Building the Empire State. Brian Phillips Murphy
course. Moreover, none of the state’s existing institutions had the capacity to offer the favors, privileges, and opportunities that could reorganize the rivalries and contain the animosities threatening to destabilize the infant republic. As he watched the local economy of New York City deteriorate, Robert Livingston ridiculed the lack of money and credit in the city as “republican economics.” Having driven Tories and their capital abroad, the chancellor feared that New York would eventually have to go abroad in search of funds to operate its state government.
Each pro-bank mobilization therefore sought to reach beyond rhetoric by launching an institution capable of offering financial incentives to Tories and Whigs who found common cause with one another, replacing mutual hostilities with transactional trust. Livingston thought a bank would aid New Yorkers in financing their own future and secure the confederation among the new states, “[helping] cement a union that separate [state] debts would weaken.”12 Alexander Hamilton and a group of Manhattan merchants shared similar views regarding the potential for commercial relationships to mend divisions between rival parties. Hamilton proposed that different interests not merely acknowledge mutual ambitions and symbiotic relationships but act on them, too. A bank could fulfill his wish to “make” durable alliances by encouraging Tories and Whigs to “participate” in the “privileges” of the new regime while resetting peacetime trade with Britain.13 The pro-bank activists of 1784 therefore considered commercial and business relationships to be essential features in the civic ecology of a stable and thriving state as well as a union of states. In this way, economic materialism did not merely peacefully coexist alongside democratic political institutions; instead, the two seemed to be fundamentally linked. Business interests tamed the passions and rivalries that deference, aristocracy, and politeness could not master. If the state created the market, the market in turn stabilized the state and gave it the capacity to govern.
Beyond resuscitating the local economy and strengthening the nation’s prestige and power abroad, an incorporated bank would strengthen bank petitioners’ hands in New York State’s political arena. In replacing animosities with alliances, bankers would constrain the ability of New York politicians to continue to exploit anti-Tory sentiment among voters. On a practical level, Tory bank clients would quickly find themselves ensnared in legal contracts and credit relationships, making future legislative assaults more difficult to justify and frustrating to enforce. A Tory-Whig bank would place Tory capital beyond lawmakers’ reach by comingling Tories’ “Loyalist” assets and capital with those of “patriots,” thereby sheltering them from confiscation or seizure. Even as they were being asked for charters of incorporation, therefore, lawmakers were being kept in the dark about one of the true motives behind the pro-bank mobilizations of 1784: an incorporated bank, clothed in the legitimate authority of the state, would become an institutional counterweight to the state legislature. New York officials were being asked to create an institution that would be used to undermine their own governing agenda.
The competing coalitions of 1784 shared another reason for wanting to found a bank in New York: neither the state nor city already had one. Although competition between banks was feared as a potentially destabilizing rivalry, the absence of institutional banking in New York meant that merchants and mechanics alike lacked a stable supply of money and credit, creating logistical challenges for individuals engaged in all kinds of transactions, from buying flour to paying taxes. As Alexander Hamilton argued in a 1783 letter to New York governor George Clinton, without an “incorporation of creditors in the nature of banks” people would be “deprive[d]” of “the benefit of an increased circulation” and would, “of course … [be] disable[d]” from “paying the taxes for want of a sufficient medium.” The consequences were both local and national: a lack of sound money and available credit constrained local commerce and injured the “national faith honor and reputation” of the United States as a whole. “It will be a shocking and indeed an eternal reproach of this country,” he wrote, “if we begin peaceable enjoyment of our independence by a violation of all the principles of honesty & true policy” because of an inability to conduct basic exchanges.14
Yet despite their commonalities, the coalitions who petitioned the New York state legislature for a bank charter in 1784 had inherent differences. Each proposed to serve different interests by prioritizing different functions. The Bank of New-York opened as a money bank, meaning that its paper banknotes were backed by deposits of gold and silver coins called specie. Such a bank principally supported merchants engaged in importing goods to the city, investing in small manufacturing enterprises, and granting credit to each other and a limited circle of dependents. By contrast, the Livingston-backed Bank of the State of New York would be a land bank: its paper banknotes were to be backed with a portfolio of mortgaged lands as well as coins. Such a bank was designed to take advantage of a short-term depression in the city’s real estate market and provide a vehicle for converting existing land holdings into circulating money. Livingston hoped it would become a deposit institution for governments, churches, and charities, enabling the bank to pay regular dividends on its stock and become a profitable investment for its shareholders. Yet it would also inevitably and primarily benefit landowners.
These distinctions are important. By proposing to tether paper banknotes to different forms of collateral, bank petitioners presented lawmakers with a choice about the future direction of the state’s economy. Determining which type of capital—land or coins—was more suitable as a basis for a financial institution’s operations would also determine what interests—landed or mercantile—would gain access to credit in the near future. This choice carried long-term implications for what kinds of economic activities would take root in New York and which professions—landlords or merchants, for example—would make decisions about how to allocate resources and dispense credit in and around the state’s commercial hub of New York City. Therefore, bank coalitions were not simply asking lawmakers to award a bank charter to their favorite interest. Much more was at stake. They were asking the legislators to select a particular kind of bank and—by extension—a particular form of capitalism.
These were weighty options, but they were being laid before New York legislators at a moment when it seemed like lawmakers might welcome a momentous opportunity to shape the state’s future direction by incorporating its first bank. Despite Robert Livingston’s complaint that the state had been stingy in issuing corporate charters, New York City merchants were, in early 1784, already petitioning the state legislature to reintroduce the corporate form to the state’s institutional landscape by reissuing a charter of incorporation to the Chamber of Commerce.15 This move came on the heels of lawmakers intervening in a Whig–Tory dispute among the parishioners of Manhattan’s Trinity Church in late 1783, when the state legislature overturned the election of a Tory rector by opening the church’s 1696 charter of incorporation to vest governing authority in a new state-created board of nine trustees.16 Corporate charters were exceedingly rare in New York in the 1780s, but no more so than in the rest of the nation.17 And although the process of wrangling an act of incorporation from a legislature was no easy task, once state lawmakers had demonstrated their willingness to receive and consider petitions concerning corporate privileges, they created an incentive for new interests to mobilize and lobby for similar benefits. In nearby Philadelphia, some of the city’s wealthiest merchants had recently begun organizing a second bank in their city that would, in the words of Gouverneur Morris, be a “coalition” of “violent Whigs and violent Tories.” Although they had “turned their Backs upon every Body else about two years ago,” these patriots and Loyalists “each performed a Semi Circle and met at the Opposite Point.” New Yorkers need only read their newspapers to learn of these events.18
Therefore, despite the anti-bank and anticorporate suspicions and rhetoric permeating the new nation’s political culture, it was reasonable for New York’s bank promoters in 1784 to think that their state legislature not only could be nudged toward chartering an incorporated bank but also might have actually wanted to receive and approve such a proposal.19 The push for incorporated banks was encouraged by legislators who collaborated with petitioners to define an economy of influence. This helps explain the paradox that emerged in New York City’s (and New York State’s) political economy during the first six months of peaceful American independence: in the immediate aftermath of a revolution waged against monarchy, monopoly,