capital being located in the agrarian states of Maryland and Virginia, the demographic center of the country at the time, rather than in a metropolitan and financial center such as New York City or Philadelphia. Jefferson and Madison secured a lucrative debt adjustment for their state of Virginia from Hamilton, as part of the bargain. Assumption Historian Max M. Edling says that assumption worked by using the location of the capital as a bargaining ploy. Alexander Hamilton proposed that the federal Treasury take over and pay off the debt states had incurred to pay for the American Revolutionary War. The Treasury would issue bonds that rich people would buy, thereby giving the rich a tangible stake in the success of the national government. Hamilton proposed to pay off the new bonds with revenue from a new tariff on imports. Jefferson originally approved the scheme, but Madison had turned him around by arguing that federal control of debt would consolidate too much power in the national government. Edling pointed out that after its passage in 1790, the assumption was accepted. James Madison tried to pay speculators below 100%, but they were paid the face value of the state debts they held regardless of how little they had paid for them. When Jefferson became president, he continued the system. The credit of the U.S. was solidly established at home and abroad, and Hamilton was successful in signing up many of the bondholders in his new Federalist Party. Good credit allowed Thomas Jefferson's Treasury Secretary, Albert Gallatin, to borrow in Europe to finance the Louisiana Purchase in 1803, and to borrow to finance the War of 1812. In popular culture The compromise is dramatized in the musical Hamilton by Lin-Manuel Miranda in the song "The Room Where It Happens", which tells the story from the perspective of Aaron Burr. Officially titled Hamilton: An American Musical, it's a musical theatre production. Specifically, one that tells the story of forgotten American Founding Father Alexander Hamilton and his ascent out of poverty and to power against the backdrop of the American War of Independence See also First Report on the Public Credit Residence Act References Sources Brock, W.R. 1957. The Ideas and Influence of Alexander Hamilton in Essays on the Early Republic: 1789–1815. Ed. Leonard W. Levy and Carl Siracusa. New York: Holt, Rinehart and Winston, 1974. Burstein, Andrew and Isenberg, Nancy. 2010. Madison and Jefferson.