Land Fever: The Downfall of Robert Morris

HISTORY AS LITERATURE: The Letters of Robert Morris LAND FEVER: The Downfall of Robert Morris LAND FEVER: The Downfall of Robert Morris Introduction SPECULATION MANIA said the headline of a Boston newspaper in 1790. The speculative nature of Americans was widely commented upon during the early years of the Republic, both by Americans themselves and by visitors from abroad. One could speculate in shipping ventures like the high risk, high return East Indies tea trade, which opened up in 1790. Or one could buy and sell Revolutionary War debt. In 1789, that debt was trading at between fifteen and thirty cents on the dollar, with some instruments trading as low as 12.5 cents, but with the promise of Hamilton's Funding Program in 1790, prices began wildly gyrating upward. Speculators combed the backwoods, buying Revolutionary War scrip. The value of some scrip shot up to as much as one hundred cents on the dollar due to another aspect of Hamilton's blueprint to get the United States on its feet—the establishment of the National Bank. His plan called for shares of stock to be issued by the new bank and for three-fourths of the price of each share to be payable in Revolutionary War scrip. The many who wanted to acquire a stake in National Bank stock were faced with an artificial shortage of debt scrip and they bid up the prices. Henry Lee, travelling from Philadelphia to Virginia in 1791, wrote that the whole country had become "one continued scene of stock gambling." Attitudes toward free markets, the role of government and the ethics of government officials were not quite the same in the 1790s as they are now, with understandably less reliance on rules, laws, bureaucracies and all the other systems by which individual responsibility is supposedly channelled and mitigated. One did not assume, as one tends to now, that "they must have a rule for that," nor did one automatically assume that there should be a rule for it. A person in government, for example, might also be involved in private enterprise. Hamilton's own second-in-command, William Duer, was just such a person. While Hamilton himself was rigorously honest, he regarded the financial activities of others with a tolerance typical of the age. Attempting to corner the market for Revolutionary debt, William Duer started the infamous "Six Percent Club," offering interest at six percent per month for peoples' savings. Even people of modest means got involved, until the inevitable crash came on August 12, 1791, and prices of Revolutionary scrip fell by as much as fifty percent. Duer ended up in jail, and Hamilton did what many secretaries of the Treasury The Missouri Review · 227 have done since—he hurriedly pumped money back into the economy to prevent a general financial panic. Perhaps the characteristic form of "mania" in the new nation was land speculation. The New Federal City of the United States was planned in 1790, at an early moment in the land fever, when there were as yet few casualties. Speculation in Washington, D.C, real estate, however, was a prime cause of one of the grand financial casualties of the decade— indeed, depending on how one measures it, one of the grandest in American history. The choice of a southern location for the new capital had been related, from the start, to Hamilton's Funding Program, since in order to gain the grudging support of Thomas Jefferson and his circle, Hamilton had agreed to locate the permanent future capital on the Potomac. The success of the new city, to be built ex nihilo in a swampy wilderness, depended very much on private investors, whose purchase of building lots would provide money to the fund to build the capítol and other public buildings. Without investors, the new capital couldn't be built. After the panic in war debt in March 1792, money became scarce. Agricultural prices fell and real estate syndicates began collapsing like houses of cards. Few people were interested or able to invest in the new city. After three years, little had been accomplished on the capital-to-be, which then consisted of a few muddy streets...