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when compared to the straightforward and familiar organization of the Bank of New-York.

      Even in this instance, therefore, the state was a central agent of change in shaping its political economy. By deferring action in 1784, legislators affirmed that they would continue to receive and consider future petitions, creating incentives for future mobilizations by would-be bankers and other politically entrepreneurial projectors, and shaping the behavior of the Bank of New-York itself. During the years when the bank lacked a charter, its directors ran the bank as a New York City–centric institution, one that was conservative and cautious out of necessity. Without the privilege of limited liability, shareholders were theoretically exposed to financial risks beyond the sum of their investment. For some investors, the risk of owning shares in an unincorporated bank was simply too large to bear. When the bank opened, one investor publicly but anonymously announced that he was abandoning the bank because, without a charter, shareholders “become to all intents and purposes Bankers and Copartners, and every man is liable (however small his share may be) for all the engagements of the Bank, to the extent of his whole fortune.” “If I wished to be a Banker,” he said, “I would chuse my own partners, connect myself with one or two persons of probity and substance, and, instead of leaving the choice to others, the management of the affairs, upon the risque of my whole fortune depended, attend to it myself.”⁷¹ Despite these risks, however, most shareholders did not adopt this view and no further public defections followed.

      During this period, some sought to exploit this vulnerability at the Bank of New-York to their advantage. Soon after the bank’s charter application stalled in the state legislature, Gouverneur Morris suggested that the New York directors consider gaining a charter by becoming a branch of the Philadelphia-based Bank of North America. But Alexander Hamilton and bank cashier William Seton refused the offer. Seton told Hamilton that he and Morris “differ[ed] widely in [their] Ideas of the benefits” that would come from any formal connection between the two banks.⁷² The Bank of New-York’s mission was to create liquidity, enabling merchants to have short-term credit and specie-backed paper banknotes widely accepted and even desired by creditors. When it opened its doors on 9 June 1784, the bank was already developing into an intensely local institution whose directors never petitioned for an exclusive charter or arrogated unto themselves either the name or role of an official state bank. Instead they focused on serving the domestic needs of the city’s commercial class; their constitution explicitly stated that the institution would not deal in foreign bills or notes, and it refused to accept mortgaged properties as collateral.⁷³ Once the president and directors of the bank took oaths before the mayor of New York City on 22 May 1784, pledging to “conduct the business … to the best of their knowledge and abilities for the interest and benefit of the Proprietors,” merchants across the city began announcing one by one that they would accept the bank’s notes.⁷⁴ On 3 June, Thomas Hazard & Co. signaled that the bank’s notes would be welcomed along with Morris’s notes, Bank of North America notes, beeswax, barrels of beef or pork, pot or pearl ash, or “cash”—meaning gold or silver. A week later, the firm of Morton and Horner’s began selling printed tables calculating the rates at which British, French, and Spanish gold coins would be paid at the bank.⁷⁵ Had the bank’s directors been striving for precision, they would have renamed their institution the Bank of the City of New-York.

      Although the internal deliberations of the bank’s directors are unknown during this decade, its ledgers reveal that the institution offered $1.3 million in discounts in its first year.⁷⁶ Most directors used the advantage of their positions to obtain credit; the vast majority of the money loaned by the bank went to people beyond this small circle, however, enabling the institution to attract support among onetime land-bank promoters and skeptics, along with “radical” merchants who were quickly de-radicalized by experiencing commercial banking firsthand. Mechanics, too, found the bank’s directors supportive of small-scale manufacturing enterprises in the city.⁷⁷ The bank also integrated itself into the political economy of the city and state, becoming a lender to the municipal government, an underwriter for the construction of a new City Hall, and eventually a lender to the state government—all while it was an unchartered institution, the petitions of which were routinely rejected by state legislators whose financial fortunes were too geographically distant from Manhattan to ensnare them in the bank’s credit network.

      The founding of the Bank of New-York, therefore, inaugurated a long-term investment in the economic and political structure of New York by creating a mixed-economy institution where the dividing line separating private capital from public authority was consistently and sometimes deliberately blurred. At first, lawmakers jealously guarded their power to grant charters and print money. But as bankers begged to be recognized and regulated and as they demonstrated a capability to meet credit demands while serving as useful partners to governing institutions, it became clear that the interests of lawmakers and bankers frequently intersected. Although the Bank of New-York’s coalition had initially been a hasty union of patriots and Loyalists, those distinctions gradually eroded within a matrix of credit obligations and shared dependency. The bank raised the risk tolerance of those who used its paper in commercial transactions, making them familiar with printed money, interest, and timely repayment. It demonstrated the value of coalition building and the ways in which it could fail legislatively while remaining financially viable. And most important, the founding of the bank facilitated subsequent private speculation and investments in the infrastructure of the city and state; its notes came to represent a durable financial investment in the long-term political and economic viability of the polity, which would rise or fall on the strength of the regional economy it supported. It created an incentive for citizens to maximize their geographical, commercial, political, and strategic advantages by investing money—their most mobile asset—in both short-term commerce and longer-term fixed assets of government policies and public infrastructure.

      Had they solely wanted to make profits in a mercantilist system, the cadres of New York bank petitioners and promoters could have attempted to create incorporated trading companies—American versions of the British East India Company and the Dutch West India Company. Had they wanted to integrate Tory merchants into the Manhattan economy, they could have offered them partnerships in new firms. Had they wanted to speak out against anti-Tory legislation, they could have sought elected political offices. Eager to address each of these agenda items in commercial, social, and political contexts, however, the city’s pro-bank promoters and petitioners—groups that included elite landowners and real estate speculators, established and neophyte merchants, and arriviste attorneys—decided, independently of one another, that their best shot at broadening the city and state’s commercial horizons and settling the Revolution on acceptable terms was to start an incorporated bank. Banking, therefore, was an intensely political activity.

      During the next fifteen years, Robert Livingston watched the Bank of New-York offer a stable source of credit to New Yorkers, growing its base of supporters in proportion to its capital. In that time, banking became ever more fundamental to his understanding of politics. Those who wielded credit wielded leverage. And by the time Livingston and other Republican allies were looking for a way to consolidate and discipline their rival political factions in the late 1790s, it was clear to them what kind of institution would be most useful in their quest: an incorporated bank.

      CHAPTER 2

      “An Enlarged American Scale”

      Incorporated banking was just one activity that interested early American political entrepreneurs. The state had as its sovereign power the ability to bestow a charter, monopoly grant, or other exclusive privileges on any individual or coalition. Among politically connected would-be investors and directors with financial and political interests outside Manhattan, transportation ventures were often just as attractive as financial ones. In fact, to the extent that internal-improvement promoters from upstate New York favored the chartering of banks, it was often with an eye toward steering bank capital and credit toward the construction of turnpikes, canals, and other transportation projects that would make upstate land more desirable and salable by connecting it to marketplaces.

      The

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