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      One share would cost $750. Because an account would be credited with two-thirds of a mortgage’s face value, a $750 land purchase would be worth $500 at the bank. A merchant would therefore have to top off that sum with $250 in coined money. Not including transaction costs—legal fees, commissions, appraisals, taxes, and surveys—it would therefore cost a merchant at least $1,000 in cash and property purchases to buy a bank share worth only $750.

      By comparison, someone who was already a landowner would need to raise only $250 in cash to purchase that same bank share after mortgaging his or her existing holdings at the bank.

      Thus, an inequity had been structured into the land bank’s design: one that privileged property holders over coin holders. This distinction would be even more magnified among the bank’s directors, who had to own four shares of stock. Although Robert Livingston would meet that requirement with only $1,000 coming out of pocket, a city merchant—someone like Isaac Sears, one of Livingston’s and Sayre’s original partners—would have to spend $4,000 to buy the same number of shares. Yet as equal shareholders on paper, both men would be eligible for the same amount of bank credit. What merchant would trade $4,000 in gold and silver coins for the same face value in less secure paper money?

      The proposed Bank of the State of New York would therefore be incapable of answering the commercial credit needs of either the city’s merchants or their customers. Paper notes backed by land instead of gold or silver coins would never pass muster among merchants who were accepting only two sources of domestic paper money at the time, both of which happened to be from Philadelphia: those from the Bank of North America and so-called Financier’s Notes issued by Congress’s finance superintendent Robert Morris.³² City merchants came to view Livingston and Sayre’s proposal as fundamentally flawed—not because it was a land bank, but because it was designed primarily to serve landowners.

       The Private Bank

      When Alexander Hamilton first heard that people were proposing to open a land bank in New York City, he believed it had been the brainchild of Stephen Sayre. Later, he would say that he had always known the “true father” was Chancellor Robert Livingston.³³ Either way, Hamilton was under instructions to not pay too much attention—a directive that had come from John B. Church, the wealthy British merchant who in 1783 had hired Hamilton to be his agent in America.

      Although Hamilton was a relative newcomer to the city, his experience made him well suited to succeed in its commercial affairs. He had worked as a clerk in a St. Croix import-export house after being orphaned in 1768 and had run the firm’s headquarters for several months in 1771 when he was just sixteen years old. He therefore knew how to contract debt, pass bills of exchange, and negotiate transactions, making him intimately familiar with the skills needed to run the portfolio of a successful trading firm.

      In the early 1780s, Hamilton befriended two men who made a fortune during the Revolution: John B. Church and the merchant Jeremiah Wadsworth. When the duo left American shores for Paris after the war to buy goods and collect debts, they made Hamilton their go-to man in New York City. Being Church’s agent meant that Hamilton was charged with managing his business affairs, investing his funds, and acting as his legal representative. It also meant that he had a breathtaking amount of daily autonomy; in the fall of 1783, neither Hamilton nor John Chaloner, who, as Wadsworth’s top American agent in Philadelphia, was Hamilton’s counterpart, had heard from either of their principals since July.³⁴

      Being Church and Wadsworth’s agent also meant that, by late 1783, Hamilton was already thinking like a banker. Church and Wadsworth, after all, were no ordinary merchants. Among their many assets was the largest single bloc of shares in the Philadelphia-based Bank of North America, then the only bank in the nation. Hamilton was in charge of Church’s half, managing a combined investment of 202 shares worth just under $82,000. He was directly responsible for collecting dividends paid on Church’s bloc of shares and held a power-of-attorney that entitled him to cast shareholder votes in Church’s name, making him the proxy voice for one of the country’s most important merchant-bankers and a de facto stockholder in the bank itself.³⁵

      Despite all their influence within the Bank of North America, however, Church and Wadsworth were unhappy with how the institution was being managed. They suspected that bank president Thomas Willing was collaborating too closely with his onetime business partner Robert Morris, the financier and merchant who had been Congress’s superintendent of finance since 1781. When Willing announced in December 1783 that the bank was expanding and would put additional stock shares up for sale, it looked to Hamilton like Robert Morris was behind that plan, one that would cost his clients money and dilute their influence within the bank. Chaloner predicted the new stock would “lessen the dividend” paid to current shareholders—reducing the profitability of bank shares as an investment—and “throw it out of the power of a few individuals” to select directors and “control” the bank itself.³⁶

      Moments like this tested principal-agent relationships in the eighteenth century because the physical distance separating Hamilton from Church could be narrowed only by trust. Although Hamilton wrote to Church for instructions in December, his letter did not reach London until February. Church’s response, penned days later, did not reach New York until later in the spring. He and Wadsworth directed Hamilton to discreetly “strain at every nerve” to buy up the new shares in the Bank of North America.³⁷

      But during the intervening weeks when letters were in transit, Hamilton’s on-site autonomy and judgment led him to begin working on a different plan. In his December letter, Hamilton suggested to Church and Wadsworth that instead of tangling with Robert Morris and fighting a corporate structure rigged against them in Philadelphia, the partners should open a bank of their own in New York City. Such a bank would be unincorporated and have no shareholders. The only people with equity in the venture would be Wadsworth and Church; although this meant the bank would be smaller than the Bank of North America, the advantage would be that nobody else would have a say in its governance or management. The bank Hamilton offered to help set up would therefore be the partners’ own private commercial bank—their own personal “engine” of regulation and power in New York City.³⁸

      Church and Wadsworth envisioned their bank as an avenue to extract profits and deploy leverage in New York, and to maximize this effort they intended to restrict ownership in the bank solely to themselves. Therefore, when Stephen Sayre approached Alexander Hamilton in late 1783 to solicit Hamilton’s principals to join the land bank he would soon propose, Hamilton refused. Moreover, he did not tell Sayre that Church and Wadsworth were already nursing bank ambitions of their own. Recalling the encounter to Church, Hamilton seemed to not realize that Robert Livingston had partnered with Sayre; Church dismissively said he would be “sorry if Mr. Sayre should effect his Establishment” but “astonish[e]d if Men of Property are weak and credulous enough to give him their Confidence.”³⁹

      What Hamilton and Church did not yet realize was that those “Men of Property” would soon not need to have confidence in Sayre alone. Once Chancellor Robert Livingston and merchant John Stevens became the highly visible front men for the proposed land bank, they were the authentic men of property threatening Church and Hamilton’s plans.

      In response, Hamilton spent much of February working to “start an opposition” to what he called the “scheme” of the proposed land bank. There was “great reason,” he believed, to fear that the legislature would approve the land bankers’ request for both a corporate charter and a law declaring it exclusive, which would prevent competing banks from being incorporated. “For the sake of the commercial interests of the state,” Hamilton was making it his mission to “point out [the land bank’s] absurdity and inconvenience to some of the most intelligent Merchants,” some of whom eventually “saw the matter in a proper light” and joined in opposition.⁴⁰

      Hamilton also began a whispering campaign to “convince the [land bank] projectors themselves of the impracticability of their scheme.” In this he was aided by the land-bank promoters after they raised doubts about the propriety of mortgage-backed paper money, asking if buildings could be accepted as collateral if they were not insured against the risk of fire.

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