United States Department of the Treasury

American Revolution

The history of the Department of the Treasury began during the American Revolution when the Continental Congress, convening in Philadelphia, deliberated the crucial question of how it would finance the American Revolutionary War in which the Thirteen Colonies ultimately sought independence from the Kingdom of Great Britain, then led by King George III.

The Congress had no power to levy and collect taxes, nor was there a tangible basis for securing funds from foreign investors or governments. The delegates resolved to issue paper money in the form of bills of credit, promising redemption in coin on faith in the revolutionary cause. On June 22, 1775, only a few days after the Battle of Bunker Hill, the Continental Congress issued $2 million in bills; on July 25, 28 citizens of Philadelphia were employed by Congress to sign and number the currency.

On July 29, 1775, the Second Continental Congress assigned responsibility for the administration of the revolutionary government's finances to joint Continental treasurers George Clymer and Michael Hillegas. Congress stipulated that each of the colonies contribute to the Continental government's funds. To ensure proper and efficient handling of the growing national debt in the face of weak economic and political ties between the colonies, the Congress, on February 17, 1776, designated a committee of five to superintend the treasury, settle accounts, and report periodically to the Congress. On April 1, a Treasury Office of Accounts, consisting of an auditor general and clerks, was established to facilitate the settlement of claims and to keep the public accounts for the government of the United Colonies. With the signing of the Declaration of Independence on July 4, 1776, the newborn republic as a sovereign nation was able to secure loans from abroad.

Despite the infusion of foreign and domestic loans, the united colonies were unable to establish a well-organized agency for financial administration. Michael Hillegas was first called Treasurer of the United States on May 14, 1777. The Treasury Office was reorganized three times between 1778 and 1781. The $241.5 million in paper Continental bills devalued rapidly. By May 1781, the dollar collapsed at a rate of from 500 to 1000 to 1 against hard currency. Protests against the worthless money swept the colonies, giving rise to the expression "not worth a Continental".

Late 18th century

Since the late 18th century, the office has been customarily referred to as the singular "Treasury", without any preceding article, as a remnant of the country's transition from British to American English. For example, the department notes its guiding purpose as "Treasury's mission" instead of "the Treasury's mission."

Robert Morris was designated Superintendent of Finance in 1781 and restored stability to the nation's finances. Morris, a wealthy colonial merchant, was nicknamed "the financier" because of his reputation for procuring funds or goods on a moment's notice. His staff included a comptroller, a treasurer, a register, and auditors, who managed the country's finances through 1784, when Morris resigned because of ill health. The treasury board, consisting of three commissioners, continued to oversee the finances of the confederation of former colonies until September 1789.

Founding

The First United States Congress convened in New York City on March 4, 1789, marking the beginning of government under the U.S. Constitution. On September 2, 1789, Congress created a permanent institution for the management of government finances:Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That there shall be a Department of Treasury, in which shall be the following officers, namely: a Secretary of the Treasury, to be deemed head of the department; a Comptroller, an Auditor, a Treasurer, a Register, and an Assistant to the Secretary of the Treasury, which assistant shall be appointed by the said Secretary.Robert Morris from Pennsylvania, who was also a Second Continental Congress delegate, was Washington's first choice for the position, but declined the appointment. Alexander Hamilton was recommended instead to Washington by Morris. Hamilton took the oath of office as the first secretary of the treasury on September 11, 1789. Hamilton had served as George Washington's aide-de-camp during the American Revolutionary War and was influential in the ratification of the Constitution. Hamilton's financial and managerial acumen made him a logical choice for addressing the problem of the new nation's heavy war debt. His first official act as secretary was to submit a report to Congress in which he laid the foundation for the nation's financial health. Hamilton's portrait appears on the obverse of the ten-dollar bill, while the Treasury Building in Washington, D.C. is depicted on the reverse.

To the surprise of many legislators, he insisted upon federal assumption and dollar-for-dollar repayment of the country's $75 million debt in order to revitalize the public credit: "[T]he debt of the United States was the price of liberty. The faith of America has been repeatedly pledged for it, and with solemnities that give peculiar force to the obligation." Hamilton foresaw the development of industry and trade in the United States, suggesting that government revenues be based upon customs duties. His sound financial policies also inspired investment in the Bank of the United States, which acted as the government's fiscal agent.