Alexander Hamilton was Secretary of the Treasury under President George Washington. In that role, he devised a financial plan that he claimed would put the new nation on a sound financial footing. The plan had two main features. The first was federal "assumption" of state debts. During the Revolutionary War, each state had amassed considerable debt, and though some had actually retired their debts, many others had not. Hamilton proposed a plan by which the federal government would take up that debt, and issue new bonds to cover the cost. This would have two effects, both of which Jefferson found alarming.

The first was that the states would be more firmly tied to the federal government. The second was that wealthy individuals, who would purchase the new bonds issued by the federal government, would therefore support it for a very simple reason—they would lose their investment if it failed. Securing support for the new government from wealthy financiers was essential to Hamilton's plan. The second part of his plan was the establishment of a national bank that would hold federal tax revenue, while also issuing loans and bonds against it. Through a number of means, the Bank of the United States would control the amount of money in circulation, regulating the money supply and ensuring that paper money was backed by specie (hard currency). Jefferson opposed these plans for a number of reasons. The first was he, like many other southern politicians, objected to being taxed to pay off other state debts—most debt, it turned out, was held by New England states. He also opposed the use of an excise tax on whiskey to pay off the debt, a plan that led to open rebellion in the Pennsylvania backcountry. Above all, Jefferson opposed the formation of a national bank, primarily on the grounds that the Constitution did not explicitly provide for one. Hamilton's more expansive view of the powers of Congress under the Constitution struck him as dangerous.

Thomas Jefferson was opposed to Alexander Hamilton’s financial plan. Alexander Hamilton’s plan called for combining the state and the federal government debts. New bonds would be issued. The old bonds would be redeemed at full value. Hamilton knew we needed to pay our debts to have credibility in the eyes of other countries. Hamilton also believed we needed to have a national bank. Hamilton believed our economy would benefit from having a stable currency.

Thomas Jefferson had concerns with Alexander Hamilton's plan. Thomas Jefferson believed in a strict interpretation of the Constitution. He believed that a national bank would be illegal since the Constitution didn’t specifically mention that a national bank could exist. Jefferson also believed a small number of people would benefit tremendously from Hamilton’s plan. Many people had sold their old bonds at a fraction of their value because they believed they would never get full value for them. Speculators, mainly from the North, bought these bonds at very low rates. Now, these speculators would benefit tremendously because those bonds would be redeemed at full value.

Thomas Jefferson was opposed to Alexander Hamilton’s financial plan for a few reasons.

Jefferson, who was Secretary of State at the time, was oppossed to Hamilton's plans for a number of reasons.  Hamilton's plan called Assumption was opposed because his friends stood to make fortunes off the new government by speculation.  The plan was for the federal government to assume the $25 million debts of the states from the Revolution, and to pay them off at face value.  The new government already owed nearly $12 million to France and Spain, and over $40 million in domestic debts, much of it for food and clothing for the army during the war.  The problem with paying the states' debts at face value was that the vast majority of the war bonds had been bought for pennies on the dollar by speculators, who would of course make a great deal of money off Assumption.  Many of these speculators were friends of Hamilton, hence the opposition of Jefferson and many others.

Jefferson also oppossed the National Bank, disliking the idea of the federal government having centralized control of the economies of all the states.  Jefferson claimed the plans were inspired by "principles adverse to liberty."  The Bank was, in fact, unconstitutional, the federal government being denied any powers not specifically given it by the Constitution.  Hamilton invented the concept of "implied powers" to counteract that.

In addition, Jefferson distrusted Hamilton and the others involved in the emergence of America's first political party, the Federalists.  Jefferson, like Washington, believed "party politics" would be the downfall of America if once allowed a foothold.  Jefferson believed the Federalists were attempting to inject monarchist institutions into America, to create a new nobility based on money and influence.  He considered this as the opposite of everything the Revolution had been fought for.  Washington, in fact, only accepted a second term as president to try to prevent political parties from coming into being.

Jefferson, Madison and others finally agreed to Hamilton's Assumption for the proto-Federalists accepting the new capitol being built on the Potomac.  Jefferson regretted this bitterly.  The payment of the debts certainly did increase the credibility of the new government, but the Bank was an idea so far ahead of its time that it was not that workable, and was later done away with.  Still, it did institute the concept of governmental control of the banking industry, although bizarrely enough the creation of a national bank became a central part of Karl Marx's theories of government.

The Federalist Party later became the Whigs, who much later morphed into the Republican Party, which was called the "Grand Old Party" in honor of its descent from the first party.