Gotham_ A History of New York City to 1898 - Edwin G. Burrows [246]
The value of BUS “subscription shares” or “scrip” climbed steadily—from $25 to $45 to $60 almost overnight, from $60 to $100 in two days, from $100 to $150 in a single day. Toward the end of October shares in the bank were selling for $170. It was clear by this time that a number of Hamiltonians had acquired big stakes in the BUS as well as seats on its board; some indeed had seats on the BONY board as well, giving the two banks something close to interlocking directorates. (The state of New York hedged its bets by investing sixty thousand dollars in BUS stocks.) In the meantime, according to one of Andrew Craigie’s associates, ordinary mechanics and shopkeepers had begun to dream of making easy money in the market—a danger because “ideas of this kind being disseminated amongst the various Classes of people become subversive of private industry, happiness, & economy.”
Hamilton too worried about the “scriptomania” raging in New York, but his attention was momentarily diverted by another of his projects, the Society for Establishing Useful Manufactures. The purpose of the SUM was to promote the industrialization of the United States, diversifying the country’s economy and reducing its dependence on imported, chiefly British, manufactures. SUM shares, valued at a hundred dollars each, could be purchased with either federal securities or BUS stock as well as specie—an ingenious arrangement that not only enabled the project to draw upon the increasing sums of foreign as well as domestic capital sluicing into the New York financial market but would also, in the process, help brake excessive speculation by stabilizing the demand for government bonds.
Although its operations would be located at Paterson, New Jersey, the SUM’s New York connection was repeatedly underscored—by the fact that a majority of its directors were big New York speculators, by the board’s decision to make William Duer its first governor or president, by the speed with which its stock was taken up by New York investors, and by its selection of L’Enfant to lay out a company town (his sense of grandeur proved too expensive, however, and he was let go). As of November 1791 over $625,000 had been raised toward an initial capitalization of one million dollars—the bulk of it from the city, where SUM stock was selling at or above par. A month later Hamilton gave Congress a Report on Manufactures that urged federal support for all such undertakings (because, among other things, idle “women and Children are rendered more useful” by employment in manufacturing).
PANIC
At the end of December 1791, former assistant secretary of the treasury William Duer mobilized a small group of New York speculators—among them Alexander Macomb, John Pintard, William Livingston, and Royal Flint—for a daring attempt to manipulate the city’s stock market. The plan called for “the Company” or “the Six Per Cent Club,” as it was known, to make massive secret purchases of government paper and bank stocks (Duer himself had bought over half a million dollars’ worth in the previous nine months alone). To keep the market percolating, the club would also announce the formation of a new bank with an initial capitalization of a million dollars, then hint that this so-called Million Bank would merge with both the Bank of New York and the Bank of the United States. Stocks of all three institutions were certain to rise in value. When they had gone up far enough, the club would unload its holdings at tremendous profits—and perhaps (though Duer’s exact intentions remain hazy) seize control of the Bank of New York as well.
Shares in the Million Bank went on sale in January 1792. Excited investors bought the entire offering within a matter of hours, and the ensuing cry for bank stocks of every