hee stuck stuck to gallatin's policy. jackson could crow that the federal government had repaid the last dollar of its debt. the federal government has never again been free from debt. culture of fiscal responsibility cap public debt in check throughout the 19th century. in peacetime, the government paid most of its bills with import duties that were

effectively invisible to most americans. went the war required borrowing, the government intended to pay down the debt after peace returned. modern republicans put a statue of alexander hamilton on the south side of the treasury building in that the early 1920's. the taller statute that dominates the front of the white house is a figure of albert gallatin. that is no accident. for most of the last century, hamilton was not a hero. he was a government elitist. it was gallatin he was remembered as a man of the people who tried to keep the government in check. why don't we remember albert gallatin? jefferson's first term, a prominent virginia republican named john taylor

took a few minutes to reflect on what we would call the media value of what gallatin had done. brilliant as they are, he said, -- there is aorms desk eunice about them that is sure to assign them to oblivion. he was right about that. taylor himself never minimized the importance of government in america political life. his own political tracks were filled with rants about the corrosive effect of money on republican government. financeelieved public was the beating heart of american politics. jefferson's lasting political -- it was extreme

folly to suppose the bulk of the people are influenced by abstract political principles. that was never the case in any nation. what brought the republicans to power, he said, was the taxes imposed by the federalist and what kept them in power was of the taxes they had repealed. politicians have said the same thing in soundbites. whatever the slogans and the no oneal persuasion, would pretend to understand american politics without knowing how the government does withey, what it the money, and how taxing and spending affect the american people. the american public is no different.

albert gallatin, the man who was in charge of jefferson's treasury. [applause] happy to take questions. >> was the economic effect -- what was the economic effect of gallatin andlicies did -- policies and did gallatin agree with jefferson's embargo? >> the first question is difficult to answer because of the data that was collected in those days. the data available is not

anything like the economic statistics with which we are familiar. definitively whether the american economy was so different under the republican policies then it would have been under the federalist hamilton policies. pointse of data important our federal spending was small compared to the size of the economy in those days. what the federal government spent or did not spend was not nearly as important as it soon became and is but a shadow of what it is today. states orly the taxing at a rate about the same as the federal government was at the time. the total burden, state and , theal, on the economy

total tax burden was about 4% of national income, about the closest we can get to gdp using the figures available at the time. reaction to your question is the most important thing was what the policies did to the financial system. u.s.oss of the bank of the before the war of 1812 was a disastrous occurrence, not only for the finances of the federal government, but because it created a proliferation of state banks, many of which were not sound and none of which were well regulated. when the second bank of the west was chartered -- of the u.s. was chartered, it had success in disciplining the issuance of bank notes. , especially after

bank oftaxed the second the united states and destroyed it, the issuance of notes by state banks became an important source of monetary instability in the country. a lot of that has to be assigned to this republican financial policy. the second question about the embargo. the embargo is an interesting subject which i have chosen not to talk about because it relates more to foreign policy at the time than financial policy. gallatin opposed the embargo strongly. oftenis a famous letter quoted that he wrote to jefferson on the morning send ton was going to

congress a bill to enact the embargo where he pleaded with jefferson to hold back and not do it. is, gallatin became the cabinet secretary who had to enforce the embargo because it fell to the treasury to cut off ones since they were the who charged all of the fiscal agents and seaports. and forcing the embargo was virtually impossible. there was a surprising level of compliance. there was also a large level of smuggling and noncompliance which continued throughout the war, the one trading with the british throughout the war. >> one of the linchpins to how

the program was the first bank of the u.s. how did gallatin feel about it and how to jefferson feel? you talked about the letters back and forth once gallatin gets into power, the central piece of hamilton, how did he think about it? >> gallatin never opposed the bank of the u.s. even when he was in opposition of congress. when he got to the treasury, he continued to use it. it thatnued to reassure he would not try to bring it down. he tried to get its charter renewed just before the war of 1812 without much support or any support for madison, who failed to let it be known what his real opinion was. hatred of the bank of the united intes was a republican dogma

the fact that gallatin did not oppose it is an illustration of his pragmatism, he was more andncially sophisticated more of a pragmatic thinker than madison, jefferson, and more political members of the party. he thought the bank was important to create a workable monetary system for the new country. received allce it of the government revenues for deposit, received a huge percentage of the bank notes issued by the state banks. the bank of the u.s. could .ontrol the overall size

he did not speak in terms of .entral banking they were not quite sure how to label it, manage it, promote it, how far to carry it. a clear discussion of what we now would understand to be central banking. by the time gallatin wrote a pamphlet to defend the second bank of the united states against jackson, he was speaking in terms recognizable today in defense of central banking. was there a question?

>> [indiscernible] the same ones the republicans had repealed. there is no particular surprise about that. those were the same taxes that were enacted in great britain to pay for the french revolution and napoleonic wars. similar, although different from taxes being used in france. none of the hamiltonian system -- so innovative that he that when it came time to raise taxes again, and gallatin said taxes would have to be raised in to reachit was logical for the usual list. >> that is a good question.

the answer is not easy to give. the constitution requires direct taxes to be apportioned by population within each state. each state got a portion of the total tax equal to its proportion of the national population. did not work that too well. for example, an early controversial tax was on carriages. some states had more carriages per capita than others. thatmenting the direct tax was apportioned in a way the constitution required it to be was politically impossible and unjust. was uncertainty over what was a direct tax and a lot of pragmatic decision-making,

including a supreme court decision in which justices decided the carriage tax was a direct tax. -- was not a direct tax and did not have to be proportioned. >> thanks, everyone. [applause] we are going to start a tradition today as a thank you to our speakers. it will be a tie for the men and a scarf for the woman. it is fitting. it is our alexander hamilton tied would like to present to you. greg mentions on page 394 footnote 19 the story that is talkedold that gallatin with alexander -- with james hamilton and said your dad's financial system, he committed

no fraud. with that, i want to make sure you will accept a graciously from us. [applause] i will have to refer you to that footnote where i tried to debunk that quotation. [laughter] >> jefferson's treasure is on sale now. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org] >> you are watching american history tv, 48 hours of programming on american history every weekend. followed less on twitter at c-span history for information on our schedule and to keep up with the latest history news. >> monday night on the communicators. >> what we are talking about is fiber-optic technology. it has been around for a decade. the idea is a thin strand of unlimited amounts

of information to be pumped through by lasers used around the world to carry to medication. countries are ensuring everyone of their citizens has access to a fiber-optic connection. >> author and harvard law professor susan crawford fiber, theer book coming tech revolution and why america could miss it. >> there will be no wire better than fiber. leaving behind a lot of the country when it comes to great communications capacity and as a nation, we are falling behind in the global race. >> watch the communicators monday night on 8:00 eastern on c-span two. >> in the final weeks of his

eight years as president, ronald oval officed to interviews where he reflected on his terms. prior to leaving office, president reagan is interviewed by nbc news anchor tom brokaw. he talked about his childhood, religion, radio and acting career, and major events of his presidency. comes4 minute recording from the ronald reagan presidential library. a long way from a small town in illinois. the protective warmth of your mother. what is your earliest memory of your mother's influence on you? i had a brother a couple of years older than i am. sh