When James Madison entered the House of Representatives in 1789, he found himself playing a singular role in America's new regime. Alongside President George Washington, Vice President John Adams, Secretary of State Thomas Jefferson, and Secretary of the Treasury Alexander Hamilton, Madison was viewed as a leader in the government. In the House, he often served as Washington's floor leader and right-hand man. In Congress, he was known by his colleagues as "our first man."
In addition to his important work for the drafting and passage of the Bill of Rights, Madison also had many important objectives for the government regarding commerce and trade. First, he wished to fight British influence over American trade. He also wished to encourage American shipping and navigation and to see new markets open up as part of the free trade situation spurred on by America's alliance with the French. He believed it was the duty of the national government to pursue these objectives.
Madison's ambitions for American commerce and trade, however, were severely checked after Alexander Hamilton presented his very ambitious Report on Public Credit to the Congress early in 1790. Hamilton proposed that the national government assume all the debt which had been incurred by the governments of the thirteen states, and Madison thought that this plan went much too far in the extent to which the government would be involved in economic matters. Although he had firmly supported Hamilton's elevation as Secretary of the Treasury, Madison soon found himself acting as the primary voice of opposition to the Hamiltonian Federalists. To his dismay, a modified version of Hamilton's proposal for national assumption of state debts was passed by both houses of Congress in July 1790.
Madison's fight with Hamilton was just beginning. In the fall of 1790, Hamilton proposed the setting up the First National Bank, after the model of Great Britain's, which would harness the interests of private enterprise for the benefit of the public welfare. It would circulate large quantities of paper money in order to stimulate the nation's economy. Madison objected outright to the plan, arguing that it plan was unconstitutional–that the legislature did not have the power to form such an incorporated institution as a national bank. He led the opposition to the bank proposal in the House of Representatives. The bill passed and became law, however, on February 25, 1791, after President Washington had rejected the Madison's strict constructionist interpretation of the Constitution in favor of Hamilton's doctrine of implied powers.
Hamilton followed up his success with the bank with his presentation of the Report on Manufactures to the Congress, which proposed a centralized system of economic development whereby the national government would actively encourage trade and manufacturing throughout and American nation which was still very largely agricultural. Madison led the opposition to this idea. He argued that Hamilton's doctrines subverted "the fundamental and characteristic principle" of the federal government, which was the limitation of mixed powers. "If Congress can do whatever in their discretion can be done by money," he wrote, "and will promote the General Welfare, the Government is no longer a limited one, possessing enumerated powers, but an indefinite one, subject to particular exceptions."
These controversies over finance and commerce laid the groundwork for partisan divisions in the government. Madison, finding himself in a very different role from the one he played at the Constitutional Convention, was now arguing for a less active federal government. By 1792, congressmen were speaking of "Mr. Madison's party," and the Federalists were condemning him for his opposition to Hamilton's influence over the Administration. He felt a very strong need, however, to defend his conception of republican government against the "powerful combination" of financial speculation, mercantilism, manufacturing, and Anglican religion in the government of which Hamilton was a chief representative. Madison's old friend Thomas Jefferson, the Secretary of State, found himself sympathizing. He and Madison created a new political party, the Democratic- Republicans, in opposition to the Federalists.