IO 
WAR BORROWING 
power was perhaps the most important factor in 
preventing outright prohibition. The final phras 
ing was a compromise acceptable to both elements 
— the one believing that resort to such an expedient 
was possible if occasion required under the general 
borrowing power; the other convinced that the 
omission of specific authorization would “ shut and 
bar the door against paper money.” 
This hostility to paper emissions was fully 
shared by Alexander Hamilton. As a policy, he 
maintained that “ the wisdom of the Government 
will be shown in never trusting itself with the use 
of so seducing and dangerous an expedient.” In 
practice, he relied on temporary bank loans in an 
ticipation of established revenue to extricate the 
new Treasury from its inherited difficulties. The 
same deep-rooted association in the public mind of 
bills of credit or treasury notes with the excesses 
of paper money continued for a generation to dis 
courage the use of negotiable instruments in connec 
tion with temporary borrowing. Not until the 
War of 1812 was recourse had to short-term obliga 
tions. A funded loan to cover the war deficit had 
met with disappointing public response, and Gallatin 
sought authority to issue treasury notes for the un 
subscribed amount. In the congressional debate 
which preceded the passage of the act, the plan was 
opposed “ as engrafting on our system of finances 
a new and untried measure,” and many of the 
criticisms which the subsequent use of the device 
aroused were anticipated. 8 But the situation was 
deemed critical and the act was passed and ap- 
8 Bayley, pp. 343-5.