The Compromise of 1790

The District of Columbia's location came about through the so-called Compromise of 1790. This saw powerful Virginia politicians Thomas Jefferson and James Madison agree to Alexander Hamilton's plan for the federal government to bail out state debts incurred during the revolution in exchange for Hamilton and other Northerners agreeing to move the capital to the shores of the Potomac — a concession to Southerners. Virginia, the largest and most important Southern state, was the locus of opposition to Hamilton's assumption plan for several reasons. One was that the more agrarian Southern economies saw less benefit in establishing a stable financial system. Another was that Southern states were generally less indebted at the time. A final one was that Virginia in particular still held vast (and valuable) western landholdings that made its fiscal position more credible. Hamilton's Assumption Act had a long-term impact on the nation's finances, while its companion Residence Act has defined the capital from the beginning. The government would be established in an essentially new city, rather than an existing port that served as a center of commerce and trade.