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What is the significance of funding at par?

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whaddupthough | Student, Grade 10 | eNotes Newbie

Posted November 8, 2011 at 7:08 AM via web

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What is the significance of funding at par?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted November 8, 2011 at 7:47 AM (Answer #1)

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Since you have posted this under history, I assume that you are asking about the issue about "funding at par" of government debt after the Revolutionary War.

During the war, governments had borrowed money from people and given them bonds in return.  Many of those people had sold their bonds to speculators for much less than face value.  The question, then, was how much the government would pay for the bonds after the Constitution was written.  If they did funding at par (buying the bonds at face value) they would be rewarding these speculators (typically rich people) who had paid much less than the government would pay them.

The government ended up funding at par, which was a win for Alexander Hamilton who wanted the government to act in ways that would make rich investors happy so the economy could be strong.  Therefore, the significance of this was that the government chose to act in a way that made rich people happy in the days right after the new government was set up.

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