With sources of revenue legislated, Congress proceeded to address the pressing issue of public credit.
Establishing government credit – the ability to borrow – was deemed a necessity if the nation was to endure.
In order to convince investors to purchase United States securities, a system was needed to reliably pay interest.
Considering the magnitude of the debt burden it had inherited  Congress wished to dispose of it with economy, and "the only real difference of opinion ... was how much of the existing debt had to be redeemed in order to establish the government credit."

Various plans had been considered to pay down the domestic debt under the new federal government.
Some advocates wanted to abruptly scale back the debt to ease tax burdens, so as to retire the debt quickly.
Proposals to default on the loans were termed partial- or full "repudiation".
None of these, however, suggested defaulting on any portion of the $12 million foreign debt – plus $1.5 million in interest – regarded as a "sacred obligation [to be] paid in full".

A significant portion of the nation's $40 million domestic debt  was owed to American patriots who had supported the War of Independence through loans or personal service.
Many of these were combat veterans who, demobilizing in 1783, had been paid in IOUs – "certificates of indebtedness"  or "securities" (not to be confused with the worthless Continental currency or bills of credit) and redeemable when the government's fiscal order had been restored.

Schemes more in sympathy with the ex-soldiers who had relinquished their certificates to speculators at reduced rates were termed "discrimination".
These called for paying the original holder of the security at full value, and reimbursing the current holder of the security for its purchase price.
 The combined payments would, however, exceed the denomination of the original certificate.

Congressman James Madison of Virginia offered his own variation of "discrimination" which preserved the federal obligation of face value debt repayment.
In his version, current certificate holders would be reimbursed at their purchase price for the devalued certificate, and the balance would be handed to the original holder; the government outlay would match the face value of the original certificate.

Hamilton rejected both "repudiation" and "discrimination" and championed "redemption", i.e. reserving payment at full value strictly to the current holders of the certificates, with arrears of interest.

Near the close of the first session of the First Congress in September 1789, with the matter of establishing public credit unresolved, the legislature directed the new Secretary of the Treasury Alexander Hamilton to prepare a report on credit.
With sources of revenue legislated, Congress proceeded to address the pressing issue of public credit. Establishing government credit – the ability to borrow – was deemed a necessity if the nation was to endure. In order to convince investors to purchase United States securities, a system was needed to reliably pay interest. Considering the magnitude of the debt burden it had inherited  Congress wished to dispose of it with economy, and "the only real difference of opinion ... was how much of the existing debt had to be redeemed in order to establish the government credit." 
Various plans had been considered to pay down the domestic debt under the new federal government. Some advocates wanted to abruptly scale back the debt to ease tax burdens, so as to retire the debt quickly. Proposals to default on the loans were termed partial- or full "repudiation". None of these, however, suggested defaulting on any portion of the $12 million foreign debt – plus $1.5 million in interest – regarded as a "sacred obligation [to be] paid in full".
A significant portion of the nation's $40 million domestic debt  was owed to American patriots who had supported the War of Independence through loans or personal service. Many of these were combat veterans who, demobilizing in 1783, had been paid in IOUs – "certificates of indebtedness"  or "securities" (not to be confused with the worthless Continental currency or bills of credit) and redeemable when the government's fiscal order had been restored.
Schemes more in sympathy with the ex-soldiers who had relinquished their certificates to speculators at reduced rates were termed "discrimination". These called for paying the original holder of the security at full value, and reimbursing the current holder of the security for its purchase price.  The combined payments would, however, exceed the denomination of the original certificate. 
Congressman James Madison of Virginia offered his own variation of "discrimination" which preserved the federal obligation of face value debt repayment. In his version, current certificate holders would be reimbursed at their purchase price for the devalued certificate, and the balance would be handed to the original holder; the government outlay would match the face value of the original certificate. 
Hamilton rejected both "repudiation" and "discrimination" and championed "redemption", i.e. reserving payment at full value strictly to the current holders of the certificates, with arrears of interest.
Near the close of the first session of the First Congress in September 1789, with the matter of establishing public credit unresolved, the legislature directed the new Secretary of the Treasury Alexander Hamilton to prepare a report on credit.
First Report on the Public Credit