underwriter for the construction of a new City Hall, and eventually a lender to the state government—all while it was an unchartered institution, the petitions of which were routinely rejected by state legislators whose financial fortunes were too geographically distant from Manhattan to ensnare them in the bank’s credit network.
The founding of the Bank of New-York, therefore, inaugurated a long-term investment in the economic and political structure of New York by creating a mixed-economy institution where the dividing line separating private capital from public authority was consistently and sometimes deliberately blurred. At first, lawmakers jealously guarded their power to grant charters and print money. But as bankers begged to be recognized and regulated and as they demonstrated a capability to meet credit demands while serving as useful partners to governing institutions, it became clear that the interests of lawmakers and bankers frequently intersected. Although the Bank of New-York’s coalition had initially been a hasty union of patriots and Loyalists, those distinctions gradually eroded within a matrix of credit obligations and shared dependency. The bank raised the risk tolerance of those who used its paper in commercial transactions, making them familiar with printed money, interest, and timely repayment. It demonstrated the value of coalition building and the ways in which it could fail legislatively while remaining financially viable. And most important, the founding of the bank facilitated subsequent private speculation and investments in the infrastructure of the city and state; its notes came to represent a durable financial investment in the long-term political and economic viability of the polity, which would rise or fall on the strength of the regional economy it supported. It created an incentive for citizens to maximize their geographical, commercial, political, and strategic advantages by investing money—their most mobile asset—in both short-term commerce and longer-term fixed assets of government policies and public infrastructure.
Had they solely wanted to make profits in a mercantilist system, the cadres of New York bank petitioners and promoters could have attempted to create incorporated trading companies—American versions of the British East India Company and the Dutch West India Company. Had they wanted to integrate Tory merchants into the Manhattan economy, they could have offered them partnerships in new firms. Had they wanted to speak out against anti-Tory legislation, they could have sought elected political offices. Eager to address each of these agenda items in commercial, social, and political contexts, however, the city’s pro-bank promoters and petitioners—groups that included elite landowners and real estate speculators, established and neophyte merchants, and arriviste attorneys—decided, independently of one another, that their best shot at broadening the city and state’s commercial horizons and settling the Revolution on acceptable terms was to start an incorporated bank. Banking, therefore, was an intensely political activity.
During the next fifteen years, Robert Livingston watched the Bank of New-York offer a stable source of credit to New Yorkers, growing its base of supporters in proportion to its capital. In that time, banking became ever more fundamental to his understanding of politics. Those who wielded credit wielded leverage. And by the time Livingston and other Republican allies were looking for a way to consolidate and discipline their rival political factions in the late 1790s, it was clear to them what kind of institution would be most useful in their quest: an incorporated bank.
CHAPTER 2
“An Enlarged American Scale”
Incorporated banking was just one activity that interested early American political entrepreneurs. The state had as its sovereign power the ability to bestow a charter, monopoly grant, or other exclusive privileges on any individual or coalition. Among politically connected would-be investors and directors with financial and political interests outside Manhattan, transportation ventures were often just as attractive as financial ones. In fact, to the extent that internal-improvement promoters from upstate New York favored the chartering of banks, it was often with an eye toward steering bank capital and credit toward the construction of turnpikes, canals, and other transportation projects that would make upstate land more desirable and salable by connecting it to marketplaces.
The scale of potential profits to be generated by transportation development in northern and western New York was large enough that contemporaries found potential profits difficult to calculate. By one measure, New York’s state government in 1790 possessed $75 million in unsold public lands. Meanwhile, in the western part of the state two Massachusetts merchants headed a syndicate that either owned or owned the right to buy from Iroquois tribes six million acres of land that stretched to Lake Erie, for which they had paid $1 million in 1788.1 For all the vastness of these expanses, however, the most valuable land in the state was concentrated along a narrow ribbon: the banks of the Hudson River. This was not because soil elsewhere was infertile or unusable but because it could not be reached. All but the most durable agricultural products shipped to New York City or Albany from faraway farms spoiled before arriving or became so expensive because of shipping costs that it was impractical to attempt such trade. The only way to render such distances irrelevant was to increase the speed, quantity, and transparency of exchanges by altering both the physical and the institutional landscape of the state.
Although people living far from cities were most directly injured by this status quo, political entrepreneurs who speculated in upstate and distant land purchases were better positioned to persuade state lawmakers to adopt remedies. In the early 1790s, a coalition of politically connected land speculators and bank promoters lobbied New York’s legislature to incorporate two companies that would be charged with building canals northward and westward from Albany. At the time, the city itself had a population of just several thousand people. It was situated, however, in Albany County, one of New York’s most populous, with more than 75,000 inhabitants.2
These canal projects promised almost immediate benefits: just the prospect of slashing shipping costs could reward land speculators with speedy profits as soon as they could unload their holdings onto ambitious upstart farmers. For some promoters and lawmakers, longer-term interests were also at stake: a desire to consolidate the vast territory of New York State by populating it with settlers, some of whom would dispossess Iroquois Indians and connect New Yorkers across the state’s spanning stretches. There were also nationalist reasons to support the projects: forming commercial connections to easterly markets would speed the integration of western states and territories into the federal union.3
However, for all the gains, financial and political, promised by the two canal companies, both faltered. The Northern and Western Inland Lock Navigation Companies had been created alongside a new Bank of Albany, the state’s second bank. The canal companies were chartered on 30 March 1792 and the bank’s petition for incorporation was approved by the legislature on 2 April 1792. The bank and canal companies shared many of the same investors and sponsors, most notably Philip Schuyler, the onetime general and former U.S. senator who lobbied for all three incorporations from his seat in the state senate. When they were incorporated, the canal companies counted Federalists, anti-Federalists, and future Republicans among their directors and shareholders, including Stephen Van Rensselaer—likely the wealthiest man in the state—as well as Chancellor Robert R. Livingston. Despite having this political and financial capital at their disposal, however, the companies soon ran short on funds and repeatedly found that their charters, crafted by the legislature to restrain the powers and privileges that were inherent in state-issued grants of incorporation, hobbled them from fully executing their missions. Just months after the companies were incorporated, Schuyler and the companies’ directors returned to the legislature seeking to amend their charters so that they could acquire wider rights of way—the amount of land bordering either side of the canal. They needed this land not only to cobble together a commercially viable route for their projects but also to have enough room to do the practical work of clearing that land of trees and obstacles while doing construction. Legislators overwhelmingly supported this request over the property-rights objections of some state jurists and residents of affected counties.4 The companies’ dependence
