Alexander Hamilton's Market Based Debt Reduction Plan

39 Pages Posted: 15 Mar 2004 Last revised: 31 Oct 2022

See all articles by Peter M. Garber

Peter M. Garber

Brown University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: January 1991

Abstract

In 1790, Alexander Hamilton, the first Secretary of the Treasury of the United States, initiated a program to refund the U.S. debt. Debt that had sold at 75% discount two years earlier would be refunded at par into new funded debt of the new federal government. All foreign indebtedness would be repaid. I present evidence that Hamilton's actual refunding policy did not differ in nature from that envisioned under the recent Brady plan. I will show that the bond package for which the old debt exchanged had a market value well below par. Thus, a large part of the face value of the debt was effectively written off. I compare the Hamilton restructuring package to the recent Mexican restructuring package to find points of similarity to the Brady plan.

Suggested Citation

Garber, Peter M., Alexander Hamilton's Market Based Debt Reduction Plan (January 1991). NBER Working Paper No. w3597, Available at SSRN: https://ssrn.com/abstract=379266

Peter M. Garber (Contact Author)

Brown University - Department of Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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