Artisans, Banks, Credit,
and the Election of 1800
M
ANY SCHOLARS CONSIDER THE YEAR 1801 a watershed in
American history because in that year Thomas Jefferson, leader
of the Republican party, gained control of the presidency by
defeating incumbent John Adams, a Federalist. Many historians contend
that Jefferson's victory moved the young nation away from the highly
commercial economy Federalists such as Alexander Hamilton envisioned. It
therefore behooves historians to ascertain the causes of Jefferson's election.
At root is the issue of the extent to which Americans believed in Jefferson's
vision of a yeoman republic based primarily on an agricultural economy. In
their quest to understand the reasons underlying Jefferson's victory,
historians have overlooked an important aspect of early American
politics—access to institutional credit. Decreasing access to such credit helps
to explain why an important constituency, urban artisans, shifted from
Federalism to Republicanism in the last years of the eighteenth century. By
1800, artisans who had once obtained loans from Federalist-controlled banks
could no longer do so. Astute politician Aaron Burr therefore established a
Republican-controlled bank that lent freely to artisans and thereby won
them over to the Republican ticket. Jefferson, in other words, owed his first
election to the presidency more to the development of commercial
Republicanism than to any sort of agrarian or democratic "revolution." Many
artisans, after all, were businessmen and nascent industrialists, and not mere
mechanics or workers. Businessmen, even artisans, needed credit, a need not
lost on their contemporaries.
"A Tradesman, . . . having a number of Apprentices employed," noted
Philadelphia lawyer and businessman Miers Fisher in the early 1790s, "may
have a considerable quantity of his manufacture upon his hands for which he
cannot find an immediate Market." The effects could be disastrous, Fisher
argued. "His stock worked up,—without money to purchase
more,—demands upon him for Rent, market-money, Fuel &c., his workmen
THE PENNSYLVANIA MAGAZINE OF HISTORY AND BIOGRAPHY
Vol. CXXII, No. 3 (July 1998)
212
ROBERT E. WRIGHT
July
must stand idle; unless, by sacrificing his goods at a public sale, for less than
half their value, he procures a sufficiency to supply his necessities."1 Even a
tradesman who owned property and ran a successful little business lay at the
mercy of usurers and creditors if be lacked liquidity and institutional credit.
Without loans to help him through difficult times, he could lose everything.
To protect such tradesmen, Fisher suggested the Corporation of
Philadelphia establish a fund to loan tradesmen between two and fifty dollars
for up to thirteen weeks on the security of merchandise, gold or silver
utensils, linen, wool, copper, tin, books, "8c all kinds of Household Goods."
Although Fisher's plan was sound in principle, the Corporation did not act
on it, possibly because he wanted to charge a rather exorbitant rate of
interest.2 Fisher undoubtedly borrowed the idea of the loan fund from the
Bank of North America, of which he was a major customer. Like the bank,
Fisher's fund would have granted "discounts," loans with the interest
deducted up front. Also like the bank, tradesmen would have been able to
receive loan renewals or "accommodations." Unlike the bank, however, loans
would have been secured by the actual deposit of goods, not a mere written
promise to pay. Additionally, Fisher's fund would not have emitted its own
notes but merely paid out existing forms of money, including bank notes.3
The rejection of Fisher's plan did not mean that Philadelphia's tradesmen
had no institutional means of obtaining credit, however. By the late 1780s
the Bank of North America readily lent to Philadelphia's artisans and
retailers at 6 percent interest on the security of promissory notes, inland
drafts, or bills of exchange, i.e. various types of negotiable, commercial
contracts. In addition to providing insight into the nation's "transition" to
1
"A Plan for the Support of the Poor, and for the relief of the necessitous," Miers Fisher Papers,
Historical Society of Pennsylvania (hereafter, HSP). The manuscript is undated but has been identified
as having been written in 1790 or 1791. John K. Alexander, Render Them Submissive: Responses to Poverty
in Philadelphia, 1760-1800 (Amherst, Mass., 1980), 188.
2
Fisher appended a chart showing the amount to be charged for various sums for one through thirteen
weeks. According to the chart, tradesmen seeking to borrow $50 for thirteen weeks would have $3.25
deducted as interest. This works out to about 25% interest per year.
1
Bank notes were promissory notes (promises to pay) payable on demand to the bearer. Such notes
constituted a large part of the money supply of early national America, especially in the North.
1998
ARTISANS, BANKS, AND CREDIT
213
capitalism, a subject too complex to discuss in detail here,4 a study of the
artisans* access to credit, or lack thereof, is revealing for the profound
political implications that historians, uninformed about banking in general
and artisanal banking in particular, have hitherto ignored.5 Some excellent
historians have limited their analyses of the early American experience
because they have not exploited the voluminous banking records that exist
from the period.6
In the late 1780s, artisans wholeheartedly supported the federal
constitution. Their support for federalism continued in the early 1790s. By
1800, however, most artisans in New York and Philadelphia had shifted
their loyalties from the Federalist Party to the Republican Party, a trend that
constituted the single most direct cause of Jefferson's victory in 1800. Why
did artisans shift their allegiance? Historians have often pondered this
question, but no one has yet offered an entirely satisfactory explanation.
Without detailed voting records, the debate must remain somewhat
conjectural. Clearly, many factors were at play. However, as our
4
For a discussion of this issue, see Robert E Wright, "The First Phase of the Empire State's Triple
Transition ' Banks' Influence on the Market, Democracy, and Federalism in New York, 1776-1838,"
Social Science History 21 (1997), 521-58
s
The exclusion of banking from discussions of artisans' political activity is somewhat understandable
N o "smoking gun" documents, such as artisans' letters declaring a change in politics due to restriction of
bank access, appear to exist Historians are generally wary of arguments that cannot be supported by such
documentation This does not mean such arguments are wrong or should be ignored, however For
example, though no letters describing female participation in banking have been found, the account
ledgers of the Bank of North America reveal that many women had bank accounts The reluctance of
historians to see credit access as an issue is made more curious given that the tariff, another economic
issue, has long been seen as a major political factor in the Northern port cities in the 1790s This article
assumes that artisans followed their perceived material interests, notwithstanding that they occasionally
and knowingly acted against their own interest Only when people move against their self-interest are
self-expressions of their motivations necessary
6
The most recent of these is Rosalind Remer, author ofPrinters and Men of Capital In an excellent
book, based on an award-winning dissertation, Remer, who is otherwise very sensitive to the issue of
credit, erroneously argues there is an "absence of adequate bank records " Remer, Printers and Men of
Capital Philadelphia Book Publishers in the New Republic (Philadelphia, 1996), 100 In fact, scholars of
early America can consult an almost complete set of records of the Bank of North America at the
Historical Society of Pennsylvania
214
ROBERT E WRIGHT
July
understanding of the Federal period becomes more detailed and complex, a
clearer picture emerges.7
The ideology of the French Revolution and the influx of immigrants were
factors, but clearly they were not decisive causes. Some thought the
Federalists' Quasi War, New Army, and anticivil rights legislation led to the
change. Tantalizingly little evidence supports this latter view, however, as
most opposition to the Alien and Sedition laws came from the South and
West. Also, the Sedition Act was actually much more liberal than most
historians concede because, unlike the common law doctrine it replaced, the
new law allowed truth as a defense.8 Finally, artisans in New York and
Philadelphia supported the Quasi War because it helped their businesses.9
The Fifth Congress spent some $10,500,000 on defense, $6,000,000 of it
between November 1798 and March 1799, mostly in the major seaport
cities.10
Others have pointed to Federalist foreign policy as the main grounds for
the artisans7 shift. According to this view, Federalists were anglophiles bent
on maximizing their international trading profits at the expense of
indigenous manufacturers. Contrary to recent theories, however, Alexander
7
Though James Roger Sharp does not assign any role for artisans, mechanics, or the Manhattan
Company in his recent description of the election of 1800, even he concedes the pivotal roles of New
York and Pennsylvania in the election Sharp, American Politics in the Early Republic The New Nation in
Crisis (New Haven, 1993), 244-45 The best analysis of the artisanal shift is Howard Rock's Artisans of
the New Republic The Tradesmen of New York City in the Age of Jefferson (New York, 1984) Although
handicapped by the poor state of banking historiography, Rock clearly elucidates the key role artisans'
business interests played in their politics For another view, see Stanley Elkins and Eric McKitrick, The
Age ofFederalism The Early American Republic, 1788-1800 (New York, 1993), 741-50
8
Under common law, persons could be convicted of sedition even if they could prove the veracity of
their claims However, some Federalist courts interpreted the new clause very strictly, to the detriment
of defendants James Morton Smith, Freedom's Fetters The Alien and Sedition Laws and American Civil
Liberties (Ithaca, 1956), 421-22 Smith does not prove, however, that strict court interpretations played
a significant role in the artisanal shift
9
Ebenezer Stevens to Alexander Hamilton, New York, Oct 21,1799, Harold Syrett, ed , Papers of
Alexander Hamilton (27 vols, New York, 1961-), 23 544 (hereafter, PAH)
10
Statutes at Large
1789-1873 (17 vols , 1850-73), especially 1 621-22, 732, 741-43
1998
ARTISANS, BANKS, AND CREDIT
215
Hamilton and most Federalists were strong supporters of domestic
manufactures, and artisans recognized them as such.11
Proponents of a third view contend that artisans' disillusionment with
Hamilton's financial system led to their migration to the party of Jefferson.
Though once a highly esteemed interpretation, this approach now appears
almost wholly unfounded. The banking system ran smoothly in the 1790s,
save for one panic that Hamilton and normal market forces quickly
squelched. This minor dislocation, William Duer's infamous Panic of 1792,
occurred years before most of the artisans left the party, which disqualifies
it from causal significance unless more direct evidence can be shown.12
A subtler and more specific version of this view, ably presented by Roland
Baumann, blames Hamiltonian taxation for artisanal unrest. Philadelphia
artisans, at least those involved in foreign markets, sought protection from
foreign competition and disdained internal taxation. Tremendous
demographic and economic forces caused their ferocious reaction to the
Revenue Act of 1794. Assuaged for a time by extended access to credit and
improving business conditions, some artisans who were unprotected from
foreign competition left Federalism under the impression that the party no
longer supported indigenous manufacturing. Though the excise was an
important issue, the big and lasting split came over access to credit. The loss
of credit explains why all types of artisans, those in protected local markets
11
"The parting of the ways came in Washington's second term, and the precipitant was Federalist
foreign policy " Alfred Young, "The Mechanics and the Jeffersonians New York, 1789-1801," Labor
History 5 (1964), 247-76 Alfred Young, The Democratic Republicans of New York. The Origins, 1763-1797
(Chapel Hill,1966), 568 For John R Nelson's thesis that Hamilton did not really support
manufacturing, see Liberty and Property Political Economy and Pohcymaking in the New Nation, 1789-1812
(Baltimore, 1987), and "Alexander Hamilton and American Manufacturing A Reexamination," Journal
of American History 64 (1978-79), 971-95 For critiques of Nelson's thesis, see Doron Ben-Atar,
"Alexander Hamilton's Alternative Technology Piracy and the Report on Manufactures," William and
Mary Quarterly 52 (1995), 389-414, Robert E Wright, "Thomas Willing (1731-1821) Philadelphia
Entrepreneur and Forgotten Founding Father," Pennsylvania History 63 (1996) 525-60, Robert E
Wright, "Banking and Politics in New York, 1784-1829," Ph D diss , SUNY Buffalo, 1996, chap 5
12
Young, Democratic Republicans, 571 For a description of the Panic of 1792, and the attempts to
form new banks in New York that spring, see Wright, "Banking," chap 4
216
ROBERT E. WRIGHT
July
as well as those subject to foreign competition, and even retailers, fled
Federalism in 1800.13
Ironically, then, the main reason for the shift was not artisans' fear of
banks but their desire for more banks. Contrary to legend, the early
commercial banks of New York and Philadelphia did not deny discounts to
artisans. Although never a majority in terms of numbers of customers or
total dollars borrowed, from 1784 until the mid- to late 1790s many artisans
found accommodation "at bank."14 These businessmen found banking very
useful for maintaining their liquidity, making remittances, diversifying their
investments, extending their capital, and safely investing their profits. For
complex political reasons, the number of banks and amount of banking
capital grew slowly during the 1780s and 1790s in Philadelphia and New
York. During these years, however, the urban population literally exploded
and trade increased almost threefold. The number of discount applicants
soared. Under free market conditions, bankers would have responded to this
increased demand by raising the cost of borrowing (i.e., increasing the rate
of interest), or by increasing the amount of loanable funds by increasing their
banks' capital (i.e., getting more investors), or by adjusting their banks' loanto-asset ratios (i.e., lending more bank notes on less reserve specie.) With
interest rates, capital, and asset ratios mandated by law or prevalent banking
theory, however, bankers responded in the only way they could, by raising
their standards of security. Artisans, mechanics, retailers, and even minor
merchants found themselves less able to get discounts as large merchants
with substantial collateral took up an increasing percentage of loanable
funds. Doubting that entrenched Federalist banking interests would
incorporate rivals, artisans in Philadelphia and New York switched not to
Jefferson but to the moderate wing of the Republican party. Much more
commercially minded than their agrarian brethren, moderate Republicans
reflected the middle of America's political spectrum. This broad middle
13
Roland Baumann, "Philadelphia's Manufacturers and the Excise Taxes of 1794* The Forging of
the Jeffersonian Coalition," Pennsylvania Magazine of History and Biography 106 (1982), 3-39. Many of
the large manufacturers Baumann mentions in his article, including Jacob Morgan, Isaac Pennington,
Edward Pennington, and Matthew Lawler, had accounts with the Bank of North America in the 1790s.
14
Significant numbers of businesswomen also received accommodation at bank. See Wright,
"Banking," chap 13 Women accounted for 9% of the Bank of North America's active customers in 1800,
but only 0 54% of its total resources; Bank of North America (hereafter, BNA) individual ledgers, 1800,
HSP For details of how individual businessmen benefited from banks, see Wright, "Banking," chap 14.
1998
ARTISANS, BANKS, AND CREDIT
217
would soon incorporate banks designed specifically for lesser merchants and
retailers, and—a little later—artisans. These banks, combined with the War
of 1812 and the loosening of bank entry in the 1810s, sealed the fate of
Federalism.15
In 1781 Robert Morris founded the nation's first commercial bank, the
Bank of North America, to help disentangle Congress's finances and to help
his circle of friends make money. Because of a shaky start and the
cautiousness of its president, merchant Thomas Willing, the early bank
accommodated few customers. The bank soon proved so profitable, however,
that by 1784 its directors yielded to pressure and enlarged its capital by
selling a new issue of its stock at par ($400). In the year after this
enlargement about 10 percent of the bank's 832 account holders were
artisans. At least three of the artisans were among the bank's most active
discounters. A radical Pennsylvania Assembly then revoked the bank's
charter. Although it continued in business, the next few years were difficult
ones. Matters improved significantly after the bank received a new, though
more restrictive, charter in 1786. By 1790-91,20 percent of the bank's 1,350
discount customers were artisans. Though no artisans were among the most
active discounters, there was little room for complaint. At least 10 percent,
and perhaps as many as 20 percent, of Philadelphia's artisans received bank
discounts from the Bank of North America in 1790.16 As Thomas
Doerflinger argues, the Delaware Valley was not flooded with banknotes,
but it was flooded with bank money of account, a significant segment of
which artisans controlled and disbursed with checks.17
15
Wright, "Banking," chap 6
16
At first glance these seem like rather inconsequential numbers, but these figures represent between
50% and 75% of the city's master artisans With from one to a score of apprentices and journeymen under
his control, each master artisan was an established businessman with considerable influence over his
trainees and employees
17
George Rappaport, "The Sources and Early Development of the Hostility to Banks in Early
American Thought," Ph D diss, New York University, 1970, 20, 55, Thomas M Doerflinger, A
Vigorous Sptnt of Enterprise Merchants and Economic Development in Revolutionary Philadelphia (Chapel
Hill, N C , 1986), 303-5 It is a myth that modern checks, much like those used today, were not used
very much until the antebellum period See David Gilchnst, ed , The Growth of the Seaport Cities,
218
ROBERT E. WRIGHT
July
Because of the paucity, or inaccessibility, of New York's early bank
ledgers, analogous figures for that city cannot be determined. Qualitative
evidence shows, however, that the early Bank of New York (established
1784, chartered 1791) was a much more inclusive institution than usually
assumed. Its founders, including Alexander Hamilton, formed the bank to
combine the city's businessmen, including "radical" artisans, into a coalition
to thwart the spread of the violent, democratic, leveling forces unleashed by
almost a decade of war, revolution, and occupation. Artisans did not control
the Bank of New York, but as long as they were accommodated, they did not
have to.18
Demographic changes, especially the rapidly growing population of the
two cities, combined with political factors to slowly decrease artisanal
participation in banking during the 1790s. Fearful of competition for
theoretical and political reasons, Federalist bankers disapproved of new
banks. This was the case in Philadelphia in the 1780s and New York in
1792. Stripped of discounts once received, bereft of accommodations
assumed to be rightfully theirs, and disgusted with the stubborn entrenched
Federalist banking interests, artisans joined moderate Republicans in the
quest for more banks.19
Like other types of businessmen, many artisans needed banking facilities
in order to stay profitable or at least solvent. Whatever their station or
degree of wealth, businessmen generally used bank- to extend their capital
while maintaining their personal liquidity, to make remittances, to diversify
their investments, and to safely reinvest their profits.
Businessmen without bank access had to keep enough cash on hand to
meet their bills payable. Besides incurring risk of loss, this practice decreased
the speed of the circulation of money, and hence the real supply of money,
thereby decreasing the volume of business. Businessmen with access to bank
1790-1825 (Charlottesville, Va., 1967), 147-49, for discussion. Money of account is simply credits in
account books that can be withdrawn by means of a check (bank draft), or by account transfer, or by
visiting the bank and requesting the actual funds.
18
19
Wright, "Banking," chaps. 2 and 3.
Ann Schwartz, "The Beginning of Competitive Banking in Philadelphia," Journal of Political
Economy 55 (1947), 417-31.
1998
ARTISANS, BANKS, AND CREDIT
219
loans, on the other hand, could discount their bills receivable, or even their
own promissory notes if necessary, in order to make payments.20 Liquidity
allowed them to conduct more business on less capital or to carry on the
same volume of business more safely, as they saw fit. Some, like tanner
Jonathan Meredith, used their bank accommodations to hire additional
laborers, even slaves.21 Those who merely used the bank to store their money
also gained. Although the accounts paid no interest, there were no fees
either, and accounts were safer than leaving cash about the home or office.
Most importantly, banks made collections and processed checks gratis.
Banks gained from the increased cash flow. The market gained because of
the increased punctuality of payments. Philemon Dickinson, for example,
safely and quickly paid stable keeper and Bank of North America customer
John Bidwell with a check for the $37.33 he owed for seventeen days' use of
a wagon to take his family to the Maryland shore.22 Both parties gained by
not having to handle cash. When their bills came due debtors sent checks by
post instead of waiting about their shops all day for the collector as they did
in the colonial era and later in nonbank areas. These were by no means issues
of minor importance. In 1789-90, Sampson Harvey received only three
discounts, totaling $795.60. Over the same period, the ship carpenter
disbursed some $12,900 with seventy-two checks. Tanners Arthur Howell
and Matthias Pinyard wrote 272 and 123 checks respectively during those
two years.23
When artisans had to tender specific types of coins (Spanish milled
dollars, for instance) to meet certain obligations, like some ground rents,24
20
For examples, see promissory notes, Society Miscellaneous Collection, H S R
21
Pennsylvania
Gazette, June 5 , 1 7 8 2 .
^John Bidwell, receipt, Dec. 1 , 1 7 9 1 , Cadwalader Collection, H S R Charles T h o m s o n likewise paid
house carpenter Joseph Rakestraw with bank checks. John Dickinson did the same for Venetian blind
maker John Rea. Joseph Rakestraw receipt., June 2 0 , 1 7 8 7 , T h o m s o n Papers, Gratz Collection, H S P ;
Logan Papers, 31:74-93, HSR
23
Artisanal bank-use figures in this section are from the individual ledgers, B N A , 1 7 8 9 - 9 0 , H S P .
24
F o r more o n ground rents, see Robert E . Wright, "Ground Rents Against Populist
Historiography: Mid-Atlantic Land Tenure, 1750-1820," Journal ofInterdisciplinary History 2 9 (1998),
23-42.
220
ROBERT E.WRIGHT
July
the bank made exchanges at the market rate. For example, Moses Johnson,
a "negro," kept an account at the bank in the early 1790s simply to facilitate
the payment of his rent, which was payable in specific coins.25 Artisans often
deposited coin in the bank simply to withdraw bank notes. Combmaker
Samuel Scotten used the bank for this purpose in the early 1790s.26 The
notes were both lighter, easier to conceal, and more understandable than the
many varieties of coin, most foreign, that floated into early national
Pennsylvania.
Once a businessman accumulated a sum of money that he could no longer
profitably invest in trade, banks provided an important opportunity for
investment. Bank stocks, even though they offered some risk of capital loss,
were an essential part of diversified portfolios because they tended to yield
more than government securities or personal bonds. If business improved
and stockholders wished to reenter trade, banks gladly lent on the security
of such stock, allowing businessmen to reinvest flexibly in their enterprises,
often with a small net yield. In all these ways banks increased businessmen's
return on investment.27
The exact ways banks helped specific occupational groups, aside from
merchants, is an aspect of early banking that has been too little investigated.
25
For Johnson's rent, see the Pemberton Papers, 50:60, H S P .
26
Scotten received no discounts and deposited no checks. He made all cash deposits, some of which
he disbursed with his own checks. Much of it he withdrew in banknotes when needed.
27
Thomas Willing to William Philips, Isaac Smith, Jonathan Mason, Thomas Russell, J. Lowell, J.
Higginson of Boston, Philadelphia, Jan. 6, 1784, Thomas Willing to Arthur Lee, May 28, 1784,
directors' meetings of May 19, 1785 and June 2, 1785, Minutes of the Directors, BNA, 1784-1800,
HSP; Abraham Van Vechten checkbook, Bank of Albany, 1792-1816, Albany Institute of History and
Art, Albany, N.Y.; Philip Schuyler Papers, 1750-1805, SUNY Buffalo, rolls 1, 32, 33, 37; Aaron Burr's
bank book, in Mary-Jo Kline, ed., Papers of Aaron Burr (Glen Rock, N.J.: Microfilming Corp. of
America, 1978), (hereafter, Burr Papers); John Greig to Thomas Morris, card, c. 1825, Greig Papers,
Cornell University Archives (hereafter, CUA), Ithaca, N. Y., roll 2; Gilbert Saltonstall to Rufus and
James Backus, New York, Apr. 12,1794, Mercantile Collection, New York Public Library (hereafter,
NYPL), box 1; George Fleming to Ebenezer Foote, West Point, Aug. 28, 1794, box 9, folder 1,
Ebenezer Foote Papers (hereafter, Foote Papers), New York State Library, Albany, N. Y.; American
Minerva, Feb. 25,1795; John R. Carpenter to Simon N. Dexter, Providence, Feb. 13, July 11,1807, roll
2, Simon Newton Dexter Papers, 1785-1862, CUA; Cornelius Ray to Peter E. Elmendorf, New York,
Jan. 7,1794, New-York Historical Society (hereafter, NYHS); Erastus Spaulding to Lyman Spaulding,
Rochester, Mar. 18,1827, Lyman A. Spaulding Papers, CUA; William B. Rochester to Nicholas Biddle,
Rochester, Nov. 21,1829, Nathaniel Rochester Papers, University of Rochester, Rochester, N.Y.
1998
ARTISANS, BANKS, AND CREDIT
221
Generally, banks hastened the transition from traditional to modern business
forms. Much qualitative evidence suggests that bank directors were more
likely to discount the notes of a man of action, probity, and vision, regardless
of his occupation, than a man of limited goals.28 Early banks, in a sense,
created entrepreneurs by lending to those most likely to return a healthy
profit. Success brought more accommodation and the likelihood of further
gains. Under these conditions some could become wealthy very quickly.
Thomas Passmore, for decades a middling tin master, blossomed into a
large-scale capitalist with the help of the Bank of North America in the last
few years of the 1790s. Despite major setbacks, Passmore extended his trade
network far into the hinterland, began to engage in foreign trade, and
became a moneylender. It does not seem that Passmore merely usurped the
money other Philadelphia tin makers would have otherwise made. Passmore
literally grew the economy by exploiting and even, in a sense, creating
untapped markets in the South, West, and overseas. Nor was Passmore the
only person who gained by this growth. His business with the bank left him
extremely liquid as the punctual cash payments he made to his journeymen
indicate. His liquidity allowed Passmore to extend six-month credits to his
customers without decreasing his production.29
Although banks did not lend on the security of mortgages, they did help
artisans and other businessmen to purchase land. By lending money on other
security, or for other ostensible purposes, banks freed up funds for purchasers
to buy real estate or other physical capital. The discounts the bank made to
brewer William Dawson, for example, increased and thereby enabled
Dawson to make several land purchases in the 1790s.30 Brewer Reuben
28
T h e classic source for this notion is James Gibbons, The Banks of New-York, Their Dealers, the
Clearing House, and the Panic of 1857, with a Financial Chart ( N e w York, 1858). T h o u g h written late i n
the antebellum period, there is much earlier evidence t o support Gibbons' views o f the bank directors'
decision making.
29
T h o m a s Passmore's letterbook, ledger, journal, bills, and day books for the 1 7 9 0 s survive at H S P .
When analyzed in conjunction with the Bank of North America's individual ledgers, a researcher with
a knowledge of early accounting can follow the smallest details of Passmore's business and the crucial role
played by the bank.
^Mary Emlen, executrix of Caleb Emlen, to William Dawson, Aug. 21,1799, William Poyntell to
William Dawson, Jan.7,1800, Miscellaneous Deeds, HSR, Philadelphia Deedbooks, EF1:93, D63:133,
Philadelphia City Archives (microfilm).
222
ROBERT E WRIGHT
July
Haines was such a large operator at both the bank and in real estate
speculation that only a modern cash-flow statement could describe fully and
accurately the bank's role in his various land ventures.31 Timely bank
discounts also helped artisans to make rent or ground rent payments when
business was a little slow.
Banks, then, were important components in the business strategies of
some artisans. Although many artisans managed to survive without recourse
to the institutional loan market, once they had experienced the benefits of
bank accounts, they did not like losing access to banking facilities. This was
particularly true if they relied too heavily on the bank for discounts. For
example, woolen draper Augustus Fricke, "although engaged in an active and
profitable . . . business for many years," had to call "his Creditors together
and make an assignment" of his property after the bank closed his account.32
While most artisans did not go bankrupt when they lost their accounts, they
did encounter other difficulties. Brewer Thomas Morris, for instance, had
to enter the more expensive private loan market to meet his liquidity needs.33
Jesse Sharpless, a saddler, had to treat his debtors harshly, imprisoning
William Harrison for a time in 1798.34 Coachmaker Conrad Hanse had to
resort to barter at times.35 Without the bank's support, Hanse also had to
11
For Haines's land and business transactions, see Miscellaneous Society Collection, Box 9B, leases,
Cadwallader Collection, Gen John Cadwalader section, Asylum Company Papers, F-3, passim, Society
Miscellaneous, Shippen Papers, 6 185, 217, Society Collection, Stauffer Collection, Rittenhouse
Commonplace Book, 1755, Wilson Manuscripts, 8 116, Gratz—Non-importation Resolution, all at
HSP and listed in the manuscript card catalog under Reuben Haines See also Pennsylvania Patentbooks,
Pennsylvania Historical and Museum Commission (microfilm), AA8 382-91, AA10 6, 7, 21-77,
AA12 220-22, AA13 431-75, AA14 467-69, AA15 50,406-13, 821-26, 886, Philadelphia Deedbooks,
H3 16, H12 184, H21112,115,125,141,18 299,301,305,308,310,311,19 403,405,110 465,112 44,
113 126,115 459,461,464,465,117 317, D2 439, D2 531, D14 220,221,222,537, D38 449,453,458,
EF33 487, 490, 494, IC2 6
32
Peter A Grotjan's Memoirs, 1774-1850,2 252, HSP
33
Thomas Morris, M a y 9 , 1 7 9 5 , Dreer Collection, Alphabetical Series, H S P
34
William Harrison to Jesse Sharpless, Sept 14, 17, 1798, Coxe Papers—Tench Coxe, William
Harrison Papers, Box 77y H S P
35
Conrad Hanse t o Levi Hollingsworth and Sons, O c t 2 0 , 1 7 9 7 , Levi Hollingsworth Papers, Society
Collection, HSP
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ARTISANS, BANKS, AND CREDIT
223
purchase a plot in fee farm, with a covenant to build, rather than i n ^
simple.36 Business relationships were also lost.
Without access to credit, many artisans and retailers suffered pecuniary
loss. Ship carpenters, for instance, complained they were "often put off for
a long Time before they can procure Payment for their Bills to their great
Damage" because the law did not allow them to seize the "Body, Tackle,
Furniture" and other appurtenances of ships.37 Innkeeper James Kitchen and
others so desired to enjoy banking facilities again that they appended an
unincorporated bank to a bridge company late in the first decade of the
nineteenth century. Though the bank operated for a time, the project proved
a costly one when the legislature made such ventures illegal.38 To further
exacerbate artisans' anger, some of those artisans the bank had dropped, like
brewers Jacob Morgan and Edward Pennington, were already peeved at
Federalists because of the excise taxes of 1794.39
Historians love to reiterate vituperative Republican James Cheetham's
story about how the Manhattan Company broke the Federalist "banking
monopoly" in New York, extended credit to a wider class of people, and
lowered interest rates. Historian Beatrice Reubens argues that banking was
then so exclusive "that even the bulk of Federalist voters would not have
qualified for bank services." These views are correct, but only for the latter
half of the 1790s. Before then, as we have seen, there was no need for a
"Republican" or artisanal bank because most who desired and deserved
accommodation could get it.40
36
Fee farm is a less complete and less costly form o f land ownership than fee simple. Christopher
Martin t o Conrad Hanse, July 1 , 1 7 9 6 , Stratton Collection, H S P .
37
Philadelphia Ship Builders Petition, Society Miscellaneous Collection, box 4a, folder 5 , H S P .
38
Society Miscellaneous Collection, box 4b, petitions—bridges, N o v . 2 9 , 1 8 1 0 , H S P .
39
Baumann, "Philadelphia's Manufacturers and the Excise Taxes o f 1794," 3 - 3 9
40 a
Politicus,"yf« Impartial Enquiry into Certain Parts of the Conduct of Governor Lewis, and of a Portion
of the Legislature, Particularly in Relation to the Merchants* Bank (New York, 1806), 1-30 passim; L. Carrol
Root, "New York Bank Currency: Safety Fund vs. Bond Security," Sound Currency 4 (Feb. 1895), 286;
Martha Lamb, History of the City of New York Its Origin, Rise and Progress, Vol II (3 vols., New York,
1880); Beatrice Reubens, "Burr, Hamilton, and the Manhattan Company," Political Science Quarterly 71
(1957), 1:578-79; Young, T h e Mechanics and the JefFersomans," 247-76.
224
ROBERT E.WRIGHT
July
Federalists had a "banking monopoly," but only in a very limited sense.
According to Reubens, Federalists thought more than one bank in a city
would breed "unbridled competition and insufficient specie holdings."
However true this might have been in 1791 and 1792, by 1799 New York
City's two chartered banks, the Bank of New York and the branch of the
Bank of the United States (BUS-NY, established 1792), showed that
competition did not mean disaster. In fact, the potential market was much
larger than the capital and conservative asset ratios of the banks could
accommodate. As early as 1792 marginal groups in New York felt a need for
more bank capital, as the bank petitions that flooded New York's legislature
in the months before the establishment of the branch show. By creating
more bank capital in New York City, the BUS-NY merely staved off the
impending demographic crisis for a few years.41
Most of the directors of the Bank of New York and BUS-NY were
Federalists. Both banks had Republican customers, stockholders, and even
directors, but only wealthy ones. The capital of the two institutions remained
more or less fixed. Their capacity to extend discounts was limited by their
capital, their charters, and their leaders' understanding of banking theory. As
the population and commerce of Manhattan grew, the banks were forced to
turn increasing numbers of discount applicants away. The most economically
rational course for the bankers to have taken in a market of increasing
demand and finite supply would have been to raise interest rates, but their
charters and the usury law capped them at 6 percent. The next best course
was to invest in sounder and safer paper—the notes and bills of the richest
and most reliable—but such a course gave them the appearance of political
exclusivity. Republican Jabez D. Hammond later admitted that this
exclusivity was "not in consequence of any political manoeuvring, b u t . . . the
natural course of trade and traffic among the citizens." As Reubens points
out, even many Federalists felt the squeeze, too. On the other hand, "the
Bank of New York faithfully discounted" the notes of rich Republicans, such
as Robert R. Livingston. Despite the bankers' good intentions, the less
wealthy of both parties found themselves bereft of banking.42
41
Reubens, "Burr, Hamilton, and the Manhattan Company," 582; Wright, "Banking," chap. 4.
42
Albert Bolles, The Financial History of the United States,from1789 to 18 60 (New York, 1883), 144;
PAH, 7:444, note 5; Jabez D. Hammond, The History of Political Parties in the State of New-York, from the
Ratification of the Federal Constitution to Dec, 1840(3 vols., Albany, 1842), 1:325; John Stevens to Robert
1998
ARTISANS, BANKS, AND CREDIT
225
Aaron Burr devised the Manhattan Company scheme to help him out of
his personal financial trouble and to help strengthen his personal political
faction. Desirous of keeping control of the institution out of both Federalist
and Republican hands, Burr devised a scheme of embedding his bank in the
charter of a water company. New York desperately needed a decent water
supply as its citizens became increasingly disgusted with the city's putrid
water. Hopes of an easy solution waxed when Philadelphia completed its
municipal water system for a mere $220,000. In July 1798 Burr's brother-inlaw, a physician and engineer named Joseph Bowne, submitted a report on
Manhattan's water situation to the Common Council of the City of New
York. Though skeptical of the viability of the scheme, the council eventually
accepted Bowne's plan for furnishing the city with Bronx River water and
sent it to the legislature. Burr gained the upper hand when the New York
Assembly asked him to head the committee to which the council's prayer
was referred.43
Extremely organized and very persuasive, Burr put together a committee
of representative citizens to approach the Common Council in favor of a
private company, thereby placing the Manhattan Company along
Republican but not obviously partisan lines. He also arranged for numerous
bipartisan petitions to be sent to the assembly. The Manhattan Company's
supporters included Alexander Hamilton, Hamilton's brother-in-law John
Church, Bank of New York president Gulian Verplanck, and president of
the Chamber of Commerce John Murra.
How Burr won these men over to his cause is a matter of some
speculation. Reubens suggests that Hamilton and Burr were not yet mortal
R. Livingston, Hoboken, Aug 28, 1799, Robert R Livingston Papers, NYPL; George Dangerfield,
Chancellor Robert R Livingston of New Yorkt 1746-1813 (New York, 1960).
43
The following is just one example of Burr's financial difficulties on the eve of the 1799 session: "I
do not as yet perceive any resource from which I can raise a Dollar in addition to the embarrassments
which I had reason to apprehend, the fever has imposed others by occasioning loss of business, expence
& inability to pay in those who owed me " Aaron Burr to Pierpont Edwards, New York, Dec. 14,1798,
Burr Papers Wright, "Banking," chap 6, History of Columbia County, New York (Philadelphia, 1878),
174-75; Laws of the State of New York (16 vols, 1800), 3:156, passed Mar. 11,1796, Albany Argus, June
6,1817; New York Register of the Times A Gazette for the Country, Mar. 10,1797; John George Rommel
Jr., "Richard Variclc New York Aristocrat," Ph.D. diss., Columbia University, 1966, 136-37; "An
Outline History of New York's Water Supply," New-York Historical Society Quarterly Bulletin 2 (1917),
68-69.
226
ROBERT E. WRIGHT
July
enemies. She also points out that Burr was very Federalist in his family
connections and habits. He was, for example, a member of the Order of the
Cincinnati. The inclusion of Church as a director in the Manhattan
Company may have been a concession for Hamilton's support. Also,
Hamilton was preoccupied with the Quasi War with France. He may not
have wanted the state or city to divert funds from defense in order to pay for
a water supply. The state's treasury was severely strained that spring; as a
result, the state levied a one mill real estate tax. Hamilton probably knew of
the banking clause and may have wanted to get more Republicans involved
in banking so they would grow accustomed to the banks and not oppose
them so heartily. Whatever his motivation, Hamilton's support was crucial
because he neutralized the Federalist-controlled Common Council. Its active
opposition to Burr's plan could have killed the water company in the
legislature.44
In late January 1799, Philip Schuyler wrote Hamilton to inform him that
the Corporation of New York requested Mr. Weston, "an English engineer
who from 1795 to 1799 was supervisor of construction for the Western and
Northern Inland Lock Navigation companies," to look into the "Subject of
supplying the city with water." Hamilton soon came to believe New York's
tax on auction sales would not be sufficient to build and maintain a water
works, so he instructed Federalist New York Mayor Richard Varick, to "let
a Company be incorporated." We must call "in the aid of private Capital,"
Hamilton asserted, suggesting the corporation be capitalized at $1,000,000
In shares of $50. He thought the city should buy up to a third of the shares,
and be represented on the board by the recorder. Varick may have been
willing to follow Hamilton's lead in order to avoid the severe criticism he
44
For example, Burr had given significant aid to Alexander Hamilton's friend and law partner Robert
Troup. Wendell Tripp Jr., "Robert Troup: A Quest for Security in a Turbulent New Nation,
1775-1832," Ph.D. diss., Columbia University, 1973, 63-64; Carl Prince et al., eds., Papers of William
Livingston (5 vok, New Brunswick, N.J., 1979-88), 5:598; W. W. Pasko, ed., Old New York: A Journal
Relating to the History and Antiquities of New York City (2 vols., New York, 1889-90), 2:129. The city's
financial embarrassment continued throughout 1799 and 1800. "It seems the Comptroller of this State
has reimbursed the Corporation of this city with the Sum they borrowd of the Bank for the fortification
in this harbour. But Sir there are a number of acco'ts Still unpaid of such a nature as require immediate
Settlement." Ebenezer Stevens to Alexander Hamilton, New York, Oct. 21,1799, PAH 23:544. Don C.
Sowers, "The Financial History of New York State From 1789 to 1912," Ph.D. diss. Columbia
University, 1914.
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ARTISANS, BANKS, AND CREDIT
227
had come under because of his unwillingness to search for healthful solutions
during the yellow fever epidemic of 1796.45
How Burr won Republicans to his plan is also a matter of speculation.
Hiding the banking powers within the charter helped to ease the measure
past antibank Republicans. The venture was presented as being so
unprofitable that it almost took on the aspect of a philanthropic venture.
Unlike the existing banks, with shares costing hundreds of dollars,
Manhattan Company shares were offered at a mere $50 each. This
potentially allowed a very large segment of the population to take part in the
venture, which eased fears of concentrating wealth, a pervasive concern for
Republicans of all stripes. Other Republicans supported the plan because it
was a private corporation that would not swell the size or power of
government. Republican scholars could take solace in the fact that Adam
Smith thought a joint stock company was the best way to create a municipal
water system. Upstaters of both parties appreciated the fact that Burr's plan
would not divert the state's general tax revenues to a water supply of only
local value.46
The directorship of the Manhattan Company was composed of
Federalists, Clintonians, Livingstonians, and Burrites. This diversity gave
the company a nonpartisan look. Burr shrewdly collected information for his
quest and drew the charter bill with care. The banking clause read: "it shall
and may be lawful for the said company, to employ all such surplus capital as
may belong or accrue to the said company in the purchase of public or other
stock, or in any other monied transactions or operations, not inconsistent with
the constitution and laws of this State or the United-States, for the sole
benefit of the said company." Burr waited until the last few days of the
45
Philip Schuyier to Alexander Hamilton, Albany, Jan 3 1 , 1799, PAH 2 2 : 4 4 9 - 5 0 ; Alexander
Hamilton t o Richard Varick, N e w York, Feb 2 6 , 1 7 9 9 , PAH 2 2 . 5 1 0 - 1 1 . Hamilton put forth much the
same plan i n "Memorial t o t h e Legislature o f the State o f N e w York," F e b . - M a r , 1799; R o m m e l ,
"Richard Varick. N e w York Aristocrat," 136, n. 46. R o m m e l argues that V a n c k was never swayed by
popular opinion.
46
Bray H a m m o n d , Banks and Politics in America From the Revolution to the Civil War (Princeton,
1957). Like Bray H a m m o n d , Jabez D H a m m o n d believed that the bank must have been a trick. T h e
Federalists, the highly partisan former legislator asserted, would not vote for a Republican bank and
Republicans were against banks on principle "It is certain that an immense majority o f the legislature did
not entertain the least suspicion that this charter contained a grant o f banking powers." S o m e Federalists
may have been bribed, h e claimed H a m m o n d , History of Political Parties, 1:325-27.
228
ROBERT E. WRIGHT
July
session to unveil the charter in order to take advantage of the traditional rush
and confusion of legislators eager to return home. On March 28 the
assembly passed the charter without division. There was no opposition of
any sort. The banking clause slipped past the potential opposition for several
reasons: it was late in the session, the project was seen as visionary, and it
would not require state funds. Finally, Burr got it approved in less than
twenty-four hours. Like all bills, it had to be read three times before it could
be brought to a vote, but it is clear that no one had time to peruse the bill in
print. The banking clause sounds much less ominous than it reads. Burr's bill
likewise had little trouble in the Senate. Samuel Jones, the Federalist "Father
of the New York Bar," Federalist but soon-to-be Republican Ambrose
Spencer, and Western District Federalist Thomas Morris helped the bill
pass with their strong committee report. On March 30 the Senate passed the
Manhattan Company's charter without division or amendment. The
measure also met the approbation of New York's Council of Revision,
meeting criticism only from staunch Republican Judge John Lansing who
feared the perpetual charter, the large total capital, and the open-ended
"surplus capital" clause. Robert R. Livingston and Federalist Egbert Benson
overruled him, however.47
Many Federalists may have known about and yet still supported the
banking aspect of Burr's charter for economic or political reasons.
Economically, existing banks had more business than they could handle;
even many Federalists could not obtain discounts. Politically, some
Federalists may have sought to gain political leverage by portraying
Republicans as duplicitous hypocrites. That charge, in fact, was effective, but
only in the short term.48 Before the Manhattan Company charter,
47
Aaron Burr to Charles Biddle, Jan. 13,1799, Burr Papery "An Act For Supplying the City of NewYork with Pure and Wholesome Water" passed Apr. 12,1799, in the pamphlet An Act of Incorporation
of the Manhattan Company (New York, 1799), emphasis added; Journalof'theAssembly, 22d Session, 1799,
261,263, 283; Lamb, History of the City of New York, 2:455; John Jenkins, History of Political Parties in
the State of New York (Auburn, N.Y., 1846), 70; John Jenkins believed Ambrose Spencer was a Republican
in 1798. Journal of'the Senate, 22d Session, 1799,110,118; Gregory Hunter, The Manhattan Company:
Managing a Multi-Unit Corporation in New York, 1799-1842 ( N e w York, 1989), 4 9 .
48
Bray H a m m o n d believes the Federalists were duped. Hammond, Banks and Politics in America, 1 5 5 .
H a m m o n d does not cite Reubens as their works appeared about the same time. H e used many o f the
same sources, however. H e also used Pomerantz, the originator o f the idea that the Federalists may have
known about the banking aspect o f the provision. H a m m o n d did not discuss w h y h e rejected Pomerantz's
view. Alexander Hamilton called the Manhattan Company "a trick" and "a perfect monster in its
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ARTISANS, BANKS, AND CREDIT
229
Republican Sylvanus Miller of New York thought the "representation will
be divided in this City." Voters were at first so outraged over Burr's apparent
perfidy that Federalists, despite Miller's prediction, swept the 1799 elections.
Although the Federalists dominated the legislature, nothing was done to
weaken the Manhattan Company. Only after the legislature closed up shop
in the fateful spring of 1800 did it become clear that Burr had gained the
upper hand.49
Some historians, following Federalist accusations and Republican
boasting, argued that the Manhattan Company used its financial muscle to
principles, but a very convenient instrument of profit 6c influence " Alexander Hamilton to James A.
Bayard, New York, Jan 16,1801, PAH25 321 But Hamilton wrote to Bayard to convince him to vote
against Burr for president in the House election If Hamilton was mad at Burr for the Manhattan
Company "trick," he had a funny way of showing it "Ably defended by Brockholst Livingston, Aaron
Burr, and Alexander Hamilton, [Levi] Weeks [an accused murderer] won acquittal before a session of
the Court of Oyer and Terminer in the spring ofl8OCT, emphasis added Sidney Pomerantz, New York.
An American City, 1783-1803, A Study of Urban Life (2d ed , Port Washington, N Y , 1968), 300-301
New York Morning Chronicle, Apr 6 ,1805 According to Pomerantz, Burr told Samuel Jones that the
"excessive capital" clause could be used to create a bank. Pomerantz believed Federalists constructed the
"trick" to gam political leverage Pomerantz, New York, 189-90
49
Silvanus [Sylvanus] Miller to Ebenezer Foote, New York, Mar 25,1799, Foote Papers There was
much indignation at the trick so "at the next election Burr and his party were defeated " John Jay Knox,
A History qf Banking in the United States (New York, 1903), 396 According to Pomerantz, Republicans
accused the Federalists of packing election boards, denying discounts to Republicans, and the outright
bribing of voters in order to win that spring The financial proscription was a strange accusation given
the fact that Republicans complained they had long been deprived of discounts Pomerantz, New York,
124-25 Edmund Willis argued that Federalists pressured cartmen to vote for Federalists that spring,
especially where voting was still done by voice Edmund Willis, "Social Origins of Political Leadership
in New York City from the Revolution to 1815," Ph D diss University of California, Berkeley, 1967,
12 It is clear that Republicans were also responsible for some of the raucousness that spring Consider
the following from the Albany Centinel, May 3,1799 "A New York paper gives an account of a meeting
of the friends of Government in the 6th Ward of that city, to deliberate on proper measures for
supporting the federal ticket for members of Assembly—and adds, that the Jacobins rallied at an early
hour, took possession of the place designed for meeting, and by their riotous and disorderly behaviour,
rendered an adjournment necessary,—This looks somewhat as tho' the French faction were in dread of
a downfall, and that they feared to permit the friends of Government peaceably to deliberate on measures
interesting in a high degree to the public " One thing is certain, one of the Manhattan Company's first
directors, William Laight, a political neutral and director of the BUS-NY, knew nothing of a bank
because he resigned as soon as the company's plans for a bank were announced. See Beatrice Reubens,
"Launching a Bank," Political Science Quarterly 71 (1958), 103, n 10 Jabez D Hammond claimed that
the Federalist victory was not nearly as large as Federalist pundits had anticipated, however, Hammond,
History of Political Parties, 1 129
230
ROBERT E.WRIGHT
July
help Aaron Burr defeat the Federalist assembly candidates in New York's
spring 1800 elections. These representatives gave the Republicans a majority
in New York's Twenty-third Assembly, the body responsible for choosing
the state's presidential electors. Since New York's electoral votes decided the
contest that fall, Thomas Jefferson ironically may have owed his presidency
to the efforts of those who erected the Manhattan Company's bank. Though
sometimes crassly, and wrongly, considered a form of bribery, it is clear the
Manhattan Company's liberal banking policies won many over to the
Jefferson-Burr ticket that fateful spring. The Manhattan Company's
influence was more subtle, and in some ways more powerful, than outright
bribery.50
The bank of the Manhattan Company opened on September 24,1799.
The company put most of its energy and money into this bank, though it
also dabbled in insurance and other financial operations. Only a few drops
of the company's capital flowed into its water system. The company decided
to take a cheap, low-technology approach, relying on animal-driven pumps
and wooden pipes. To dampen the memory of Burr's "trick," however, it
made every effort to appear strongly interested in the water business. One
director explicitly argued that the company should seek means of putting
"the Citizens in good humour with us." The rest of the directorate agreed.
To gain public favor, for example, the Manhattan Company published the
minutes of some of its meetings, highlighting the directors' water efforts and
barely mentioning their banking plans.51
50
The Manhattan Bank itself has often stressed its role in the election. In one pamphlet, the bank
portrayed itself as the destroyer of Federalism: "Outside of New England, Federalism had become oldfashioned in a year. Following Jefferson's sweeping social success, men abandoned knee breeches and
became democratic in garb as well as in thought." A Historical Sketch of the Bank of the Manhattan
Company, Chartered 1799 (New York, [1945?]), 115. The quotation is from De Alva Alexander, A
Political History of the State of New York, Vol. 1:1774-1832 (New York, 1906). According to Burrite and
Federalist editors, a few years later Manhattan lobbyist Maturin Livingston would boast that the
Manhattan Company made Jefferson president. New York Chronicle Express, Mar. 26,1804; New York
Evening Post, Mar. 22, 1804. Jefferson had an account with the Bank of North America as early as
1789-90. Bank of North America Papers, Individual Ledgers, HSP.
51
Advertisement in Supplement to Evans Early American Bibliographyy 48786; John Stevens to Robert
R. Livingston, New York, Apr. 12,1799, Robert R. Livingston Papers, NYPL. For an example of the
publication of the minutes of a Manhattan Company meeting, see the Albany Centinel, June 4,1799.
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ARTISANS, BANKS, AND CREDIT
231
The easiest way for the Manhattan Company to regain support, however,
was the one most within its means—to make discounts. Although records
of individuals who received Manhattan Company discounts in the early
nineteenth century have been lost, it is clear the bank loaned to a wide
variety of occupational groups. Because of the low price of its shares, the
company's stockholders were a diverse group. Besides the usual merchants
and lawyers, retailers, grocers, shoemakers, hatters, potters, hairdressers,
bakers, carpenters, tailors, and even cartmen owned Manhattan stock and
hence had a fairly well established right to receive discounts appropriate to
their financial situation. It is clear from the general ledger that the
Manhattan Bank significantly stepped up operations in April 1800. A March
30,1800, ledger entry labeled "Discount Received Dr. to Profit and Loss for
amount of Discount received from September 3,1799 to March 29th, 1800
inclusive" shows that the bank made $42,755.90 in interest charges during
that seven-month period.52 A June 30,1800, entry called "Discount Received
Dr. to Profit and Loss for Amount of Discount received from March 31st
to June 30th, 1800 inclusive" shows the Bank made $45,720.86 in interest
in just three months.53 The volume of the bank's business grew as
stockholders paid for their shares in installments. However, the big jump in
activity in the second quarter of 1800 is not explainable solely in terms of an
influx of capital. The Manhattan Bank apparently hoped to gain votes by
proving it was a less restrictive institution than the two Federalist banks.
Federalism was now ironically tainted by its own "trick" as the party opposed
to the extension of banking. Already widely condemned as "aristocrats,"
Federalists now seemed directly and unequivocally opposed to the economic
interests of artisans.54
52
General ledger, Manhattan Bank, Chase Manhattan Bank Archives, New York, N.Y. This equals
a yearly profit of $73,337.74. This would be approximately 6% of the total discounted, or a yearly
circulation rate of $1,222,295.60.
51
This equals a yearly profit of $182,883.20. This would be approximately 6% of the total discounted,
or a yearly circulation rate of $3,048,053.30. That would mean the Manhattan Company discounted
approximately $762,013.32 in Apr., May, and June of 1800. This conclusion is further supported by the
printing orders for bank notes that the Manhattan Bank made in that period.
54
"The stock had been floated in such small denominations that ownership of the bank was spread
beyond the business community." Elisha Douglass, The Coming of Age of American Business: Three
Centuries of Enterprise (Chapel Hill, N.C., 1971), 52. See Table 6-2 in Wright, "Banking"; Beatrice
Reubens, "Launching a Bank," 102.
232
ROBERT E. WRIGHT
July
New York's Tammany Society explicitly argued about the efficacy of the
current banking system as the crucial spring assembly elections grew near.
The outrage over Burr's infamous "trick," the chartering of the Manhattan
Company as a water company with hidden banking privileges, had long since
subsided. The Federalists' "trick," pretending they knew nothing of Burr's
plans, now backfired. Convinced Federalism was now the antibank party,
and welcomed with open arms into ownership and membership of the
Manhattan Company, New York's artisans voted for Burr's, and hence
Jefferson's, assembly candidates. The Manhattan Bank was in an especially
advantageous position to use its financial influence to win votes because the
spring of 1800 witnessed a little-known financial dislocation that bordered
on a full-fledged panic in places. At a time when the older banks had to call
in loans, the Manhattan Company was able to increase its discounts, as
previously mentioned. Though other causes contributed to the Republican
victory that spring, including the "irresistable [sic] Fury" of the "Demon of
Democracy" and the "withered" and "nerveless . . . Federal Arm," the
Manhattan Company's timely assistance to the common artisan and lowly
retailer was the single most important factor.55
The results of the election in Philadelphia, and the next decade of
banking politics in both ports, strongly support this conclusion while
simultaneously casting doubt on the interpretation set forth by Stanley
Elkins and Eric McKitrick in their magisterial Age of Federalism. An
outstanding piece of intellectual history, the work somewhat ironically
s<i
Pomerantz, New York, 472. Joseph S. Davis points out that business activity crested in late 1784,
1792,1795, and in 1799; Essays in the Earlier History of American Corporations, vol. 2 (2 vols., New York,
1917). This recession is little known or often ignored. Elisha Douglass, for example, believed the
Manhattan Company was started "in the midst of a boom." Overall, the times were good, and the bank
did prosper, as Douglass argued. Though relatively insignificant macroeconomically, these dips were
important for their impact on political developments. Douglass, The Coming of Age of American Business,
51. Melancton Smith to Zepheniah Platt, New York, Dec. 16,1799, John Lawrence to Zepheniah Platt,
New York, Feb. 1,1800, Thomas Storm to Zepheniah Platt, New York, Feb. 7,1800, Zepheniah Platt
Papers, NYSL. The "business revulsion" of the spring of 1800 "was especially severe in Baltimore"; James
O. Wettereau to N.S.B. Gras, Manhasset, L.I., Jan. 29,1941, box 25: Miscellany, James O. Wettereau
Papers, Columbia University Manuscripts. Nicholas Low to Rufiis King, New York, Feb. 8, Apr. 13,
1800, Rufus King Papers, NYHS. Benjamin Winthrop to Thomas Willing, New York, Mar. 18,1800,
Bank of the United States, Etting Collection, vol.1, folder 55, HSP; Abraham Van Vechten to Ebenezer
Foote, May 23,1800, Foote Papers.
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ARTISANS, BANKS, AND CREDIT
233
focuses on elite politics. Chapter titles like "The Mentality of Federalism in
1800," and a dearth of primary socioeconomic source citations demonstrate
the abstract level of the authors' analysis. However much the ideological
movement from "civic humanism" led elites to abandon Federalism, it seems
highly unlikely that such complex ideas swayed the masses of the late
eighteenth century any more than they influence the bulk of voters today. As
Elkins and McKitrick argue, the concept of Federalism may have died in
1800, but the Federalist party could have made a resurgence.56 With artisans
now for the most part in the Republican camp, Federalists had to find a way
to win them back. The party's chance came at the end of the decade when
Republican trade warfare combined with continued demographic pressures
to create yet another credit crunch. Now aware that seeming to support
privilege did not win elections, Federalists in New York and Philadelphia
attempted to create more banks. Republicans, also sensible of the importance
of credit access, incorporated banks first, however, and thereby maintained
many artisans' votes through the vicissitudes of the embargo and the war.
In 1800 Philadelphia had no Aaron Burr, no Republican bank, and less
revulsion to the existing financial order to influence its assembly elections.
The result was a very narrow Federalist victory in the city proper and a split
electoral college vote—eight for Jefferson and seven for Adams.57
Demographic pressures forced Pennsylvania's Federalist bankers to push
artisans away, but, unlike New York, there was not yet a Republican bank
to pull them into the Jeffersonian camp. Doerflinger estimates that the Bank
of North America supported 1350 discounters in 1790. By his count, 20
percent were artisans. In 1800, however, the bank had a mere 1215 active
customers, not all of whom received discounts. Artisans composed 20
percent of the bank's active customers, but many were mere depositors using
the bank to store their funds and make remittances. Retailers lost yet more.
Accounting for almost 32 percent of the most active discounters in 1790,
retailers had dropped to a mere 17 percent of the bank's customers by 1800
56
Elkins and McKitnck, The Age of Federalism, esp. 6 9 2 - 9 3 .
57
According to Thomas P. Cope, the Federalists won the city by only 25 votes. "Last year [1799] the
Federalists had a majority in the City of about two for one. So fleeting is the public mind." Eliza Cope
Harrison, ed., Philadelphia Merchant The Diary of Thomas P Cope, 1800-1851 (South Bend, 1978),
29-30.
234
ROBERT E WRIGHT
July
and accounted for only 7 percent of the bank's throughput, down from 13
percent in 1790. This is significant because the economic and social division
between retailers and artisans was very porous and difficult to establish.
Many artisans, especially bakers, jewelers, shoemakers, and smiths,
combined manual labor and retail trade to such an extent that classification
is difficult. Also, it seems many lesser retailers joined artisans in the move to
Jefferson.58
Philadelphia's population grew almost 40 percent over the decade. The
artisanal population grew by about 35 percent. So, while in 1790
approximately one artisan in ten received discounts at the Bank of North
America, by 1800 only one in fifteen were customers of any sort. This
represented an absolute loss of about thirty artisans as customers of any sort
and an even larger loss of absolute artisanal discount customers.59
Of course, Philadelphia boasted two more banks in 1800 than it did in
1790, the Bank of the United States and the Bank of Pennsylvania.
Unfortunately, the detailed records of neither bank survive, so exact analyses
of their customer bases are impossible. However, as their names suggest, the
main objective of both banks was to aid the fiscal needs of the national and
state governments, respectively. Led by the Bank of North America's
cautious former president, Thomas Willing, and dominated by Federalist
merchants, the Bank of the United States rarely lent to nonmerchants. The
Bank of Pennsylvania, "which was virtually an agency of the
Commonwealth," also served a limited and elite clientele, including Robert
Morris, Tench Coxe, the City of Philadelphia, and associates of Thomas
Jefferson. Some surviving lists of protested notes list almost entirely
merchants, professionals, or government officials. A few men controlled so
much of the bank's loanable funds by 1795-96 that the stockholder meeting
58
Active accounts are those of more than $1 and at least one deposit or withdrawal during the year
Throughput is defined as total credits, be they lodged deposits, deposits created by discount, or intrabank
account transfers Data compiled by the author from the Individual Ledgers of the Bank of North
America, 1800, at HSP
w
George Rogers Taylor, "Comment," in Gilchnst, The Growth of the Seaport Cities, 39 Statistics for
artisanal numbers are based on the 1790 and 1800 Philadelphia directories The census figures in Donald
Adams, "Wage Rates in Philadelphia, 1790-1830," Ph D diss, University of Pennsylvania, 1967,17,
give far lower estimates of the total number of "manufacturing 8c mechanical pursuits " Using his
numbers, as many as one artisan in five may have dealt with the Bank of North America in 1790
1998
ARTISANS, BANKS, AND CREDIT
235
minutes record complaints that certain favorites had greatly overdrawn their
accounts for extended periods. The bank directors took strong action,
however, vastly improving the institution's balance sheet by 1797.
Stockholder letters granting powers of attorney to collect dividends and
conduct other bank business indicate that the bank's clientele remained
exclusive and extralocal, however. Philadelphia stockholders granting powers
of attorney were either merchants or the wives of merchants. NonPhiladelphia stockholders were not identified, but their wide geographic
distribution shows that the Bank of Pennsylvania truly had interests across
the state, and, indeed, across the nation.60 Though more of a book merchant
than an artisanal printer, even Mathew Carey experienced difficulties
obtaining discounts from the Bank of Pennsylvania.61
The continued double-digit dividend rate of the Bank of North America
proves that the institution was not losing customers in the competitive
struggle with the other two banks. The bank remained profitable by lending
more to wealthy merchants, grown fat on the tripling of exports over the
decade. In 1800 the average account throughput was $22,894.48 compared
to just $15,147.28 in 1789 and 1790. Furthermore, the average size of the
top 10 percent of accounts jumped from $107,268.28 in 1789-90 to
$145,823.06 in 1800. As in New York, then, capital growth was insufficient
to handle the credit needs of the increasing population. If contemporary
statistician Samuel Blodget was right, the national per capita money supply,
in both coin and bank notes, shrank about one-sixth during the 1790s. The
60
Nicholas B Wainwright, History of the Philadelphia National Bank A Century and Half of
Philadelphia Banking, 1803-1953 (Philadelphia, 1953), 2 , Robert Morris and John Nicholson to the Bank
of Pennsylvania, Philadelphia, M a y 6, 1796, Etting—Eminent Americans, Ettmg Collection, H S P ,
T e n c h Coxe Bank Book, 1 7 9 3 - 1 8 0 2 , Coxe Collection, H S P , Bank o f Pennsylvania M s s , Nancy
Patterson Bright Collection, 1 7 9 0 - 1 8 3 1 , H S P , Thomas Jefferson to John Smith, cashier o f the Bank
o f Pennsylvania, Washington, July 2 1 , 1804, Etting—Eminent Americans, Etting Collection, H S P ,
Protest lists for Apr 1794, D e c 1794, Jan 1795, May 1795, D e c 1795, May 1796, June 1796, July 1796,
N o v 1796, D e c 1796, Jan 1797, Feb 1797, and Apr 1797 can be found in the Bank o f Pennsylvania,
1793-1859, Etting Collection, H S P , Bank o f Pennsylvania Mss , Minutes o f Stockholders, 1 7 9 3 - 1 8 4 2 ,
H S P D u r i n g the 1790s and first few years o f the 1800s, Bank o f Pennsylvania stockholders lived in
Lancaster, Carlisle, Pittsburgh, Montgomery County, Chester County, and Fayette County,
Pennsylvania Stockholders also lived in N e w Brunswick, N e w Jersey, N e w York City, Wilmington,
Delaware, Chestertown and Baltimore, Maryland, Richmond, Virginia, and Charleston, South Carolina
61
Mathew Carey to Samuel McFen, N o v 1 7 , 1 7 9 8 , Mathew Carey to Alexander Henry, N o v 1 9 ,
1798, M a t h e w Carey Letterbook (letterpress), 1 7 9 8 - 9 9 , Lea and Febiger Collection, H S P
236
ROBERT E.WRIGHT
July
lesser retailers and artisans, then, received a smaller slice of a smaller pie and
revolted, not in favor of agrarianism, but in favor of equal economic
opportunity.62
Meanwhile, back in New York, the Empire State's Twenty-fourth
Assembly, the one voted into office to ensure the election of Jefferson and
Burr, showed itself to be a commercially oriented group of men. The
Republican-controlled legislature strengthened the Federalist Bank of New
York, chartered the Farmers' Bank of Lansingburgh, and passed three
important pieces of financial/business legislation. These commercially
oriented Republican legislators did not seem to fear the wrath of their
constituents, although the election of 1801 was an important gubernatorial
contest, a further indication that the results of 1800 in New York were more
a mandate for commercial Republicanism than Jeffersonianism. Two years
later, Republican politicians teamed up with Albany businessmen to form
the New York State Bank (chartered 1803).63
With Republicans gaining increasing support from businessmen, New
York's Federalist party was forced to confront its own hypocrisy. As a
progrowth party it should not have allowed itself to be seen as an obstacle to
new bank opportunities. Led by Hamilton, Federalists decided to endorse
controlled bank proliferation. The result was the Merchants' Bank of New
York (established 1803, chartered 1805), a nominally Federalist institution
with a broad base of stockholders and customers. When Republicans tried
to block the charter of this bank, New York's political field turned into a
bloody mess for four years. The ultimate defeat of the Republicans showed
that New York voters disdained outright partisan manipulation of economic
matters. Governor Daniel D. Tompkins rediscovered this when his attempt
62
For the tremendous growth of exports, see Adams, "Wage Rates in Philadelphia, 1790-1830," 192.
Lawrence Lewis Jr., A History of the Bank of North America, the First Bank Chartered in the United States
(Philadelphia, 1882). According to Edwin J. Perkins, American Public Finance and Financial Services,
1700-1815 (Columbus, Ohio, 1994), 247, $18 million in coin and $11.5 million in bank notes were in
circulation in 1792, ($6.50 per capita), and $17.5 million in cash and $10 million in bank notes were in
circulation in 1800 ($5.40 per capita).
63
For details, see Wright, "Banking," chap. 7.
1998
ARTISANS, BANKS, AND CREDIT
237
to prevent the incorporation of the Bank of America by proroguing the
legislature in 1812 backfired.64
What emerged in New York was a broad probank, progrowth political
consensus that transcended party lines. Although nearly all the state's
staunch antibank legislators between 1785 and 1819 were Republican, onethird of the state's forty-three strongest bank advocates were also of the party
of Jefferson. Of a sample of 11,655 votes on banking issues from 1784 until
1819,605 Republicans cast 7,170 votes, 50.08 percent of which were in favor
of banks. Over the same period, 367 Federalists cast 4,166 votes, 69.90
percent of which were in favor of banks. Though Federalists, following
Hamilton's lead, began wholeheartedly to support banks based on real
business needs, artisans did not immediately swing back to Federalism.65
As the first decade of the 1800s drew to a close, the debate over the
embargoes intensified, Manhattan's population growth remained unchecked,
and another credit crunch loomed. Republicans shrewdly offered the
Mechanics' Bank of New York to fill the void. Though a Republican-led
institution with a "republican" charter, Federalists dared not oppose it. "The
petition for this bank was supported by the whole mechanic interest of this
city," claimed future Mechanics' Bank president and sailmaker Stephen
Allen, "and appeared so reasonable, to the Legislature, that the charter was
granted with little or no opposition." "A distinguished federalist" told
DeWitt Clinton "that neither party dare oppose the incorporation of the
Mechanic Bank," which caused Clinton to correctly "presume that the
federalists governed by fear not by affection, will give their support." The
slight opposition to the bank was almost entirely Republican. Like the
Manhattan Company a decade before, the Mechanics' Bank tied artisans to
" T h e contest literally grew "bloody " Republican John Tayler physically accosted Senator Ebenezer
Purdy "while yet in the senate chamber" because of the Merchants' Bank dispute Charles A Foote to
Ebenezer Foote, Union College, April 1805, Foote Papers T h e Fracas," New York Morning Chronicle,
Apr 16,1805, Wright "Banking," chaps 7, 8 , 1 0 and table 8-1
6S
See the table "Extreme Anti- and Pro-Bank Legislators with More Than 14 Recorded Votes" in
Wright, "Banking " Every effort was made to include all votes on banking issues, but the author is not
so bold as to assert that he discovered every roll caU in the poorly indexed journals of the assembly and
senate, however Also, a small number of votes were deliberately excluded because it was not clear
whether a "yea" was for or against banking The divisions on these omitted votes also indicated that the
legislators themselves were not clear on the matter The party of some legislators was not identified
Journal of the Assembly, 22d session, 1799
238
ROBERT E.WRIGHT
July
the Republican party at a critical demographic and political juncture.
Though Federalists remained strongly progrowth after the war—the
Hartford Convention did not entirely kill the party—the six banks chartered
in New York City during the 1810s, combined with a slower rate of
population growth, did not create any more crisis opportunities for
Federalists to win back artisans and mechanics. Federalists were too weak by
1819 to take advantage of the commercial disruptions of the next few years.
The mood of the state had changed anyway, as various bank failures and
scandals elicited increasing Jacksonian criticism of commercial banking.66
A similar scenario occurred in Pennsylvania. Following the lead of
Hamilton's Merchants' Bank, a broad segment of Philadelphians, from
Federalist George Clymer to Republican mayor Matthew Lawler, formed
the Philadelphia Bank in 1803 to meet dire business needs. The proposed
bank hit a political snag in the assembly, but the intense need for
institutional credit prevailed. The Bank of Pennsylvania's profits were so
large at this time that Philemon Dickinson suggested that the directors "be
extremely cautious in declaring the next dividend." "A reduced one," the
former Continental Congressman contended, "would be attended with many
obvious advantages to the Institution." High dividends of course meant
ample business and suggested the need for a new bank. Growing
Philadelphia needed more credit, however, and the assembly relented in
1804. Over the next few years, still more people, physical capital (goods,
infrastructure, and physical property as opposed to monied capital), and
energy poured into the port. When continued population growth and
dissatisfaction with the embargoes created another crisis at the end of the
decade, Republicans took credit for establishing the Farmers' and Mechanics'
Bank (chartered 1809). Like the Mechanics' Bank of New York, the
institution kept artisans in the Republican ranks. The four banks chartered
in Philadelphia in 1815, like the New York institutions of the 1810s, staved
66
The population increased from 60,515 to 100,775, far surpassing Philadelphia in both absolute
numbers and rate of growth. Memoirs of Stephen Allen, 1767-1852, typescript, NYPL, 55; De Witt
Clinton to Henry Remsen, Albany, Mar. 20,1810, De Witt Clinton Papers, New York Public Library,
Wright, "Banking," chaps. 9,16,17, and 18.
1998
ARTISANS, BANKS, AND CREDIT
239
off any further demographically related credit crunches until after the
disappearance of Federalism in the Quaker State.67
Federalism died for many reasons, but its failure to retain artisans,
mechanics, and small retailers in its ranks was the main reason for its demise.
Unable to convince artisans—the constituency most closely tied to the
interests of merchants—that it was the best party for the small businessman,
Federalism had little chance of maintaining the allegiance of farmers.
Though both parties could convincingly claim to be proponents of economic
growth, the anticompetition tactics of entrenched Federalist banking
interests and the Federalist "trick" of 1799 enhanced the perception that
Federalism stood for "aristocracy." Once artisans entered Republican ranks
they tended to stay there. When Jeffersonian trade warfare and demographic
pressures threatened artisanal loyalty, Republicans chartered "mechanics'"
banks in both New York and Philadelphia to maintain artisans' allegiance.
Unfortunately, it is impossible to test whether early nineteenth-century
politics would have turned out differently if New York Federalists had been
as eager to charter new banks before 1800 as they were after that pivotal
election. Only by placing intellectual and cultural evidence in the vise of
demographics and economics can historians sense the root (i.e.
socioeconomic) causes of the sea change of 1800. Regardless, it remains
unclear, and at root indeterminable, whether Federalism simply would have
found another way to destroy itself.
Biographical Dictionary of
Early Pennsylvania Legislators
ROBERT E. WRIGHT
67
Wainwright, History of the Philadelphia National Bank, 2-13, Philemon Dickinson to Jonathan
Smith, cashier of the Bank of Pennsylvania, Dec 27, 1803, Gratz Papers, HSP Theoretically, by
decreasing trade, the embargoes should have decreased demand for credit During stagnations, however,
merchants feared to make person-to-person loans, driving people to banks Also, rather than he idle,
many merchants increased investments in domestic concerns during commercial downturns