Gotham_ A History of New York City to 1898 - Edwin G. Burrows [241]
MONEYED MEN
What couldn’t be shrugged off so easily was New York’s growing notoriety as a cauldron of financial speculation. Over the previous half-dozen years, “moneyed men” throughout the United States, often as not in league with European financiers, had come to think of heavily depreciated state and Continental securities as good investments. (As early as 1786, William Duer owned sixty-seven thousand dollars’ worth of Continental paper outright, and another two hundred thousand in partnership with half a dozen other New York investors.) If the American experiment in self-government succeeded, they reasoned, the value of their holdings would be multiplied many times over. The tempo of speculation quickened in the months before Washington’s inauguration, as investors became more and more certain that the new federal government would take immediate steps to put the nation’s finances in order.
New York afforded speculators two advantages. Rapid population growth—and above all a stream of immigrants with cash, credit, and connections—favored the city with an abundance of capital. “More money is to be had in Your City” than anywhere else in the country, a Philadelphia merchant complained to Andrew Craigie in 1789. As the national capital, furthermore, New York churned with valuable rumors, tips, and inside information that took days, even weeks, to reach buyers and sellers elsewhere. There was no substitute for rubbing elbows with important people in the government on a day-to-day basis, Craigie said. “I know of no way of making safe speculations but by being associated with people who from their Official situation know all the present & can aid future arrangements either for or against the funds.”
The early summer of 1789 brought word that southern state securities were both cheap and plentiful, some selling for as little as ten cents on the dollar. Over the next six months, seventy-odd New Yorkers scooped up $2.7 million worth of South Carolina, North Carolina, and Virginia obligations—roughly a third, all told, of their outstanding debts. Leading the pack was the firm of Herman LeRoy and William Bayard, with a combined investment of over $580,000. Andrew Craigie and four others were each in for a hundred thousand dollars or more. William Constable, another participant, told an English investor that “those in the secret” expected to come away with huge profits in the very near future. “My opinion is founded on the best information,” he wrote. “I cannot commit to paper my reasons, nor explain from whence I have my information, but I would not deceive you.”
Constable’s “secret” was that Treasury Secretary Hamilton (“our Pitt,” Constable called him reverently) would soon go before Congress with a financial plan calculated to boost the value of state and federal securities. How did Constable know? No evidence exists that Hamilton breached the confidentiality of his office. Assistant Treasury Secretary Duer, on the other hand, talked freely to Constable and their other New York friends and was himself deeply involved in speculation. Hamilton surely knew of Duer’s activities and did nothing—which encouraged the widespread suspicion that he was masterminding a corrupt conspiracy against the republic.
The denouement came in mid-January 1790, when Congress received from Hamilton a fifty-page Report Relative to Public Credit. According to Hamilton’s figures, the unpaid foreign and domestic debts of the United States amounted to some fifty-four million dollars. Outstanding state debts came to another twenty-five million. The total—nearly eighty million dollars—was the country’s “price of liberty,” Hamilton said. Yet, he added, neither the old Confederation nor many of the states had fulfilled their duty to pay off this sacred debt as promised. The annual revenues of the new federal government weren’t even enough to cover the interest on the debt (currently around $4 million a year), let alone retire the principal, and numerous public creditors had been waiting for their money for years. This intolerable negligence