Washington [462]
The same day that Hamilton delivered his report to Congress, Madison unleashed an anonymous assault on the Washington administration, accusing it of laying the groundwork for a monarchy. He deplored the “increasing splendor and number of prerogatives” enjoyed by the executive branch, which might “strengthen the pretexts for an hereditary designation of the magistrate.”10 Hamilton, aware of the orchestrated nature of these salvos, wrote to Vice President Adams, “The plot thickens.”11
Starting in the summer of 1791, the Jeffersonians followed with alarm the rampant speculation in government bonds and bank shares. On July 4, 1791, the Treasury had begun selling shares in the new Bank of the United States, and pent-up demand proved so explosive that the entire subscription sold out in one frantic hour. Swarms of investors invaded the Treasury building, mobbing the clerks. For Hamilton’s supporters, it was dramatic proof of the trust that investors placed in the new institution. Now an unashamed bank booster, Washington exulted over this initial offering: “The astonishing rapidity with which the newly instituted bank was filled gives an unexampled proof (here) of the resources of our countrymen and their confidence in public measures.”12 Although the par value of bank stock was $400 per share, Hamilton, to make it affordable to small investors, allowed them to make $25 down payments; in exchange, they received certificates called scrip, which entitled them to purchase full shares in future installments.
In the next few weeks, as the price of scrip soared, it produced a speculative frenzy that was dubbed “scrippomania.” Far from construing it as symptomatic of Hamilton’s success, Madison was appalled by this “scramble for so much public plunder.”13 Equally aghast, Jefferson wondered aloud to Washington whether “such sums should have been withdrawn from . . . useful pursuits to be employed in gambling.”14 Hamilton erred in selling most scrip in Philadelphia, Boston, and New York, feeding southern fears of a northern hegemony. In August the price of scrip touched such dizzying heights that Senator Rufus King of New York reported that business had ground to a halt as people rushed to buy scrip, with “mechanics deserting their shops, shopkeepers sending their goods to auction, and not a few of our merchants neglecting the regular and profitable commerce of the city.”15 According to Dr. Benjamin Rush, the madness engulfed Philadelphia as well: “The city of Philadelphia for several days has exhibited the marks of a great gaming house.”16 By August 11 bank scrip had zoomed from the $25 offering price to $300, with government bonds also touching delirious new heights. When bankers drained credit from the market, speculators dumped their scrip, the bubble burst, and prices plummeted. Hamilton steadied the market by buying government securities, but Jefferson was convinced that scrip had already worked its evil influence. “The spirit of gaming, once it has seized a subject, is incurable,” he wrote.17
The speculative fever abated temporarily, and Hamilton had to counter an organized effort to revive it. His friend William Duer, recently departed as assistant treasury secretary, had hatched a plan to corner the market in government bonds and bank shares and enlisted Alexander Macomb, a wealthy merchant, to join the effort. What made this situation so distressing for Hamilton was that he had just tapped Duer as governor of the SEUM, where Macomb was also a governor. The two men emerged as ringleaders of a speculative clique known as the Six Per Cent Club because they tried to manipulate the price of government bonds yielding 6 percent.
In early 1792 financial markets grew feverish as the creation of several new banks spurred a mania for bank shares. “Bancomania” surpassed even the “scrippomania” of the previous summer. Hamilton was staggered by the