Building the Empire State. Brian Phillips Murphy
wonder Livingston feared that “hotheaded” Whigs would paint him and his associates as “suspected.” If anyone found out about his partners’ plans and his own personal duplicity, his credibility could be devastated.26 As reckless as these actions might seem, Robert Livingston took them as a man of sound mind. He was a political entrepreneur and an aristocrat operating in New York during the immediate months that followed the end of the Revolution—a man who felt at liberty to conduct business as he saw fit, negotiating and negating agreements that privately contradicted his public statements. Perhaps because he did not feel that Stephen Sayre was one of his peers, Livingston considered their arrangements to be provisional. He saw himself as a man without boundaries.
Yet Livingston was about to learn that both his name and the pre-Revolutionary habits and impulses with which he had been raised would prove to be insufficient in helping him successfully navigate the political economy of post-Revolutionary New York. Only days after sending his letter to Peter Van Berckel, Livingston received a reply. In it, the Dutch minister declined his request for credit. He simply did not have “time enough to write to my friends” in Amsterdam right then. Then Van Berckel revealed that he could not partner with Livingston since he had already “thought it prudent to join with gentlemen” who were pursuing a similar scheme to invest in Toryowned New York properties. They included Gouverneur Morris, New York land baron Philip Van Rensselaer, and Robert Morris. These men, the minister explained, had “experience and knowledge” and his “engagement” with them “put out of any power to do for another what I want to do for myself.” Van Berckel closed his letter by suggesting that Livingston lift his request for silence; he wanted to know if the chancellor would be willing to join with them to everyone’s “mutual advantage.”27 In reply, Livingston had no choice but to grudgingly “congratulate” Peter Van Berckel for making allies with men of “judgment & integrity.” He hoped, however, that their “objects may not be the same” as his, and steered them away from “this Island” of Manhattan toward “improved and unimproved Land in other parts of the State.”28 Thus it turned out that Livingston would need his partners after all. Without credit from Van Berckel or Jay, he also needed a new plan.
It was at this moment that Livingston decided to try to become a banker. A corporation offered the institutional advantage of installing himself and his partners at the center of their real estate speculations, and an incorporated bank—particularly a land bank—would enable him to raise outside investment capital and convert his personal land holdings into cash.
Although Livingston’s shift of priority from real estate speculation to bank proprietorship had taken place in just under two weeks and smacked of pragmatic opportunism, it nevertheless forced him to recalibrate both his goals and his stated agenda. When dealing solely with private partners, the chancellor had mainly expressed interest in the private profits to be had in real estate speculation. But once he began pressing for a bank charter, Livingston began highlighting the civic benefits such an institution could deliver to the city and state.
Newspaper advertisements placed in the 12 February 1784 editions of the New York Independent Gazette and the New York Packet claimed that the land bank would be both a “place of safety for cash” and a tool that “renders aid to merchant and tradesman.” Livingston and his partners pointed to Venice, Amsterdam, London, and even Philadelphia in its “infancy” as places where “great profits” had rewarded the “proprietors” of banks and “supported and created a system of credit extremely advantageous to … trade and revenues.” They suggested the bank could reconcile Whigs and Tories by tying the two groups together through business relationships and pushing back against aggressive anti-Tory legislators. It was “universally acknowledged,” they claimed, that there were “great benefits to commerce and society at large, to be derived from well regulated BANKS, especially in republican governments, where the hand of arbitrary power is restrained by law.” In addition, banks created order in commerce and society by “compelling society to punctuality in contracts,” enabling people to “make fresh ones.” They made it possible to do “more business in less time and with greater facility.”29
These public statements about banking were not about profits; they offered a prospectus of civic benefits, reflecting an awareness that the public good would have to be served by the state’s first incorporated bank. Livingston, the consummate political operator and entrepreneur, simply did not feel that it was appropriate to seek a corporate charter to serve his private ambitions. There was something inherently transactional about applying to the state legislature for a bank charter. Even Robert Livingston felt that it was appropriate to place the public character of that institution at the center of his mobilization efforts. As an institutional extension of the state, a bank would be an agent of regulation, making commerce orderly, monitored, and efficient. And as an institution operating within the apparatus of the state, a bank could act as a safeguard against abusive legislators. In this vision, there was no conflict between incorporated banking and the flowering of a democratic republic; banking, in fact, promised to stabilize the regime. Incorporated banking was therefore being sold to the investing public as a commercial activity that had an inherently political character, and bank directors would be individuals who would wield both political and financial power within the early republic’s economy of influence. For these reasons, the Livingston-backed proposal was to be called the “Bank of the State of New York,” soliciting investments from an office at No. 6 Wall Street.
According to published details, the bank was to be managed by six directors who would be elected once the bank recruited its first 300 subscribers.30 One thousand shares would be available for purchase; each was to cost $750, with one-third of that paid in cash and the remainder pledged in “landed security”—mortgaged properties in New York or New Jersey that would be credited for two-thirds of their assessed value. Shareholders would be allowed to borrow money from the bank, up to one-third of the assessed value of the lands they mortgaged. The bank would therefore enable land-owners to transform their properties into circulating, liquid money. All told, the bank’s credit would be based on assets worth $1 million: $250,000 in gold and silver specie and $750,000 in mortgaged land titles. The bank promoters knew this investment would present risks to shareholders, but they promised that investors’ other assets would be shielded in the event of the bank’s failure; no subscriber was “liable for debts beyond his stock.” Moreover, no salaries would be paid to the directors or clerks of the bank until shareholders were first paid a dividend.
To observers, it should have been obvious from the 12 February newspaper advertisements that the land-bank proprietors intended to forge a formal relationship with the New York state government. By describing the bank’s potential to serve a public good as one that depended on them being “well regulated … especially in republican governments,” the promoters anticipated that state lawmakers would eventually be forced to author a set of legal rules to govern and guide its operations. Of course, the bank’s directors would presumably wield a heavy hand in shaping such regulations. Once codified in state law, the Bank of the State of New York would then become an institution designed to not only reflect the interests of the state’s largest landholders and specie-rich merchants; it would also formally structure that interest, consolidating its membership into a corporate institution that—with shares priced at $750 apiece—would speak in the voice of its wealthiest owners.
From the start, then, it was understood that the land bank was not an apolitical entity that spontaneously sprang forth from the private marketplace; instead, it was an institution that deliberately mixed interests—landed and mercantile, established aristocrats and nouveau riche arrivistes, and private citizens along with office-holding public servants—to stockpile financial as well as political capital. And there, from atop the perch of one of the only incorporated banks in the western hemisphere, Robert Livingston and his partners would be able to influence the hearts and minds of the state and nation’s top policy makers by dispensing a much-desired but limited commodity: access to credit.31
But as they read the plans for the land bank, New York City merchants began to appreciate just how much the land bank would privilege the interests of landowners over others. Land-bank shares would have to be purchased in part with mortgaged lands, therefore merchants who did not own real estate would be ineligible to buy shares unless