Two of our
founding fathers, Alexander Hamilton and Aaron Burr, clearly hated each
other. Most Americans are aware that, in
the summer of 1804, the two men fought a duel, in which Vice-President Burr
killed the former Secretary of the Treasury.
Very few are aware of how the feud between the two patriots started or
that there is still tangible evidence of that argument today.
Both men served
with distinction in the army during the revolution, and—for a while—were friends. Burr actually saved Hamilton's life at the
Battle of Monmouth Courthouse. Sadly,
this friendship did not last for long.
Alexander
Hamilton was the consummate politician, and was appointed Secretary of the
Treasury by President Washington, while Hamilton achieved miracles in
establishing a firm financial footing for the the new country. He also established the first political
party: The Federalists. It would be
correct to say that Hamilton also invented partisan politics, and this is what
started the bad blood between the two men.
Hamilton, with
the Federalists, established The First Bank of the United States. Chartered for 20 years, the bank was to
handle the monies of the new government, and both borrow and lend monies. Almost immediately, it was a powerful tool
for the Federalist Party and its supporters.
Just as quickly,
the opposition party—the Democratic-Republicans—hated the bank. The party's leaders, Thomas Jefferson and
Aaron Burr, fought against the creation of the bank and lost. The ultimate decision was George
Washington's, and the bank was chartered in 1791, so for years, it was the
500-pound banking gorilla in New York.
Between the New York branch of the national bank and Alexander Hamilton's
own bank, the Bank of New York, the Federalist party profited from the monopoly
on banking and successfully fought against the creation of any other new
banks. (These were the only two
banks in the both the city and state of New York).
In 1795, the
city of New York saw the onset of a Yellow Fever epidemic that would last for
eight years, killing thousands of people.
While every doctor in the city had a pet theory about the cause of the
dreaded disease, no one knew for sure, so wild theories were offered: swamp air, rotting coffee—a few crazy
dreamers even blamed mosquitoes! But
everyone could agree on one course of action:
the city's water supply had to be improved.
Aaron Burr,
Governor DeWitt Clinton, and few other members of the Democratic-Republican
Party proposed a solution: a modern
water supply company. They successfully
petitioned the state assembly to charter the Manhattan Water Company to supply
the lower half of Manhattan Island with water.
The company quickly sold $2 million in stock and set up business.
The company was
headquartered in a house at 40 Wall Street, and quickly purchased several miles
of logs, bored them out, and began using them as water mains. Wells had to be dug, so the company secured sites as cheaply as
possible—meaning that many of the wells were located in cemeteries, in
stockyards, and in feed lots. In
addition, while the company's business was to
supply water to the city, the wooden water lines were laid at first to only
the most affluent parts of town.
Considering the
rotting wooden pipes, the potentially tainted locations of the wells, and the
total lack of any purification treatment, it is amazing that anyone who
actually drank any of the water lived to tell about it! The few who did, usually added copious
amounts of alcohol to the water in the vain hope of making it safe to
drink. (I would love to say this was the
birth of the Manhattan cocktail....but it wasn't. While there are conflicting theories as to
the cocktail's origin, it appeared on the scene at least half a century after
the water company was chartered.)
Obviously, as a
"public utility", the Manhattan Water Company was not really
trying too hard. As a matter of fact,
from that original sale of $2 million worth of stock, only $100,000 was used
for the water company. A closer look at
the company's corporation charter will reveal what it was actually
doing.
Even today, when
a new corporation writes its charter application, it pretty much claims that
the company will be engaged in every sort of business imaginable, and then waits
for the chartering commission to whittle that down. In the case of the Manhattan company, Aaron
Burr had quietly included a clause that allowed the water company "to use
surplus capital for banking transaction."
In plain
English: besides selling water, the
"water company" could also be a bank.
Since it had
only used 5% of its capital for piping bad water to people who wouldn't drink
it, the remaining $1.9 million was used to start the bank. After ten years, the company sold its water
assets to the city for an additional $1.9 million.
Alexander
Hamilton was furious and never forgave Burr for ending his banking
monopoly. In 1804, when Burr ran for
governor of New York, Hamilton denounced him publicly. Insulted, Burr demanded an apology—which Hamilton
refused to give—so the argument was settled in the famous duel on July 11,
1804.
The Bank of the
United States didn't last much longer In
1811, when the charter came up for renewal, the Senate vote was tied, forcing
Vice-President Clinton to cast the deciding vote to deny the charter's renewal. (I'm sure that his being one of the
stockholder's in the Manhattan Water Company did not influence his vote.)
The Manhattan
Water Company continued as a bank, and since
its charter still called for it to sell water, it continued to offer
water for sale until late in the 19th century.
At board meetings, a pitcher of water sat symbolically on the table
(though as far as the company records show, no one ever sampled it).
By the turn of
the 19th century, the bank bought and merged with other banks, becoming (for a
while), the Chase Manhattan Bank with its headquarters still at 40 Wall Street
in the Chase Manhattan Building. Today,
the bank is simply known as the Chase Bank, and 40 Wall Street is now called
the Trump Tower.
And DeWitt Clinton was on the $1,000 bill from 1869 to 1880.
ReplyDeleteNot quite as absurd as putting Woodrow Wilson on the 100,000 dollar bill.
ReplyDelete