LITMIR.BIZ

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“violent papers” were encouraging a “spirit of [Tory] emigration,” observed Hamilton. “Many merchants of second class, characters of no political consequence,” were “carry[ing] away eight or ten thousand guineas” from the “popular frenzy” in New York—a loss of capital he predicted “our state will feel for twenty years at least.⁷ Writing from Paris to raise alarm with both Livingston and Hamilton, John Jay hoped the “indiscriminate Expulsion and Ruin” of Tories would not come to pass; he reported that “the Tories are almost as much pitied in these Countries, as they are execrated in ours.” “Violences and associations against the Tories pay an ill compliment to Government and impeach our good Faith,” he wrote. Events in New York were being read as a sign of “unnecessary Rigour and unmanly Revenge without a parallel except in the annals of religious Rage in Times of Bigotry and Blindness.” Whigs were “carry[ing] the Matter too far.” Their actions were “impolitic as well as unjustifiable.”⁸

      In the weeks that followed the British evacuation, Robert Livingston, Alexander Hamilton, and a cohort of like-minded, self-styled moderates tried to assuage Whig-Tory tensions in the city of New York by appealing to social ties, crafting legal arguments in favor of revolutionary settlement, and attempting to influence the direction of the city and state’s politics. When those tactics failed, they separately decided that their best chance for success was to found a bank.

      In the first three months of 1784, three distinct coalitions began publicly organizing themselves to launch what they hoped would become the first incorporated bank in the state of New York. Each group made it far enough to file petitions with the New York state legislature seeking charters of incorporation. Two of the groups publicly solicited stock subscriptions from investors in advance of those filings. And even after the legislature declined to grant any of their requests for a charter in 1784, one faction went ahead and opened a bank anyway: the Bank of New-York. The directors of that institution persistently filed incorporation petitions throughout the remainder of the decade.

      This chapter focuses on illuminating the appeal of incorporated banks at this moment of history in the early American republic. After all, given the avenues open to elite New Yorkers in 1784—from launching a new social club or society to replicating one of the Revolution’s many semi-official committees of notables—why create a bank? And why not simply form a private bank rather than seek state permission for an incorporated one?

      On its face, the corporate form is a useful legal instrument that enables a rotating group of people to hold common property over long periods of time and to be a fictitious “person” who could sue and be sued in court as a single entity. But in practice the corporation is a vehicle for the accumulation of capital and influence. The extent of that influence is determined by the underlying purpose and function of the corporation at hand, and a bank’s essential institutional function is to amass capital and offer credit. As institutions that unite human, financial, and political capital under one roof, banks are different from ordinary firms that buy and sell goods. As a route to participation in the Atlantic economy that would reestablish New Yorkers’ access to British and Continental credit, an incorporated bank would present a familiar and reassuring façade to foreign creditors, which would inspire confidence and initiate mutually beneficial transatlantic mercantile alliances.

      At the heart of those alliances were transactions; banks could enable them by connecting borrowers with lenders. Yet because a bank’s resources were finite, its directors and managers had no choice but to exercise discretion in deciding who was eligible to gain access to that credit and the institution’s other services. Each time the bank extended itself it was taking a risk; personal relationships therefore were important factors in determining who received credit. Outside the bank’s offices, any person accepting a check drawn on a bank as a substitute for gold coins or paper money had to make a similar set of judgments: about the person passing the check, the name of the person on the check itself, and the bank’s ability to pay that check. Banks, then, were not primarily vaults or even offices. By printing reliable paper money and checks that facilitated the buying and selling of goods and services, they provided a crucial medium of exchange in the local and regional economy. And by lending to borrowers and accepting capital from creditors, banks created institutional networks of obligation and dependence.

      For the economically and politically ambitious, no institution in the early American republic offered a more tempting array of advantages than a bank. Bank proprietors and clients were dealmakers and brokers in opportunity, making fortunes for those fortunate enough to be members of its network. The act of granting and tapering access to credit while excluding others from having it is what gives bankers their power; that access was preferential and revocable, enabling bank directors to shower preferred treatment on favored clients, projects, or politics. Banks therefore shape their clients’ interests, and if a bank is a lender to local or state government, its directors calibrate the capabilities and interests of those public entities as well. The existing banks familiar to former British colonists in the late eighteenth century—namely, the Bank of England in London and the Bank of North America in Philadelphia—were quasi-independent arms of the state; no other type of institution was more likely to be regarded with skepticism, suspicion, and outright fear by the public and elected officials alike.⁹

      Figure 1. Partly printed check endorsed by Aaron Burr, 24 April 1788. This is an example of an early American bank check issued by the Bank of New-York. Note that because there was only one bank in New York City, the check refers to the Bank of New-York simply as “the Bank” Source: Private collection.

      Understanding the utility of banks and the opposition they provoked is crucial to understanding the development of this era’s political economy, but despite the multiple efforts launched to win bank incorporation charters in New York in 1784, the ferocious competition for that prize has all but vanished from modern accounts of this period.¹⁰ Histories of early American banking instead tend to settle their gaze on just one of these associations: the Bank of New-York. The reasons are understandable: it was the only one of the proposed banks to open its doors in 1784, it remained the city’s only bank until a branch of the Bank of the United States opened in 1791, and it operated under its own name until a 2007 merger. In addition, the bank has one particularly prominent name tied to its origin story: future Treasury secretary Alexander Hamilton. His role in the bank’s founding and early operations invites observers to view it as an intellectual antecedent of his political and economic philosophy in establishing the first Bank of the United States and a securitized, tradable national debt. Before one can understand Hamilton, the thinking goes, one must study “his” bank.¹¹ Yet the Bank of New-York’s early years—the seven years it operated before it was incorporated—are often ignored in studies of early American finance that rely on quantitative data. The bank did not begin keeping a single set of archived account books or minutes of the meetings of its board of directors until the bank was chartered; therefore, the precise details of its finances remain opaque and unknowable. Approaching the Bank of New-York through Hamilton can be more distorting than illuminating. Hamilton’s position was initially tangential and his influence within the bank was diluted by other directors and shareholders. He owned, after all, just one symbolic share of its stock. Acting as an agent for two wealthy out-of-town merchants, Hamilton had initially planned to help them found their own bank. Once he learned that a coalition had already met to organize a commercially oriented bank, he joined that group and was welcomed by promoters who were as eager to gain access to two large investors as they were to Hamilton’s thoughts on finance. Therefore, studies of New York banks that fixate on Hamilton’s role at the Bank of New-York risk overstating his indispensability and overshadowing the institution’s more authentic originators: New York City merchants and the competition for charters in New York City during the winter and spring of 1784.

      The various bank cohorts in New York in 1784 were united by motivations to ameliorate ongoing tensions between New York’s Whigs and Tories by creating a venue for what Robert Livingston called “social intercourse” that would “wear down mutual prejudices.” The bank promoters agreed that anti-Tory politics were blinding both lawmakers and voters to the obvious contributions Tories could make to the city and nation’s commercial and political

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