BY WILLIAM KEMBLE-DIAZ AND ART PATNAUDE

LONDONThe unexpected departure of European Central Bank chief economist Jrgen Stark intensified investors worries about the euro-zone financial crisis Friday and unleashed a broad pullback from risk in European financial markets, sinking the euro to its lowest level in more than six months.

The cost of insuring European government debt against default rose to record highs as peripheral sovereign bond markets were hit by a fresh selloff, prompting the European Central Bank to step in again to support the market by buying Italian and Spanish government bonds. The cost of insuring European banks against default were also trading around record …

RUADHN Mac CORMAIC in Marseille

EUROPEAN LEADERS came under pressure from the United States yesterday to calm the debt crisis by deploying unequivocal financial force to support weak economies.

As G7 finance ministers and central bankers gathered in Marseille amid fresh concerns over Greece and fears of a new recession, US treasury secretary Timothy Geithner warned that European leaders had a lot more to do to demonstrate to the world they have the political will to protect troubled euro zone members.

He said Europes debt crisis was a significant cause of the slowdown in the US economy, and urged Europes leaders to back up their reforms with very, very powerful, unequivocal financial force.

It is completely within the capacity of the stronger members of the euro area to absorb those costs, Mr Geithner said. Those costs would be much, much greater for their economies if they were to sit here and do nothing.

Any expectations of a single co-ordinated response from the G7 after several weeks of market turmoil were dampened even before the talks began, with France insisting there was no one-size-fits-all solution to the current problems.

French finance minister Franois Baroin, who is hosting the two-day summit, alluded to differences over how to strike the balance between cuts and stimulus, adding: Some are in favour of a uniform action. Im inclined to look for what is best adapted to each countrys situation.

The OECD said this week that growth across the G7 could slow to 0.2 per cent in the last quarter of 2011, and urged the bloc to send a clear signal of its readiness to take action if growth slows further.

Any grand initiatives such as those seen at the height of the credit crunch in 2009 were ruled out by several delegations yesterday, however. Mr Geithner said the current challenges were different and cannot realistically be confronted by a repeat of that co-ordinated global response of financial stabilisation and fiscal and monetary stimulus.

US president Barack Obama on Thursday responded to a sluggish summer for the US economy by unveiling a larger-than-expected $447 billion jobs package, but Washington appeared to be going it alone. Germany and Britain the only two of the large European economies that have not faced bond market pressures in recent months have insisted their fiscal consolidation will continue, while Canadian finance minister Jim Flaherty said slowing that process too much would be foolish. I hope we would all agree we have to stay the course, that we have to go through the pain of fiscal consolidation, Mr Flaherty said.

On her way to yesterdays summit, Christine Lagarde, the head of the IMF, urged leaders to take bold action to steer their economies though this dangerous new phase of recovery.

Ms Lagarde gave her blessing to more quantitative easing by central banks and said the challenge was to find a pace of adjustment that was neither too fast nor too slow. She said countries facing market pressures must push ahead with urgent fiscal consolidation, while there was scope for slower action in countries not at the mercy of market forces.

If growth continues to lose momentum, balance sheet problems will worsen, fiscal sustainability will be threatened, and the scope for policies to salvage the recovery will disappear, she warned.

Fears the global economy may be in its most difficult period since the collapse of Lehman Brothers bank gave added significance to the G7 summit, while news of the imminent early resignation of ECB executive board member Jrgen Stark, which reached Marseille shortly after the summit began, added to the sense of uncertainty. The euro fell and shares tumbled in Europe and on Wall Street during the day.

EU economic and monetary affairs commissioner Olli Rehn played down concerns about the Continents banks, however. Were not in the same kind of situation . European banks are much better capitalised. Of course there are challenges in terms of bank funding, but the ECB continues to provide liquidity.

President Obama is planning next week to reveal a detailed plan to pay for his new $447 billion jobs bill and then will follow up the next week with a second, much broader deficit reduction proposal for the Super Committee on Capitol Hill to consider, according to top aides.

Aides are promising that all told the two proposals will provide at least $2 trillion in deficit savings, the most sweeping and specific blueprint for debt reduction on paper that Mr. Obama has ever provided during his presidency.

White House spokesman Josh Earnest tells Fox News that Mr. Obamas aim is to push the Super Committee, which was created by the debt ceiling deal forged earlier this summer, to go beyond its charter of getting both chambers of Congress to enact deficit savings of $1.5 trillion before Christmas.

The president is committed to paying for the American Jobs Act and asking the Super Committee to go above and beyond their $1.5 trillion mandate, said Earnest.

Phase one in a two-phase Obama approach will come next week when aides say the president will officially send his new jobs bill, unveiled to a Joint Session of Congress on Thursday night, to House Speaker John Boehner (R-Ohio) and other leaders.

White House aides are promising the bill, known as The American Jobs Act, will include specific budget off-sets, like tax changes and spending cuts, to fund Mr. Obamas $447 billion proposal.

Phase two of his deficit reduction pitch comes on Monday September 19, when the president offers a broader plan for the Super Committee to consider.

In his speech to Congress, Mr. Obama said, Ill be releasing a more ambitious deficit plan — a plan that will not only cover the cost of this jobs bill, but stabilize our debt in the long run.

This broader plan will include the $447 billion in budget offsets for the American Jobs Act plus a detailed look at how the president suggests the Super Committee should reach their edict of $1.5 trillion in deficit cuts.

The administration is couching the plan as a deficit reduction package of $1.947 Trillion or more, which could counteract any charges that Mr. Obama is planning to tap into the Super Committee cuts to pay for his jobs bill.

The president previewed all of this in Thursdays address by noting the Super Committees mandate to find $1.5 trillion in savings on top of the $1 trillion in cuts already agreed to during the debt ceiling talks.

Tonight, I am asking you to increase that amount so that it covers the full cost of the American Jobs Act, he said.

While Republicans like Speaker Boehner and House Majority Leader Eric Cantor (R-Va.) are saying positive things about the jobs plan, theyre still reserving full judgement on the bill until they get specifics on the budget cuts.

While we have a different vision in terms of what is needed to boost private-sector job creation in our country, we believe your ideas merit consideration by the Congress, and believe the American people expect them to be given such consideration, Boehner and Cantor wrote in a letter to the president on Friday.

The Republican leaders, who have previously sharply criticized the president for not being more specific about budget cuts, added, We look forward to receiving legislative text for any of your ideas in a manner that can be scored by the nonpartisan Congressional Budget Office, and to the upcoming speech you described last night in which you will detail the offsets that will be needed to ensure your proposals are paid for.

A senior Republican aide says Mr. Obama spoke with Boehner Thursday afternoon before his address to Congress and only provided a topline preview of the economic proposal.

A White House aide said the president also spoke by phone before the speech with Senate Minority Leader Mitch McConnell (R-Ky.) to send the message that he wants to move quickly on the jobs legislation.

While he started Thursdays address by saying he wanted both parties to put politics aside to pass the bill, the president immediately sent Republicans a not-so-subtle political warning in the same speech, at a time when Fox News polling shows Congress has an approval rating of only 10 percent.

You should pass it, Mr. Obama said of his bill. And I intend to take that message to every corner of this country.

In addition, the president is hitting a slew of battleground states to press his case with the public, including Ohio and North Carolina next week. He started the sales pitch Friday in Virginia, in Cantors district in Richmond, at a fiery campaign-style rally.

If you want construction workers on the worksite, pass this bill, he said. If you want small business owners to hire new people, pass this bill. Prove you will fight as hard for tax cuts for workers and middle class people as you do for oil companies and rich folks, pass this bill.

Kelly Chernenkoff and Fox Business Networks Rich Edson contributed to this report.

Talk of a possible Greek debt default grew louder as the day wore on Friday, with several euro zone officials commenting that they expect a default over the weekend. Naturally, the markets didn’t respond positively to the news. Combine that with the terror alerts in New York City and Washington, DC, this weekend for the 10th anniversary of 9/11, and it was a recipe for heavy selling.

The Dow closed off more than 300 points to finish another wildly volatile week, and based on the action and news, we could be headed for another huge Monday morning gap down. However, it was difficult to chase shorts at the end of the day at such oversold levels, because if the Greek default doesn’t come to fruition and there is no major terrorist attack, those short positions would likely be in serious pain.

The news of a possible Greek default, which would be a historic first-time event, overshadowed any individual stock stories today. In isolation, the default of a relatively small Eurozone economy would not be the end of the world, but with other, larger Euro economies standing on extremely shaky ground (especially Italy), such an event could trigger a domino effect unlike anything ever witnessed in modern human history.

Conventional wisdom would tell you that gold shot through the roof on a day like this, but whispers about potential margin hikes pushed GLD to a lower open and seemed to keep the metal at bay. Even with the market tanking, GLD had a hard time ticking higher.

Technical Take

If you take a step back and look at the SPY chart on a daily and even weekly time frame, the obvious pattern that jumps out at you is a wide, but well-defined, bear flag. Previously, we noted the well-defined head and shoulders pattern that forecast the deep correction.

The only strategies that have worked, and provided limited risk, over the past month have been buying and selling extreme moves in both directions. Large gap downs on Monday and Tuesday had investors extremely bearishthe most bearish since September 2007which gave way to a steep short squeeze.

As we’ve seen before, that low-volume bounce/short squeeze was only transitory, as Ben Bernanke would put it. The oversold bounce we saw early in the week actually turned out to be a negative event for the bulls, because it allowed the market to work off its severely oversold condition and prime for another plunge.

After such a harsh move lower, which began around the time of the debt ceiling debate and Samp;P downgrade, it is natural for there to be some indecision in the indices. However, nobody would have expected the range to remain as wide as it has been. Resolution to this pattern will come at one point or another, and based in the in-bound move, there will be a powerful secondary move (more than likely to the downside). The lower end of the channel also lines up with the 200-week Moving Average, which will be another crucial technical level.

The measured move could take the Samp;P down to the 1,000 range if a worst-case type scenario plays out, which would involve a Greek debt default that triggered a domino effect in Europe that could likely trigger defaults in at least a few other PIIGS (Portugal, Ireland, Italy, Greece, Spain) nations as well.

The reason: What once was thought to be a minor problem involving only some smaller peripheral nations in the European Union is now increasingly being recognized as a global train wreck about to happen.

The problem in Europe is that the banking and national interests have been uncommonly incestuous over the years with banks in France owning the debts of companies in Spain and Spanish sovereign debt, while the banks in Spain own the debts of French companies and the French sovereign, Dennis Gartman, hedge fund manager and author of The Gartman Letter, wrote Friday. In that environment, as one area of the economy contracts, others do also in a rush to liquidity and to the detriment of all.

The eurozone debt dilemma has been one of the root causes of market turmoil over the past two months, even though the problems have been known since at least early 2010.

A super committee made up of 12 members of Congress has been formed to drastically reduce the federal deficit, but economists are split on what impact they think it will ultimately have. NY1′s Erin Billups filed the following report.

Twelve members of Congress are now tasked with reducing the federal deficit by $1.5 trillion over the next decade on top of the $900 billion in cuts recently agreed to. It’s all part of the deal to raise the country’s debt ceiling.

“They have more or less cart blanche to do whatever they want to do,” said Ron Haskins of the Brookings Institute.

And it seems there’s little confidence on Capitol Hill that the Join Select Committee will do anything.

Its already a topic of national debate, a likely political football on the presidential campaign trail.

Experts at the Brookings Institute grappled with the idea during a forum this week and say history has few examples of successful “super committees.”

“Not surprisingly, these commissions find it difficult to overcome the politics that created them,” said Sarah Binder of the Brookings Institute.

There are differences written into the law that could set this super committee apart, preventing lawmakers from kicking the can further down the road.”

For one, it has legislative authority, requiring an up or down vote in Congress by December 23 and therefore preventing filibusters.

And most importantly, it has a failsafe or trigger called a “sequester.”

If committee members fail to cut at least $1.2 trillion by November 23, or Congress refuses vote on the plan, that amount will automatically be cut from the domestic and defense budgets.

“I think by and large Congress wants to avoid the triggers that they’ve pretty carefully constructed, that take a pretty hard bite out of defense,” said Binder.

Others hope that’s exactly what happens.

“If the super committee fails, taxpayers win. Why? Because we get this automatic spending cut called a sequester that would take that spending baseline and actually lower it a bit so government doesn’t grow as fast,” said Dan Mitchell of the Cato Institute.

In the end, some experts believe that while it’s unlikely the super committee will agree on the full $1.2 trillion in cuts, they will agree on something, which could at least temper the automatic cuts that would be triggered as a result.

They will begin meeting after Labor Day.

By: CNNs Rebecca Stewart

(CNN) – Threats of a national default during the debt ceiling debate amounted to lunacy. That is, according to former Utah Gov. Jon Huntsman.

He accused those who spoke of risking a possible default to force the governments hand in facing its rising debt-including some of his Republican opponents-of behaving like lunatics during an interview on CNNs Piers Morgan Tonight scheduled to air Monday.

Dismay is growing among educators, economists, parents, and students over what some are calling America’s next bubble: the skyrocketing volume of student loan debt.

Asian stocks fell, with the regional
index declining for a fourth straight week, as the global stock
rout continued amid signs the world economy is slowing and
Europe’s debt crisis will damage the banking system.

Honda Motor Co., the Japanese carmaker that gets about 83
percent of sales overseas, slipped 5.3 percent in Tokyo. Hynix
Semiconductor Inc. (000660), the world’s second-largest computer-memory
chipmaker, tumbled 21 percent in Seoul after Dell Inc. lowered
its sales forecast for this year. HSBC Holdings Plc (HSBA), Europe’s
biggest lender by market value, dropped 2.9 percent on concern
the worsening debt crisis in Europe could freeze interbank
markets and cut off funding. An index of Japan’s 30 biggest
companies hit a record low.

“Everything that’s going on is just eating away at
investor confidence,” said Matt Riordan, who helps manage
almost $6.6 billion in Sydney at Paradice Investment Management
Pty. “Business confidence is tailing off and global growth
slowing, and Europe’s debt situation appears to be getting worse
and worse without any coordinated policy response. The worst
case is that you go back to a 2008-type financial crisis.”

The MSCI Asia Pacific Index dropped 2 percent this week to
119.53. Stocks have fallen 14 percent in the past four weeks as
investors took fright after a deadlock in the US congress
brought the government to the brink of default, economic reports
showed the world’s biggest economy is slowing and concern grew
Europe’s sovereign debt crisis will spread.

Citigroup Inc. cut its forecasts for US growth on Aug. 18,
while Morgan Stanley lowered targets for stock indexes in
Indonesia and Singapore after data showed American jobless
claims and consumer prices rose and a measure of manufacturing
and existing home sales contracted.

Exporters Drop

Japan’s Nikkei 225 (NKY) Stock Average decreased 2.7 percent.
Carmakers and electronics manufacturers dropped after the yen
appreciated toward its post-World War II high of 76.25 against
the dollar reached on May 17, hurting the outlook for export
earnings. The Topix Core 30 index, which includes Panasonic
Corp., Honda and Nomura Holdings Inc., hit its lowest in at
least 22 years, according to data compiled by Bloomberg.

Sony Corp. (6758), Japan’s No. 1 exporter of consumer electronics,
fell 2.1 percent to 1,594 yen. Toyota Motor Corp. (7203), the world’s
biggest carmaker, lost 1.8 percent to 2,768 yen. Smaller rivals
Honda dropped 5.3 percent to 2,403 yen, while Nissan Motor Co.
sank 5.8 percent to 653 yen.

Rating Lowered

The strengthening yen and slowing US economic growth
prompted Goldman Sachs Group Inc. to lower its rating on the
Japanese automobile industry to “neutral” from “attractive.”

South Korea’s Kospi Index dropped 2.7 percent. China’s
Shanghai Composite Index fell 2.3 percent while Hong Kong’s Hang
Seng Index slipped 1.1 percent. Australia’s Samp;P/ASX 200 Index
lost 1.7 percent.

Singapore’s Straits Times Index fell 4.1 percent this week
as Morgan Stanley cut its outlook on the MSCI Singapore Index to
a 5 percent loss from a 22 percent gain, saying the city is
likely to be the “most significantly impacted” by slowing
global growth among Southeast Asian nations.

Global stocks have lost more than $7.3 trillion in market
value since July 26 as concern grew the US may enter a
recession as two rounds of government asset-purchases and
record-low interest rates fail to entrench an economic recovery.

Federal Reserve Chairman Ben S. Bernanke’s pledge last week
to keep interest rates near zero until mid-2013 was
“inappropriate policy at an inappropriate time,” Charles Plosser, president of the Fed Bank of Philadelphia, said on Aug.
17 in a Bloomberg radio interview. Dallas Fed President Richard Fisher said the central bank shouldn’t enact policy to protect
stock investors. Both dissented from the Fed’s Aug. 9 decision.

Central Bankers

The MSCI World Index climbed 28 percent through May 2 from
Aug. 27, 2010, when Bernanke told an annual central bankers’
symposium in Jackson Hole, Wyoming, that the Fed would do all it
could to ensure a continuation of the economic recovery.
Bernanke will speak at the annual conference next week.

“There’s a total lack of confidence in policymakers’
ability to defuse the situation,” said Nader Naeimi, a Sydney-
based strategist for AMP Capital Investors Ltd., which manages
almost $100 billion. “Fear is breeding fear now.”

The MSCI Asia Pacific Index lost 13.2 percent this year
through yesterday, compared with a decline of 10.7 percent for
the Standard amp; Poor’s 500 Index and 19.1 percent by the Stoxx
Europe 600 Index. Stocks in the Asian benchmark are valued at
11.98 times estimated earnings on average, compared with 11.3
times for the Samp;P 500 and 9.2 times for the Stoxx 600.

Technology Companies

A gauge of information technology companies led the drop
this week among the 10 industry groups in the MSCI Asia Pacific
Index. Seven of the sub-indexes declined, while three rose.

Computer-memory chipmakers tumbled after Dell, the world’s
second-largest maker of personal computers, projects growth of 1
percent to 5 percent this year, down from a previous range of 5
percent to 9 percent amid lackluster demand from consumers and
market-share gains by Apple Inc.

Samsung Electronics Co., the world’s biggest supplier of
computer-memory chips by sales, fell 3.8 percent to 680,000 won
in Seoul. Smaller rival Hynix Semiconductor plunged 21 percent
to 15,600 won and Japan’s Elpida Memory Inc. (6665) dropped 11 percent
to 457 yen in Tokyo.

Credit Crunch

Financial stocks declined following losses in European bank
shares as the chief economist at Sweden’s financial regulator
said his country’s lenders must do more to prepare for a
worsening in Europe’s debt crisis that could freeze interbank
markets and cut off funding.

HSBC Holdings lost 2.9 percent to HK$65.20 in Hong Kong.
Mitsubishi UFJ Financial Group Inc., Japan’s biggest publicly
traded lender, dropped 1.4 percent to 352 yen in Tokyo.
Commonwealth Bank of Australia (CBA), the nation’s largest lender by
market value, declined 5.4 percent to A$45.96.

The Federal Reserve Bank of New York has been holding talks
with Europe’s biggest lenders on concern that the sovereign debt
crisis may lead to funding problems, the Wall Street Journal
reported on Aug. 18, citing people it didn’t identify.

To contact the reporters on this story:
Jonathan Burgos in Singapore at
jburgos4@bloomberg.net;
Shani Raja in Sydney at
sraja4@bloomberg.net

To contact the editor responsible for this story:
Nick Gentle at
ngentle2@bloomberg.net

Investors around the world are quickly losing faith that policymakers will find a credible solution to end Europe’s most serious crisis since the euro’s inception more than a decade ago.

As stock markets plunge and fear ratchets higher, some are clinging to an intriguing concept: euro bonds. In an effort to bring Europe towards fiscal, not just monetary union, bonds would be jointly sold by the euro area’s 17 nations — likely at far lower interest rates than those offered to troubled countries like Greece.

While the idea of euro bonds is staunchly opposed by the current German government, some believe these securities could help heal Europe, but only if they are linked to painful and politically unpopular steps to wean nations off their addiction to debt and get their economies growing faster.

“I think Europe has to move towards fiscal union. A European bond would be one expression of greater fiscal union,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman. Europe “has to be brought there kicking and screaming,” he said.

When examining the merits of euro bonds, it’s important to remember that while the 17 members of the euro zone all use the same currency, they have different fiscal policies and diverse economies that grow at varying speeds. That fiscal and economic divergence explains why some countries have much higher debt loads than others.

Do Blue/Red Bonds Hold the Key?

Slow-growing countries cant rely on the European Central Bank for easy policies that might create inflation in faster growing countries like Germany. That means some countries end up tightening fiscal policy while others are loosening it.

“It is extremely difficult for monetary policy to be right when governments are marching in opposite directions,” said Adolfo Laurenti, senior economist at Mesirow Financial.

While Germany’s debt-to-GDP stands at a reasonable 83.2% and its unemployment rate is about 7%, Greece is carrying debt of 142.8% of GDP and its unemployment rate leaped to 16.6% in May.

In theory, euro bonds would allow countries that are drowning in debt to tap the capital markets and borrow at more reasonable terms. That’s because the debt would be jointly and severally guaranteed by all of the member nations, including the ones with deep pockets like Germany, the Netherlands and France.

One idea gaining traction in recent days is a blue bond/red bond concept. The blue bonds would have relatively low interest rates because they would be jointly guaranteed by all 17 countries and only cover up to 60% of a nation’s debt. (The euro’s founding treaty deems 60% debt-to-GDP as a “sustainable” level).

The red bonds would cover everything above that level and be issued by national governments. These loans would obviously have higher rates, a sort of penalty for spending excessively.

However, euro bonds wouldn’t really fix the three basic ills Europe is suffering from: too much debt, excessive spending and too little growth.

“By itself, this is not the solution,” said Laurenti. “Euro-zone bonds do not let countries grow faster, do not reduce the debt and do not lower spending.

Fiscal Reform Required

That’s why many believe euro bonds would only be a credible solution if they are married with “structural reform,” a euphemism for overhauling the entire way euro-zone national governments operate.

“The structural reforms are financially, economically and politically extremely expensive,” said Laurenti.

They include balanced budgets, reducing overall debt and essentially handing over control of public finances to the stronger countries: Germany, France and the Netherlands.

At a joint summit earlier this week, German Chancellor Angela Merkel and French President Nicolas Sarkozy signaled their desire to achieve greater fiscal consolidation. They called for a new euro-zone economic council, constitutional amendments to force fiscal constraint and balanced budgets, enforcement power to punish countries that break the rules (see: Greece) and a single euro-wide tax rate.

“Until you fix that, all you’re doing is creating an open ended liability for the rest of the euro zone,” said Douglas Holtz-Eakin, the former director of the Congressional Budget Office. “Why would they sign on to that?”

The only problem is voters in both camps tend to abhor the notions of fiscal reform and euro bonds.

Many Germans are sick of bailing out their weaker neighbors, especially because Germany has avoided the drunken spending that is crushing Greece.

Some people are calling for the creation of European bonds … which they present as a panacea, French Prime Minister Francois Fillon wrote in an op-ed article on Friday. But they forget to say that would raise the price of French debt and could even call its credit rating into question.

However, Fillon acknowledged the idea could be palatable if there is a “process of integration,” for which he noted there is “no political consensus at the moment.”

German citizens realize they would have to pay for euro-zone bonds through higher taxes and a loss of creditworthiness. One report estimated Germany would face extra costs of $67.6 billion a year through higher interest rates.

“There is no doubt at the end it will be a transfer of wealth from Germany into Greece and Italy and Portugal,” said Laurenti.

At the same time, citizens of debt-ridden countries don’t want to hand the keys to their economies over to their richer neighbors. This will be difficult to overcome, especially given Europe’s deep rivalries and distrust.

Lessons from America

Despite these political barriers, the European Commission on Friday opened the door to euro bonds.

“These euro securities would aim to strengthen fiscal discipline and increase stability in the euro area through markets,” Olli Rehn, the EU Economic and Monetary Affairs Commissioner, said in a statement.

It’s clear that euro bonds will only work if Europe’s economy speeds up from its current slothful place. Stronger growth will translate to more robust revenues and help the struggling countries pay back their loans.

“If income doesn’t pick up in the future, those euro-zone bonds will suffer the same credibility and anxiety that the bonds do now,” said Jack Goldstone, a senior fellow at George Mason University.

As Europe weighs the pros and cons of euro bonds, Rickard Sylla, a financial historian at NYU, suggests policymakers take a page out of Alexander Hamilton’s playbook. Then the US Treasury secretary, Hamilton spearheaded the effort in 1790 to assume the debts of the US states, which at the time had their own currencies and drastically different fiscal policies.

The 13 US states had $25 million in debt combined, compared with $54 million owed by the federal government.

“Hamilton saw a lot of problems in having 13 or 14 different fiscal policies in one country,” said Sylla.

Despite fierce political opposition from Thomas Jefferson and James Madison, Hamilton ultimately prevailed and the model stuck.