Alexander Hamilton's debt assumption plan failed twice in Congress in early 1790 before Thomas Jefferson brokered a deal over dinner on June 20. Hamilton got federal assumption of state Revolutionary War debts. Jefferson and Madison got the national capital moved to the Potomac River.
Northern states supported assumption because they hadn't paid off their war debts, while Southern states opposed it because they'd already paid theirs. Hamilton argued federal assumption would establish U.S. credit and give wealthy bondholders a stake in the national government's success. Congress passed the Funding Act in August 1790, requiring the Treasury to take over and pay state debts by issuing federal bonds. The compromise shaped American governance—Hamilton's financial system created the foundation for federal power and American capitalism, while the capital's location in the South balanced sectional interests.