Building the Empire State. Brian Phillips Murphy
company and that once “such houses … are insured, [they] will be of course, received as security in the Bank.”41 This statement must have shaken confidence in the land bank’s backers, sparking investors’ imaginations to begin asking what other risks awaited them besides fire? The land bankers had clearly not thought through the consequences of their plans and had now committed to founding and managing not one but two new institutions in the city: a bank and an insurance company.42
Yet even as support for a land bank eroded in New York City, its prospects nonetheless seemed robust in the state capital. According to Hamilton, Robert Livingston “had taken so much pains” to cultivate support among landowning legislators—Hamilton called them “the country members”—that he feared they were coming to see the land bank as “the true Philosophers stone that was to turn their rocks and trees into gold.”
Hamilton decided he had to block the land bank once and for all, and as he peeled away supporters he hoped he could convince them to rally around the bank he hoped to found on behalf of Church and Wadsworth, who were prepared to sell their Philadelphia bank shares and reinvest the profits in New York.43
The Commercial Bank
Up to this point in February 1784, the one group with the most at stake in Manhattan’s bank machinations had been sidelined: the city’s merchants.
From the periphery, they watched as would-be land bankers sketched an institution incapable of meeting their credit and commercial needs while seeking an exclusive charter of incorporation from the state legislature. At the same time, they learned that Alexander Hamilton’s elite patrons were planning to open a private bank, subjecting the whole of their community to the whims and wills of two faraway and well-connected competitors. The former threatened to place landed aristocrats at the head of the state’s first and only bank; the latter would give John B. Church and Jeremiah Wadsworth a unique capacity to distort New York’s political economy. In response to these prospects, New York City’s mercantile community began countermobilizing by drawing up their own plan for a bank. Of the three proposals, theirs would be the only bank to actually open (and survive to the present day): the Bank of New-York.
The first public sign of the merchants’ organized resistance appeared in the 23 February edition of the New York Packet. A letter from “A Merchant” announced that a proposal would soon be “delivered … for the establishment of a Bank on the most equitable and generous footing” to be called “the Monied Bank of New-York.” The writer then turned to dissecting the flaws in the proposed land bank. Although he agreed with the land bankers’ claims that banks in general could deliver “great benefits,” he believed that “success … depend[ed] on the nature of [its] foundation.” The Livingston-backed land bank was flawed, he explained, because it was “clearly founded” to “[add] consequence to the landed interest” in New York. “The language” of Livingston’s prospectus assumed that “commerce is dependent on agriculture” and therefore proceeded as if “the landed interest must be of more consequence to the society than the commercial.” In the writer’s view, however, that “idea is absurd.” Holland, after all, needed “no landed interest to support her.” Instead it was “commerce, the first spring of the whole machine,” that found a market for “the fruits of agriculture.”
In addition, the writer alleged that the land bank had been designed to benefit particular landholders, including Robert Livingston. He believed that even before its subscription books were officially opened to the public, the land bank’s board—“its Governor, Directors, and Cashier”—were “already in nomination.” He had been told, he reported, “one gentleman has been induced to subscribe to four shares, as he is intended for a director.” The mercantile letter writer hoped the land bankers’ petition would “meet with the fate it merits,” because “free people” had no need to show “such partiality,” particularly when no “thing was known before in a Free Country.” Even the Bank of England, “that source of wealth,” did not have “an exclusive privilege,” and the “resentment of the Public will not be less than their surprize” if the New York legislature granted Livingston’s request for an exclusive charter of incorporation—one that would not only establish the land bank as a corporation but also bar any other bank promoters from receiving a corporate charter for years or even decades to come. A more equitable alternative, the “Merchant” promised, would materialize “shortly.”44
Three days later, on 26 February, retired major general and current state senator Alexander McDougall presided over a meeting at the Merchants Coffee-House where “merchants and citizens … unanimously” vowed to form a bank of their own. The “Bank of New-York,” as it was to be called, would be a money, or commercial, bank with paper banknotes backed by gold and silver coins. The bank would make short-term loans called discounts at a 6 percent interest rate. There would be one thousand shares of stock for sale, priced at $500 each—half of what land-bank shares would cost a merchant. Shareholders would be expected to pay the first half of their stock subscription at the bank’s first meeting; they would have to pay the second half six months before being eligible to receive the bank’s promised twice-yearly dividends. The bank’s officers—a president, twelve directors, and a cashier—would be chosen by a plurality of votes cast by shareholders in elections designed to favor smaller investors. Each shareholder would receive one vote per share for their first four shares, shareholders with six shares would command five votes, those with eight would have six, and those with ten or more could cast seven. Therefore, no shareholder could cast more than seven votes no matter how large their investment. With a twelve-member board of directors (twice as many as the land bank), an electoral system that maximized the influence of smaller investors, and a set interest rate, the bank’s structure explicitly discouraged the hoarding of shares by people trying to take over the institution or seek special, more favorable borrowing terms.45
In these ways, the Bank of New-York was designed to answer the perceived financial flaws in the proposed land bank and the elite dominance of the Church-Wadsworth private commercial bank. Although any bank that backed its paper with specie would naturally be more oriented toward mercantile interests, the Bank of New-York promised credit to a wider community of less wealthy, newly established merchants than those who dominated the city’s older transatlantic trading houses. Each of the six men who co-signed the advertisement announcing the bank’s details were “merchants,” a label that seems superficial when one considers the varieties of political experience they brought to bear in making their proposal. Most had held public office in the provisional state government or had served on local committees during the Revolution; one was a sitting city alderman. A person who wanted to subscribe for Bank of New-York stock would have a choice to do so at John Alsop’s law office, Robert Bowne’s printing and stationery shop, or Nicholas Low’s mercantile firm. On the whole, these promoters were younger, more directly engaged in politics, and less economically secure than many of their social and economic betters, also called “merchants”; only one of the six was established enough to have been a member of the city’s Chamber of Commerce before the war—the remaining five were still climbing toward that status. The Bank of New-York was therefore a political mobilization led by political entrepreneurs seeking state support for a financial institution capable of representing the interests of a broad spectrum of the city’s commercial sector.
Two interests of that commercial sector in Manhattan were Tory-Whig reconciliation and revolutionary settlement. The bank supporters’ selection of Alexander McDougall as their nominal leader was meaningful on this front. He had been one of the most radical merchants in the state before war, and now at the age of fifty-two was one of the city’s senior statesmen and its current state senator. McDougall therefore had political clout. More important, he had been one of the foremost advocates for postwar reconciliation in the city.
When elections were held in the fall of 1783 to choose the members of a provisional state-level government that would transition the city from British occupation to American independence, a broadside was printed to target the city’s working-class mechanics—among them, blacksmiths, silversmiths, and hatters. The author, using the name “Cincinnatus,” had cautioned that a hostile climate for Tories would ricochet back on the people