Highly recurrent neural networks can learn reverberating circuits called Cell Assemblies (CAs). These networks can be used to categorize input, and this paper explores the ability of CAs to learn hierarchical categories. A simulator, based on spiking fatiguing leaky integrators, is presented with instances of base categories. Learning is done using a compensatory Hebbian learning rule. The model takes advantage of overlapping CAs where neurons may participate in more than one CA. Using the unsupervised compensatory learning rule, the networks learn a hierarchy of categories that correctly categorize 97% of the basic level presentations of the input in our test. It categorizes 100% of the super-categories correctly. A larger hierarchy is learned that correctly categorizes 100% of base categories, and 89% of super-categories. It is also shown how novel subcategories gain default information from their super-category. These simulations show that networks containing CAs can be used to learn hierarchical categories. The network then can successfully categorize novel inputs.