Until recently, Alexander Hamilton and his contributions as a Founding Father have been largely overlooked. In fact, my strongest mental association with his name is still the original ‘Got Milk?’ commercial from 1993—with ten thousand dollars on the line, a gameshow caller can’t answer the question, “Who shot Alexander Hamilton?” because his mouth was full of peanut butter.
But this summer, I redeemed myself by reading Alexander Hamilton by Ron Chernow. This biography inspired Lin-Manuel Miranda to write his Broadway musical, which has brought much love and attention to a great leader that is long overdue. It chronicles Hamilton’s political influence and highlights his role as the primary architect of our country’s entire financial system.
When he became the country’s first Secretary of Treasury, it was not his first choice; nonetheless, he commented, “It is the situation in which I can do [the] most good.” And he was absolutely right because not only did he create the Federal Reserve, establish our modern banking system, and guide economic policy throughout George Washington’s entire administration; he also set precedent for securities trading in the United States.
We take for granted that securities can be bought and sold freely, transferring along with them all rights and privileges, but it wasn’t always so. After the Revolutionary War, many veterans sold the IOUs for their wages to speculators who paid just pennies on the dollar. But once the new government was fully established and a system for repayment was created, their value skyrocketed.
At the time, many people thought it was unfair that these soldiers lost out on their pay. They had made tremendous sacrifices, yet speculators garnered their reward. Obviously, this issue was politically sensitive, and Hamilton could have pandered to the masses by arguing only the obvious impracticalities of tracking down original owners.
Instead, Chernow explains, “Hamilton stole the moral high ground from opponents and established the legal and moral basis for securities trading in America: the notion that securities are freely transferable and that buyers assume all rights to profit or loss in transactions.” He understood that there was too much at stake to surrender to political expediency, and this concept is fundamental to securities law today.
Sure, he is on the ten dollar bill and was famously killed by Aaron Burr, but the story of this Founding Father goes much deeper than that. Without him, we may not have some of the basic tenants that govern the greatest financial system in history.
Josh Norris is an Investment Advisory Representative of LeFleur Financial. Josh can be reached at josh@LeFleurFinancial.com.