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While Washington was thankfully packing himself off to Mt. Vernon, Hamilton's involvement with the government was far from over. He continued on as a back-door advisor to the Adams cabinet, mostly through the Secretary of War James McHenry, who regularly asked Hamilton for his advice on policy. McHenry submitted a recommendation, which unbeknownst to Adams had been written by Hamilton, calling for a special mission to France which had become increasingly hostile since the passage of the Jay Treaty.
The special envoys, John Marshall, Elbridge Gerry, and Charles Pinckney, were dispatched; and once in Paris, were compelled to deal with secret agents identified by the letters X,Y, and Z, who made it known that negotiations could commence only after paying a hefty bribe. Adams, who flew into a seething rage when he heard of the indignities heaped on the American envoys, immediately recalled them, and made preparations for war.
During this time of near national hysteria, a series of controversial laws, the Alien and Sedition Acts, were passed by the Federalist congress in order to prevent subversive activities and disloyalty to the government. In short, the Alien Acts called for the deportation of "alien enemies" in time of war; and the Sedition Act included provisions to punish anyone who wrote or printed defamatory materials against the government. For obvious reasons, these acts were decried by the Republicans as tyrannical. Hamilton was skeptical of the laws, and feared the outcome of enforcement: "Energy is a very different thing from violence." Despite the Republican outcry, Jefferson would shortly find the Sedition Act handy in his efforts to suppress criticism of his administration; and Hamilton would find himself battling Jefferson once again, leading the fight to defend the freedom of the press in the groundbreaking People vs Croswell case.
The Quasi-War was a roughly two-year period of severe friction between France and the United States during which war seemed inevitable. Internal frictions were rife as well. President Adams called Washington out of retirement to act as commander-in-chief for raising the forces requisite for the war with France. Washington wearily agreed, and when asked to name his officers, appointed Hamilton as Inspector General with a rank of major-general. The Adams administration was reluctant to give too many resources or too much power to the army while peace was still possible, thus hindering Hamilton's efforts to raise sufficient troops for his plans to fortify the borders of the United States.
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