Our special guest at our June 2026 roundtable was Richard Vague, author of The Banker Who Made America, a biography of Thomas Willing. Vague, a veteran of the financial services sector and former Secretary of Banking and Securities for Pennsylvania, discovered Willing while researching the history of banking leverage ratios. He found that Willing was not only the first president of the first two major banks in the United States but also the senior partner of the well-known financier Robert Morris. Vague describes Willing as a "deep cut" of the American Revolution whose legacy was obscured because he voted against the Declaration of Independence.
Early Life and Business Success
Thomas Willing’s father, Charles Willing, immigrated from Bristol, England, and established a merchant trading firm in Philadelphia that became the largest in the city. When Charles died unexpectedly, Thomas, then only 23 years old, took over the business. Despite his youth, Thomas displayed a mix of boldness and conservatism, immediately purchasing another ship to expand the firm.
The firm’s success was largely driven by the partnership between Willing and Robert Morris, whom Thomas promoted to equal partner after Morris served as a teenage apprentice. Vague characterizes their relationship as a perfect balance: Willing was the conservative anchor, while Morris was the aggressive "Wheeler-dealer". Together, they grew the business 70-fold during Willing’s tenure.
Beyond commerce, Willing was a central figure in Philadelphia’s civic life. He served as Mayor of Philadelphia, an associate Supreme Court Justice in Pennsylvania, and a member of the Pennsylvania Assembly. He was a leader in the early protests against British overreach, drafting and serving as the principal signatory for the merchant protest against the Stamp Act and the Townshend Acts.
The Revolution and the 1776 "Coup"
One of the most complex aspects of Willing’s life was his opposition to independence in July 1776. Vague explains this through the lens of social history and economic stability. Philadelphia’s elite, including Willing, were often wealthy, Anglican, and English-leaning merchants who had benefited from unprecedented economic growth within the British Empire. They believed the conflict with Parliament could be resolved through negotiation.
In contrast, a massive influx of Scotch-Irish Presbyterians and other groups had tripled Pennsylvania's population; these newcomers were often farmers who felt unrepresented and unprotected by the Philadelphia elite. This internal tension led to what Vague and the host describe as a "coup d'etat" in Pennsylvania’s government, where radical elements overthrew the conservative assembly to push for independence. While Morris and others avoided the final vote to allow a unanimous declaration, Willing showed up and voted "no," a move that significantly damaged his historical reputation.
Wartime Conduct and "Hedging Bets"
During the British occupation of Philadelphia, Willing chose to remain in the city. Vague suggests this was a practical move to keep his business alive and to continue supplying the revolutionary army. However, this led to accusations of loyalist sympathies. Willing navigated a precarious middle ground: he refused to sign a loyalty oath to King George III when pressured by General Howe, but he also hesitated to sign an oath to the new United States government.
We discussed the possibility that Willing and Morris may have been hedging their bets as a business strategy, ensuring that at least one partner remained in good standing regardless of which side won the war. Despite the "taint" of his 1776 vote and his conduct during the occupation, Willing’s financial expertise made him indispensable to the struggling Continental Congress.
The Father of American Banking
Willing’s most significant contribution was the establishment of the Bank of North America in 1781, the first true bank in the United States. At the time, the revolutionary cause was nearly bankrupt; the Continental currency had become worthless, and the budget for the year of the victory at Yorktown had dwindled to just $2.6 million.
Willing and Morris effectively funded the government using their personal credit. Morris issued personal notes, colloquially known as "Short Bobs" and "Long Bobs," which merchants accepted when they would not take government paper. As president of the Bank of North America, Willing maintained a reputation for impeccable prudence. He famously denied a loan request from his own partner, Robert Morris, demonstrating that the bank was an independent institution rather than a personal "slush fund".
Vague argues that Willing established the model for banking in America. When the Bank of New York and the Massachusetts Bank were founded, their directors traveled to Philadelphia to learn the trade from Willing. He described the early days of American banking as a "pathless wilderness".
The First Bank of the United States and Political Power
Following the war, Willing’s influence grew as he became the first president of the Bank of the United States (BUS). This bank had a capitalization of $10 million, which was triple or quadruple the lending capacity of all other American banks combined. This massive concentration of power was the primary reason figures like Thomas Jefferson feared the institution; Willing held the "implicit power" to influence votes by potentially denying loans to political opponents.
Willing remained fiercely independent of political pressure. In 1796, he even forced the federal government to make an early repayment on a loan, a move that Vague notes would be "unbelievable" today. Despite political differences, Willing maintained a "fundamental graciousness". When Jefferson was vice president and socially shunned in Federalist-dominated Philadelphia, the Willing and Bingham families were among the few who continued to welcome him. This pragmatism allowed Willing to develop a productive working relationship with Albert Gallatin, Jefferson’s Secretary of the Treasury, who eventually became a "huge fan" of the bank's power.
Relationships with the Founders
The recording highlights Willing’s connections to other legendary figures:
Alexander Hamilton: Hamilton viewed Willing as a mentor. Interestingly, as a 16-year-old clerk in St. Croix, Hamilton had actually conducted business correspondence with Willing’s firm in Philadelphia.
George Washington: Washington was extremely close to both Morris and Willing, even staying in a house owned by Willing in Philadelphia after the Battle of Yorktown.
William Bingham: Bingham, a "privateer" who amassed a fortune in the Caribbean during the war, married Willing’s daughter. Vague credits Bingham with potentially conceiving the idea for the Louisiana Purchase.
The Baring Family: Willing’s daughter’s marriage linked him to Francis Baring, the principal merchant banker in London. This connection was vital for the Louisiana Purchase, which was financed by the Barings and Willing’s Bank of the United States, effectively funding Napoleon even as he prepared for war with Britain.
Legacy and the Fate of Robert Morris
The partnership between Willing and Morris eventually fractured over land speculation. While Willing remained conservative, owning about 100,000 acres, Morris leveraged himself to the "hilt," buying millions of acres of western land. When the market collapsed, Morris ended up in debtor's prison. In a "poignant moment," George Washington visited Morris in prison to have dinner and relive the moments of the Revolution they had "pulled out" together.
Vague concludes that Willing’s legacy is the transformation of the American economy. Under his guidance, the U.S. moved from a "pathless wilderness" to an economy with over 100 banks by 1820, eventually surpassing Britain as the world’s largest economy. Living into his 90s, Thomas Willing survived most of his contemporaries, witnessing the full maturation of the financial system he helped build. Vague summarizes him as the true "Father of American Banking".
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George Washington had made no secret of the fact that he really didn’t want to be president. National leaders had to convince and cajole him into doing it, telling him that without his leadership, the Constitution would not survive and, without the Constitution, the United States would fall apart. Washington served for four years, expecting to get the new nation off to a good start, then finally retire to his plantation in Virginia. Once again, national leaders begged him to remain for a second term.
I think Washington really regretted his decision to remain for a second term. Some of his most controversial issues arose in that term, including the Citizen Genet Affair, the Whiskey Rebellion, the Jay Treaty controversies. Also, by half-way through his second term, his cabinet members all abandoned him.
Postmaster General
Resignations were normal in government. Postmaster General John Osgood had left during the first term. The Postmaster General was not a part of the cabinet at the time and really didn’t have any role in policy making aside from running the post office. Osgood, originally from Massachusetts, had been living in New York, working first under the Confederation Congress then under President Washington. When the capital moved from New York to Philadelphia in 1791, Osgood did not want to move and resigned instead.
Washington’s second postmaster, Timothy Pickering, deserves a little more background because he will play larger role going forward. He had been adjutant general and quartermaster general of the Continental Army during the Revolution. Although Pickering was born and raised in Massachusetts, he moved to the Wyoming Valley in Pennsylvania after the war.
There, he got caught up in the Yankee-Pennamite Wars, which I discussed a bit in earlier episodes during the Revolutionary War. This ongoing fight was between Yankees from Connecticut and Pennsylvanians who both claimed control of the Wyoming Valley. The Pennsylvania State Assembly appointed Pickering as an official in the newly-formed Luzerne County, tasked with mediating conflicting land claims between settlers.
It was in this capacity that some Connecticut settlers kidnapped Pickering in 1788, trying to force him to recognize their land claims. Pickering refused to negotiate with his kidnappers and was dragged through the forest while Pennsylvania militia were trying to track them down. After nearly three weeks, his captors released him.
Pickering spent the next few years taking time away from his farm to help negotiate some of the treaties with Indians regarding control of land in western Pennsylvania and the Ohio Territory. President Washington offered him several jobs, including Quartermaster General of the new army, but Pickering declined. He finally accepted the role of Postmaster General in 1791.
Pickering would serve as postmaster for about three and a half years before moving on to become Secretary of War. We'll get into the reasons reasons for that shortly. Joseph Habersham succeeded him in the role, and continued in that role until the Jefferson Administration.
Habersham was from Georgia. He had served as a colonel in the Continental Army, but resigned after serving as Lachlan McIntosh’s second in the 1777 duel that killed Button Gwinnett, a signer of the Declaration of Independence.
After the war, Habersham remained active in Georgia politics where he served as Speaker of the Georgia House. He was serving as mayor of Savannah when Washington appointed him Postmaster General.
Secretary of State
The first cabinet member to resign was Secretary of State Thomas Jefferson. When Washington first appointed Jefferson the two men seemed to get along well. As Washington’s first term came to an end, Jefferson was among those who begged Washington to accept a second term. Washington, in turn, asked that Jefferson stay on as Secretary of State.
Jefferson and Hamilton regularly found themselves on opposite sides of many issues. The Bank of the United States was a big one. But what really divided the two men was foreign policy. Hamilton wanted a good economic relationship with Britain, while Jefferson wanted closer ties to France.
Washington’s effort to form consensus on these divergent views was to begin having cabinet meetings where they could all sit around a table together, hash out their differences, and reach an agreeable solution. Jefferson hated these meetings. He referred to his conflicts with Hamilton there as being “daily pitted in the cabinet like two cocks.” This was a reference to cock fighting, a popular pastime where gamblers would throw two chickens into an arena, known as a cock pit, where the two animals would try to peck each other to death.
Jefferson came to believe that Hamilton had a growing influence over Washington, who seemed to be siding more and more with policies that favored Britain abroad and rich bankers and investors domestically. To counter this, Jefferson began subsidizing Philip Freneau, who published the National Gazette, which regularly attacked Washington. When the paper published a cartoon showing Washington being sent to the guillotine, Washington lost his temper and railed against the paper that Jefferson continued to support.
Finally, at the end of 1793, less than a year into Washington’s second term Jefferson had had enough. He submitted his resignation. Washington said he accepted it with regret and felt deserted by Jefferson.
After returning to private life, Jefferson continued to attack Washington as becoming too senile and becoming the puppet of Hamilton and the Federalists. In 1796, Jefferson wrote a letter to a friend where he referred to former revolutionary heroes as “apostates” who had been “shorn by the harlot England”. This letter eventually became public and Washington took personal offense at this, wrote Jefferson a letter bluntly expressing his offense, and the men ceased all communication. They would never reconcile.
Attorney General Edmond Randolph took over as Secretary of State following Jefferson’s departure. Randolph resigned after about a year and a half, for reasons we’ll get into in a moment. Timothy Pickering completed the remainder of Washington’s term as Secretary of State.
Secretary of War
The next secretary to depart was Henry Knox. During the Revolutionary War, the 25 year old Boston bookseller became one of General Washington’s most reliable general officers. After the war, Knox moved to a capacity, serving in charge of the army under the Confederation Congress. Washington happily asked Knox to continue in that role when he became President.
Washington tended to regard most of his cabinet secretaries as advisors. His relationship with Knox was a little different. Perhaps it was because Washington felt most knowledgeable personally in military matters, he tended to treat Knox more like a staff assistant than an advisor. He would give Knox instructions rather than ask his opinion on many matters of military policy.
At the same time though, Knox held Washington’s trust and confidence. Hamilton once remarked near the beginning of President Washington’s first term that Washington spoke with Knox the way a man does with his wife. Knox generally aligned himself with Hamilton as a Federalist and seemed to have a solid relationship with the president.
That relationship began to fall apart in 1794. The incident that caused the rift came during the Whiskey Rebellion.
After the Revolutionary War ended, Knox lived extravagantly. He rented a downtown mansion in Philadelphia where he lived with Lucy and his children. Lucy also enjoyed gambling and loved to play cards with Philadelphia's elite. The salary of a government bureaucrat simply did not support this lifestyle. So Knox engaged in land speculation to supplement his wealth.
Knox borrowed heavily to make investments in the Ohio Company. He also partnered with William Duer to purchase two million acres of land in Maine. During this time, Knox built a 19 room mansion in Thomaston, Maine, which he named Montpelier.
I mentioned Duer back in Episode 379 when his speculation led to the financial panic of 1792 and his bankruptcy. Knox was hit hard by those events and was struggling on the edge of bankruptcy himself.
By the summer of 1794 Knox’s financial situation had reached a crisis point. Knox had to request six week’s leave from his position so that he could travel to Maine and settle some of the financial problems related to his property there.
The timing could not have been worse. This was at the height of the Whiskey Rebellion and just around the time that Washington issued his call to raise a militia army to crush that rebellion. This was one of the most critical times for the Secretary of War. Washington reluctantly approved the leave but he was not happy about it. When Knox ended up being gone for, not for six weeks but for more than two months, Washington grew even angrier.
Hamilton happily filled in for Knox, accompanying Washington to western Pennsylvania. But while he was going to war, the president wanted his secretary of war by his side, not the treasury secretary. When Knox returned to Philadelphia in October, he sent a note to Washington, who was still out in the field with the army, whether he wanted Knox to join him. Washington sent a curt response, essentially saying it was too late to be useful. Washington was already on his way back to Philadelphia by this time.
Two months later, at the end of December, Knox submitted his resignation. Knox cited financial reasons for his resignation. Washington, still annoyed by Knox’s absence during the Whiskey Rebellion, accepted the resignation, in a way which witnesses called frosty and overly formal. Knox returned to Maine, where he sold much of his lands to stay out of debtor’s prison. He eventually resolved his finances, but his public life was at an end. Despite Washington's coolness toward Knox at the end of his term, the to men remained close friends and continued to correspond with each other until Washington's passing.
Timothy Pickering replaced Knox as Secretary of War, serving in that role for less than a year before moving on to Secretary of State in 1796. James McHenry replaced Pickering at the War Department. McHenry was a surgeon from Maryland. He served as a Continental officer during the Revolution. After the war, he served in the Maryland Senate and as a delegate to the Continental Congress. McHenry would remain in that position for the rest of Washington's term and into Adams' term.
Secretary of Treasury
Alexander Hamilton also left for money reasons. Hamilton had been the youngest member of the cabinet, and arguably the most impactful on the new government. He had served as an aid to Washington for most of the Revolution. Washington had come to admire and respect his abilities, especially in matters of finance.
During his tenure as Treasury Secretary, Hamilton became the de facto leader of the Federalists and also a lightning rod for abuse from the Democratic Republicans. The main cause of criticism was that Hamilton was imposing a British style economy, where much of the nation’s wealth went to speculators and financiers who did not really work for a living. Opponents believed that this would eventually result in a form of aristocracy, similar to the system in Britain, which they hated.
At the beginning of Washington’s second term, William Branch Giles, a Congressman from Virginia introduced a resolution to investigate Hamilton. Giles was a young man, only 27 years old when first elected to Congress. Giles was the first Representative to win a special election in 1790, replacing Theodorick Bland, who had died in office.
Giles aligned himself with the Jefferson-Madison faction in Congress. This faction not only opposed many of Hamilton’s economic plans, they also suspected that there was an element of corruption. Hamilton might be enriching himself or his friends in these transactions, at the expense of the treasury.
At the end of December, 1792, Congress demanded a full accounting of some loans that Hamilton had taken in order to repay other loans that had a higher interest rate. Hamilton submitted a report to congress a week later, on January 3, 1793, explaining the transactions. That was not good enough for Giles. A few weeks later, he introduced a series of resolutions, demanding much more details including the names of people who profited from the transactions.
These resolutions essentially accused Hamilton of financial misconduct. Specifically, private investors in the Bank of the United States would benefit from these transactions. The resolutions censored Hamilton’s behavior and attacked his honesty.
Giles did not come up with this on his own. Jefferson had worked secretly with Giles in developing the resolutions. Jefferson was still a member of Washington’s cabinet at this time. Jefferson was open about his opposition. He spoke with Washington about his concerns that Hamilton was hiding financial problems with the bank with these transactions. But he kept his cooperation with Giles a secret.
In the end, Congress refused to pass the resolutions. Their attacks on Hamilton were unfounded. Jefferson probably knew this from the beginning, but figured that some mud from the discussion would stick to Hamilton, even if he was ultimately exonerated.
Hamilton would remain as Treasury Secretary for several more years. But, like Henry Knox, Hamilton’s lifestyle was not possible on his salary as a member of the Cabinet.
Ironically, the attacks by Giles and the other Democratic Republicans delayed Hamilton’s departure. He would have resigned sooner than he did, but stayed on until he was absolved of all the accusations in the Giles Resolutions. Had he quit before, many would have taken that as an admission of guilt.
When Hamilton finally resigned on January 31, 1795, he was nearly broke. He returned to private practice as an attorney in New York in order to rebuild his wealth.
Following Hamilton’s departure, Oliver Wolcott took over at Treasury. Wolcott was from Connecticut. He began working with the Treasury Department under Hamilton as soon as it was formed. He first worked as an auditor, then serving as Comptroller. When he replaced Hamilton as Secretary, little changed. Wolcott greatly admired Hamilton and even kept up a vigorous correspondence with Hamilton when Hamilton returned to New York. Hamilton’s critics complained that Hamilton was still running the Treasury Department and influencing President Washington, just using Wolcott as the conduit for his policies and ideas.
Attorney General
Attorney General Edmund Randolph was the last to go. He had served as the President’s legal advisor for many years, even before he became president. Unlike other members of the cabinet, he was also able to take on other private legal clients to supplement his government salary. We saw last week when Randolph represented Chisholm in the case of Chisholm v. Georgia that led to the adoption of the 11th Amendment.
After Jefferson resigned as Secretary of State, Randolph moved over to State. William Bradford took over as the new Attorney General. Bradford was from Philadelphia. He had served as attorney general of Pennsylvania and on the state Supreme Court before joining the administration. Bradford seemed to be a man with a great legal future ahead of him. He was still in his late 30s while serving as attorney general. Sadly, he became ill and died during the summer of 1795.
Charles Lee next took over as Attorney General. This is not General Charles Lee from the Revolution. This Charles Lee was the younger brother of Henry “Light-Horse Harry” Lee. He was a capable attorney who had some experience in the Virginia legislature. I suspect his being a part of the powerful Lee family contributed to Washington’s decision to appoint him.
Fauchet Scandal
Randolph’s final departure as Secretary of State came under a cloud of scandal involving French minister Jean Antoine Fauchet. Recall that France had sent Fauchet in late 1793 to clean up the mess created by Citizen Genet that destroyed relations between France and the US.
During Fauchet’s first year in America the Whiskey Rebellion took center stage. That same year, John Jay was in London negotiating a treaty with Britain that French officials worried would destroy the Franco-American alliance.
Fauchet tried to build relationships with top US officials, including Edmund Randolph. In late October, Fauchet sent a secret dispatch, known as dispatch number 10, to officials in Paris. His report attacks the Washington administration on a number of issues It describes the Washington administration as decrepit. It mentions Randolph as a “confidant” and reports Randolph’s concerns that federalist policies supported by Washington are giving rise to what he calls a “financiering class” that wants to restore monarchy in America and enslave American trade to England.
He also reports that Randolph suggests that for a few thousand dollars, he can influence the outcome of the Whiskey Rebellion in a way that would benefit France. The dispatch is a cynical analysis of American politics that suggests a few bribes could influence government policy and says explicitly that all of these patriots have their price.
Fauchet put the dispatch aboard a ship headed to Paris. A British warship intercepted it, and sent the letter to London. Officials there forwarded the dispatch to British Ambassador George Hammond in Philadelphia. In late July, Hammond shared the document with Treasury Secretary Wolcott, who, in turn, shared it with Secretary of War Pickering. At the time, Washington was home at Mount Vernon.
Pickering and Wolcott viewed the dispatch as evidence that Randolph has asked the French Ambassador for a bribe, and is also committing treason by undercutting American policy in favor of France.
All of these events are unfolding in the period just after the Senate has ratified the Jay Treaty, the public is just learning about the Treaty’s terms, and President Washington is debating whether to sign it.
Washington returns to Philadelphia to deal with the matter. After reading the dispatch and discussing it with Wolcott and Pickering, the president determines that Randolph is essentially a French agent. At the time, Randolph was the only cabinet member opposing the Jay Treaty.
After Washington returned to Philadelphia in August, he decided to end this dithering and sign the Jay treaty right away, before the scandal over Randolph broke. He ordered Randolph to inform Minister Hammond and to send a signed copy of the treaty to London.
Once that was done, Washington called Randolph into his office. There, with Wolcott and Pickering present, Washington showed the dispatch to Randolph and demanded an answer. Randolph read the document as best he could. It was in French. After a short discussion, Randolph was asked to leave the room while Washington discussed the matter with the others. When Randolph returned, Washington demanded a written explanation of the allegations in the dispatch. Since these involved some matters that took place more than a year ago, Randolph said he wanted to consult with other records before writing his version of events.
Randolph believed that Washington was convinced that he was guilty of something, maybe treason, maybe just disloyalty, but it was clear that the President did not believe there was an innocent explanation for the allegations made in the dispatch. Instead of writing an explanation, Randolph returned home and drafted his letter of resignation.
Randolph’s departure marked the last of the men who made up Washington’s original cabinet.
Next Week: A treaty with Spain changes US borders and opens up the Mississippi River to America for the first time.
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Next Episode 392 The Treaty of San Lorenzo (coming soon)
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“Introductory Note: Report on the Balance of All Unapplied Revenues at the End of the Year 1792 and on All Unapplied Monies Which May Have Been Obtained by the Several Loans Authorized by Law, [4 February 1793],” Founders Online, National Archives, https://founders.archives.gov/documents/Hamilton/01-13-02-0299-0001
Sheridan, Eugene R. “Thomas Jefferson and the Giles Resolutions.” The William and Mary Quarterly, vol. 49, no. 4, 1992, pp. 589–608. JSTOR, https://doi.org/10.2307/2947173
Clifford, John Garry. “A Muddy Middle of the Road: The Politics of Edmund Randolph, 1790-1795.” The Virginia Magazine of History and Biography 80 (1972): 286-311. JSTOR http://www.jstor.org/stable/4247732
Bonsteel Tachau, Mary K. “George Washington and the Reputation of Edmund Randolph.” The Journal of American History, vol. 73, no. 1, 1986, pp. 15–34. JSTOR, https://doi.org/10.2307/1903604
Translation [of a letter from] ... Joseph Fauchet, minister plenipotentiary of the French Republic near the United States, to Mr. Randolph, Secretary of State of the United States https://babel.hathitrust.org/cgi/pt?id=hvd.hxj4gf&seq=1
Of the first 12 amendments proposed by James Madison, the ten that were ratified mostly had to do with a restatement of the basic rights that all Americans already assumed they had. The two structural amendments, one involving more specific rules on representation and another involving limits on Congressional pay raises, both failed to receive enough state support to be ratified.
On February 7, 1795, the states ratified an eleventh amendment to the Constitution. The amendment read: The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.
Basically this is saying that states have sovereign immunity in lawsuits. This week we will take a look at why the young nation thought this amendment was so important.
Founders and Federalism
The Constitution itself was a compromise document. The founders, even the men who worked on writing it, did not agree on many issues, and interpreted the final document differently. Most legal scholars at the time accepted the principle of sovereign immunity. That is that a sovereign could not be sued in court.
This principle came from the British common law tradition. In medieval times, kings ruled as they wished. Over time, kings or other sovereign leaders developed rules for society and could make judgments about how those rules would apply in particular cases. Since kings could not be bothered to deal with every dispute that subject had, they appointed judges to make rulings in the king’s name. In other words, judges hearing court cases were doing so in the name of the king, applying the king’s rules to various legal disputes. In that context, it made sense that the king could never be sued in court since the king would have to be judged by a representative of the king. Therefore, the king, as sovereign, was above the law and not subject to it.
When the states became republics, they inherited this idea of sovereign immunity, holding that an individual could not sue the state in a state court. The state, as sovereign, was immune from suit. If people had a dispute with something done by the government, the proper step would be to petition the legislature or the governor for relief, not the courts.
With the creation of the US Constitution, this raised an interesting legal question. States gave up some sovereign authority to the federal government. Part of the purpose of the new federal court system was to sit in judgment of disputes between states. But what if a private citizen in one state had a dispute with another state government? Would federal courts be able to hear such a case? or would state governments still have immunity from suit?
Alexander Hamilton, writing in The Federalist 81, insisted that the Constitution did nothing to impact the sovereignty of state governments against suits by private citizens. The fact that the constitution discussed states being parties to a case. Hamilton insisted that language was so states could bring suits, not that they would be subject to defending them. Hamilton noted that sovereign immunity was a pretty fundamental common law doctrine and the Constitution said nothing explicitly to take that traditional immunity from state governments.
If Courts had the power to give away tax money to claimants, then judges would have the power to take over the legislative power of the purse. They could even drive states into bankruptcy. Sovereign immunity was a doctrine considered necessary to allow state governments to govern.
Chisholm v. Georgia
Despite Hamilton’s firm opinions on this matter, others disagreed. The doctrine of sovereign immunity put state governments above the law. They were not obliged to repay debts or be subject to any of the other normal rules that they imposed on others. During the Revolutionary War, states had issued a great many promissory notes to finance the war. They also seized a great deal of loyalist property which, under the terms of the Peace Treaty with Britain, they were legally obligated to pay compensation.
The Constitution gave original jurisdiction to the Supreme Court for any cases where the state was a party. Numerous scholars, including Hamilton, Madison, and John Marshall, provided assurances that this only meant cases where a state brought suit. These leading legal minds assured skeptics that states could not be sued by individuals, even though the Constitution did not explicitly say that.
Inevitably though, lawyers would challenge those assurances. The first case brought before the court involved Dutch creditors who were suing Maryland for repayments of war debts. Maryland ended up settling the case before the immunity question was even raised.
Another case that raised the issue began On October 31, 1777. The governor and executive council of Georgia authorized the purchase of cloth and other military supplies from Robert Farquhar, a South Carolina merchant. The exact amount of the purchase is confusing since sometimes it is listed in Continental dollars, sometimes in British pounds sterling, and sometimes in South Carolina pounds. As best I can tell, the value was a little over £7500 British pounds sterling. That is a lot of money when you consider a typical workman would be lucky to earn £50 pounds in a year.
Georgia needed the supplies for the army. Under the terms of the agreement, Farquhar would deliver the goods by December 1, and would be paid in Continental dollars. If dollars were unavailable, he would be paid with the value of the debt in indigo. Farquhar delivered the goods ahead of schedule but got no payment.
Like most creditors, Farquhar regularly petitioned for repayment of the debt but got nowhere. Georgia refused to consider the petition.
In 1784, Farquhar sailed from Charleston to Georgia, possibly to press his claim with the Georgia legislature. While aboard a ship he was sailing, a boom swung wildly, knocking Farquhar into the water, and resulting in his death by drowning.
Farquhar left his estate to his daughter, who was 10 years old at the time. Alexander Chisholm became the executor of Farquhar’s estate. Chisholm continued to press Farquhar’s claim for the repayment of the debt that Georgia owed to him. In 1789, the legislature finally came to the conclusion that they already had paid the money to their state agents, who should have given the money to Farquhar. If he didn’t get it, he needed to sue the agents, not the state. One of the agents was dead, and the other was apparently insolvent.
Almost immediately after the federal courts were established in 1791, Chisholm sued Georgia for repayment of the debt. He brought suit in the Southern Circuit in Georgia, and served the Governor and the Attorney General. Governor Edward Telfair answered the claim by denying that the federal court had any jurisdiction in the matter since Georgia was an independent and sovereign state.
At the time, Supreme Court Justices, riding circuit, heard such cases with the local federal judges. Supreme Court Justice James Iredell was riding circuit in Georgia. Iredell was from North Carolina. He had been a prosecutor during the war. During debates on the Constitution, Iredell had been a leading advocate for ratification in North Carolina, a state which was one of the most hostile toward ratification.
North Carolina ratified the Constitution after Washington had already appointed all of the Supreme Court Justices. But one of those justices, Robert Harrison of Maryland, declined the appointment, leaving the first opening on the court. Washington gave the appointment to Iredell to include North Carolina in the new government and as thanks for all of Iredell’s work in getting the Constitution ratified there.
Iredell, along with district judge Nathan Pendleton, dismissed the case, accepting Georgia’s assertion of sovereign immunity. Chisholm appealed the matter to the Supreme Court, and hired Attorney General Edmund Randolph to represent him. At the time, the attorney general could take on private cases, as long as they did not involve the federal government.
The case was docketed for the 1792 term, but Georgia never showed up to argue the case. As a sovereign entity, the state believed it was not obligated to show up and argue its case before a court that had no jurisdiction to hear the case.
Randolph requested that the court render judgment, but the court decided to hold over the case until the 1793 term. Once again, Georgia did not show up to argue its case. It sent a written protest to the court that the Supreme Court had no jurisdiction to hear a case against a sovereign state.
The Court allowed the plaintiff to proceed with its case. Randolph made the obvious argument that the Constitution granted jurisdiction to “controversies between a state and citizens of another state.” There was no language that restricted this to cases where the state was the plaintiff. Randolph also noted that the Judiciary Act also gave jurisdiction to the Court in cases “where a state shall be a party.” Again, there was no limiting language in the statute, just as there was none in the Constitution. Congress could have very easily said plaintiff, instead of party, if that is what it wanted. Finally, Randolph noted that public policy required that states be held accountable to the law.
One concern raised by the justices was how they might be able to force Georgia to comply with a ruling if they ruled in favor of Chisholm. Randolph simply responded that courts should not be afraid to render a decision they deemed just simply because one party might act in hostility toward that decision.
At the time, there were only five justices on the court. Justice Thomas Johnson had just resigned his appointment, and Washington had not yet appointed a replacement. John Jay was still the Chief Justice.
One might think that part of the debate would be what the original intent of those who wrote the language into the Constitution? Original intent was not really a thing at this time, but one of the Justices, James Wilson had been at the convention and had played a role in writing the language regarding the court’s jurisdiction. It’s notable that, in his opinion, Wilson does not even bring up the question of what people at the convention were thinking when they wrote the parts on jurisdiction. This is true that no Supreme Court Justice then or after that would ever have a better knowledge of what happend there.
The five justices rendered their decisions fairly quickly. At the time, it was the convention that each justice would write his own opinion. There were no majority or minority opinions, and justices did not simply join onto other opinions.
Its probably no surprise that Justice Iredell, who ruled in favor of state sovereignty at the Circuit court, did so again at the Supreme Court. The other four justices, however, ruled against Georgia. They ruled that the Constitution and the Judiciary Act both made clear that states could be parties to federal cases and therefore had removed any immunity that might exist under common law.
Chief justice Jay’s opinion went further, arguing that the king’s sovereign immunity transferred to the federal government upon ratification of the Constitution. States were not entitled to any.
Despite making this ruling that Georgia was subject to the court’s jurisdiction, the justices also gave Georgia another opportunity to appear before the court. It scheduled another hearing for August 1793, then another for February 1794, and then another for February 1795.
In the meantime, Randolph began taking on more cases involving claimants against various states. One of them was William Vassall, who had lived in Boston until he fled in 1775. Vassal was a loyalist and Massachusetts seized his property. He was seeking compensation based on the Treaty of Paris.
Reaction
Reaction to the decision was swift and hostile. Georgia continued its refusal to appear before the court. In November of 1793, the Georgia legislature passed a resolution declaring that anyone who attempted to enforce the court’s judgment would be guilty of a felony and would be hanged without the benefit of clergy.
Massachusetts also took up the fight since it was facing the claim by Vassall before the court. Governor John Hancock called a special session of the legislature calling the court’s decision “dangerous to the peace, safety, and independence” of the states. The Massachusetts legislature declared that it would use the same strategy that Georgia had used, and would refuse to appear before the court in the suit that Vassall had brought.
This would be Governor Hancock’s last public appearance. He would die soon afterward.
Virginia also passed resolutions which called the decision “incompatible with and dangerous to the sovereignty of the individual states. Legislators claimed this decision was an effort to consolidate the various republics into a single nation, something that they rejected signing up for when they ratified the Constitution.
All the states had concerns over the fact that creditors who they had been blowing off for years, now had a forum where they could collect on those bills. Taxpayers would be on the hook, and would not be happy about making all these payments.
Proposing an Amendment
Congress wasted no time responding to the criticism. The Supreme Court issued its decision on February 18, 1793. On February 19th, Massachusetts Congressman Theodore Sedgwick introduced a proposed constitutional amendment prohibiting states from being called as defendants in federal court. The next day, February 20, Senator Caleb Strong, also from Massachusetts, submitted a similar amendment.
Neither the House nor the Senate acted on these proposals since the term ended in early March, and there simply was not enough time to deal with them. The Senate debated Strong’s proposed amendment, but it never got to a vote.
The third Congress did not meet until nearly a year later, in January of 1794. When it did, proponents were ready to act quickly. The Senate received a proposed amendment, based on Senator Strong’s amendment from the prior year. The new proposal read:
The judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by citizens of another state, or by citizens or subjects of any foreign state.
The main difference was adding the wording that the judicial power shall not be construed to, rather than simply saying that there was no such judicial power. This seemed to be aimed at the Supreme Court, essentially saying that their interpretation of the Constitution in Chisholm was wrong.
There was some debate on the substance. Senator Albert Gallatin of Pennsylvania proposed a change that would have allowed suits that arose to enforce terms of foreign treaties. The argument for this was that international affairs was a federal power, and states should not have the ability to interfere with federal treaties by ignoring their obligations under them. Of course, the real world application of this change would have allowed the federal courts to hear cases from loyalists who had their property confiscated during the war, because the Treaty of Paris gave them the right to make these claims. This would have allowed Vassall’s case against Massachusetts to go forward, even though that state was up in arms at the idea of having to do that. The Senate overwhelmingly rejected Gallatin’s proposed change.
As I mentioned when we covered the Whiskey Rebellion, Gallatin would be kicked out of the Senate less than two months into the session. This was not related to his unpopular proposal. It was because the Senate determined that he had not been a US citizen for the required nine years. But Gallatin was clearly not making friends among his Senators when he made this proposal.
The amendment as originally proposed, passed the Senate by a vote of 23 to 2, less than two weeks after its introduction.
Following passage in the Senate, the proposed Amendment reached the House of Representatives. The debate there focused on the fact that people with a legitimate claim needed to have some forum to seek compensation. There was a proposed change that would have restricted the jurisdiction of federal courts only in states where the state had failed to provide for jurisdiction in its own state court system.
Once again though, the overwhelming position of most representatives was that the federal government should not meddle in any way in how states handled their liability to suits. The proposed change was voted down overwhelmingly, and the House passed the amendment as originally written in the Senate on March 4 by an overwhelming vote of 81-9.
Ratification
Following congressional approval the amendment went to the states for ratification. There were 15 states at the time, so 12 would be needed for the necessary three-fourths ratification.
New York and Rhode Island legislatures ratified the amendment in March, the same month that Congress had approved the amendment. Over the course of the summer, Connecticut, New Hampshire and Massachusetts ratified it. The delay in other states was primarily the fact that the state legislatures in those states were not in session at the time. Within a year, twelve states had ratified. The 12th state to do so was North Carolina in February of 1795.
There was a delay, however, in making the ratification official. Several of the states that ratified the amendment failed to give official notice to Congress. In 1797, two years after ratification was complete, Congress passed a resolution asking President Adams to inquire into the matter and get each state to provide notice.
By this time, 1797, South Carolina also ratified the amendment, perhaps to make sure the requisite number of votes were there. By this time Tennessee had joined the Union as the 16th state. As a result of that, the required number of states for ratification would have risen to thirteen. South Carolina’s ratification provided that 13th vote.
As it turned out, that vote was not necessary. The various states reported that they had ratified the amendment before Tennessee joined the Union so the 12 ratifications were sufficient. In case you were wondering, New Jersey and Pennsylvania were the only two of the 15 not to ratify the amendment at the time.
Case Dismissed
The formal proclamation of the amendment’s ratification did not take place until February of 1798. The Court kept the Chisholm case on the docket in limbo during the four years it took since it was simply waiting for formal word on the amendment.
In the meantime, parties had brought other cases against states. One of these was Hollingworth v. Virginia. The Supreme Court used that case to render its decision that the Eleventh amendment applied retroactively to all cases, and that any case brought against a state must be dismissed.
As a result of the amendment, the court dismissed Chisholm’s case against Georgia. He would simply have to wait until Georgia felt like paying him back.
Next week, we will cover the first big scandal of the Washington Administration, and the resignation of President Washington’s first cabinet.
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Mathis, Doyle. “Chisholm v. Georgia: Background and Settlement.” The Journal of American History, vol. 54, no. 1, 1967, pp. 19–29. JSTOR, https://doi.org/10.2307/1900316.
Barnett, Randy E. “The People or the State?: Chisholm V. Georgia and Popular Sovereignty.” Virginia Law Review, vol. 93, no. 7, 2007, pp. 1729–58. JSTOR, http://www.jstor.org/stable/25050394
Fordham, Jeff B. “IREDELL’S DISSENT IN CHISHOLM v. GEORGIA: ITS POLITICAL SIGNIFICANCE.” The North Carolina Historical Review, vol. 8, no. 2, 1931, pp. 155–67. JSTOR, http://www.jstor.org/stable/23516335
