Alexander Hamilton - Ron Chernow (2005)


By the summer of 1791, after his victories in his skirmishes with Jefferson and Madison over public credit, assumption, and a central bank, Hamilton had attained the summit of his power. Such stellar success might have bred an intoxicating sense of invincibility. But his vigorous reign had also made him the enfant terrible of the early republic, and a substantial minority of the country was mobilized against him. This should have made him especially watchful of his reputation. Instead, in one of history’s most mystifying cases of bad judgment, he entered into a sordid affair with a married woman named Maria Reynolds that, if it did not blacken his name forever, certainly sullied it. From the lofty heights of statesmanship, Hamilton fell back into something reminiscent of the squalid world of his West Indian boyhood.

Philadelphia had its quota of sensual pleasures. Though French visitors dismissed it as quaintly puritanical, it enjoyed a livelier reputation among Americans. Hamilton and other government officials had access to a nocturnal medley of parties, balls, and plays. These social gatherings were often hosted by federalist merchants. The queen bee of local society was Anne Willing Bingham, wife of the extremely rich William Bingham, who presided over banquets at their opulent three-story mansion near Third Street and Spruce. Far from being prim, Philadelphia gatherings in the 1790s abounded in exposed arms and bosoms, if Abigail Adams is to be trusted. She was shocked by all the female flesh on display at parties: “The style of dress…is really an outrage upon all decency…. The arm naked almost to the shoulder and without stays or bodice…. Most [ladies] wear their clothes too scant upon the body and too full upon the bosom for my fancy. Not content with the show which nature bestows, they borrow from art and literally look like nursing mothers.”1

The vivacious Alexander and Eliza Hamilton socialized with the Binghams and other affluent couples. Perhaps by that spring, Eliza had felt the strain of their social obligations and needed time to recuperate. In mid-May 1791, knowing that Hamilton was bogged down with work, Philip Schuyler begged Eliza and the four children (plus the orphaned Fanny Antill) to join him in Albany for the summer. To avoid epidemics, many people vacated Philadelphia and other large cities in sultry weather. “I fear if she remains where she is until the hot weather commences that her health may be much injured,” Schuyler confided to Hamilton about Eliza. “Let me therefore entreat you to expedite her as soon as possible.”2 So due to Schuyler’s tender concern, Eliza and the children left Philadelphia soon after the sensational offering of bank scrip on July 4 and stayed away for the rest of that torrid summer.

It was a dangerous moment for Eliza to abandon Hamilton. He was the cynosure of all eyes, and many people noted his enchantment with women. John Adams carped at his “indelicate pleasures,” Harrison Gray Otis told his wife of Hamilton’s “liquorish flirtation” with a married woman at a dinner party, and Benjamin Latrobe, later the surveyor of public buildings in Washington, branded him an “insatiable libertine.”3 Such descriptions, though hyperbolic, may have contained a grain of truth: Hamilton was susceptible to the charms of beautiful women. Like many people driven by their careers, he did not allow himself sufficient time for escape and relaxation. When Charles Willson Peale painted him in 1791, Hamilton had the air of a commanding politician, his mouth firm, his eyes narrowed with concentration. No trace of joy softened his serious face. He was a volatile personality encased inside a regimented existence.

Whenever he dealt with women, Hamilton shed his bureaucratic manner and reverted to the whimsy of bygone days. Right before the bank subscription, Hamilton received a volume of dramatic verse, The Ladies of Castille, from Mercy Warren, a Massachusetts poet, playwright, and historian. Hamilton sent a dashing note of thanks: “It is certain that in the ‘Ladies of Castille,’ the sex will find a new occasion of triumph. Not being a poet myself, I am in the less danger of feeling mortification at the idea that, in the career of dramatic composition at least, female genius in the United States has outstripped the male.”4 His wit with women was often flirtatious. When his friend Susanna Livingston inquired about Treasury certificates she owned, Hamilton apologized for his delay in responding and said that he held himself “bound by all the laws of chivalry to make the most ample reparation in any mode you shall prescribe. You will of course recollect that I am a married man!”5

As the son of a “fallen woman,” Hamilton tended to be chivalric toward women in trouble. The day after he complimented Warren, he wrote to a Boston widow named Martha Walker who had petitioned Congress for relief, contending that her husband had sacrificed valuable property in Quebec to enlist in the Revolution. With countless petitions coming before Congress, it is noteworthy that Hamilton plucked this one from the pile, assuring Walker that “I shall enter upon the examination with every profession which can be inspired by favorable impression of personal merit and by a sympathetic participation in the distresses of a lady as deserving as unfortunate.”6 These letters to Warren and Walker, written right before Eliza left for Albany, suggest that Hamilton was more than receptive to overtures from women.

Six years later, Alexander Hamilton found himself transported back to that summer of 1791 as he told a flabbergasted public about his extended sexual escapade with twenty-three-year-old Maria (probably pronounced “Mariah”) Reynolds, who must have been very alluring. She had arrived unannounced at his redbrick house at 79 South Third Street. He began his famous account thus: “Sometime in the summer of the year 1791, a woman called at my house in the city of Philadelphia and asked to speak with me in private. I attended her into a room apart from the family.” Reynolds beguiled Hamilton with a doleful tale of a husband, James Reynolds, “who for a long time had treated her very cruelly, [and] had lately left her to live with another woman and in so destitute a condition that, though desirous of returning to her friends, she had not the means.” Since Maria Reynolds came from New York and Hamilton was a New York citizen, Hamilton continued, “she had taken the liberty to apply to my humanity for assistance.”7 Her sudden listing in the 1791 city directory as the mysterious “Mrs. Reynolds”—she was virtually the only person to appear without a first name—seems to confirm her recent arrival in Philadelphia.

The thirty-six-year-old Hamilton never shrank from a maiden in distress, as Maria Reynolds must have known. He told her that her situation was “a very interesting one” and that he wished to assist her but that she had come at an inopportune moment (i.e., Eliza was at home). He volunteered to bring “a small supply of money” to her home at 154 South Fourth Street that evening. Hamilton recounted that meeting with a certain novelistic flair:

In the evening, I put a bank bill in my pocket and went to the house. I inquired for Mrs. Reynolds and was shown upstairs, at the head of which she met me and conducted me into a bedroom. I took the bill out of my pocket and gave it to her. Some conversation ensued from which it was quickly apparent that other than pecuniary consolation would be acceptable.8

That encounter was the first of many times that Alexander Hamilton slipped furtively through the night to see Reynolds. Once Eliza had gone off to Albany, the coast was clear to bring his mistress home. After their first rendezvous, Hamilton recalled, “I had frequent meetings with her, most of them at my own house.”9 After a short period, Reynolds informed Hamilton of a sudden reconciliation with her husband, which Hamilton later claimed he had encouraged. But Maria Reynolds was no ordinary adulteress, and politics now entered into the picture. She informed Hamilton that her husband had speculated in government securities and had even profited from information obtained from Treasury Department sources.

When Hamilton met James Reynolds, the latter fingered William Duer as the source of this information. It is baffling that Hamilton, having worked to achieve a spotless reputation as treasury secretary, did not see that he was now courting danger and would be susceptible to blackmail. Maria Reynolds introduced Hamilton to her husband as her benevolent, disinterested savior during a time of desperation, and for this James Reynolds pretended gratitude. But when Reynolds said that he was going to Virginia, he asked whether Hamilton could secure a government job for him upon his return. Hamilton remained noncommittal.

In recollecting events, Hamilton admitted that the more he learned about the sleazy James Reynolds, the more he thought of ending the affair. He was in the midst of preparing his great Report on Manufactures, yet he was also in the grip of a dark sexual compulsion, and Maria Reynolds knew how to hold him fast in her toils by feigning love. “All the appearances of violent attachment and of agonizing distress at the idea of a relinquishment were played off with a most imposing art,” he wrote. “This, though it did not make me entirely the dupe of the plot, yet kept me in a state of irresolution. My sensibility, perhaps my vanity, admitted the possibility of a real fondness and led me to adopt the plan of a gradual discontinuance rather than of a sudden interruption, at least calculated to give pain, if a real partiality existed.”10 As often is the case with addictions, the fanciful notion of a “gradual discontinuance” only provided a comforting pretext for more sustained indulgence.

In his later pamphlet, Hamilton was at pains to suggest that Maria Reynolds may have been sincerely smitten with him. His recounting of the affair suggests that at moments the relationship struck him as genuinely romantic. He could never make up his mind whether it had started honestly on her side and then turned to blackmail or whether she had conspired with James Reynolds all along. Perhaps, as Hamilton intimated, his vanity could not admit that he had been conned by a pair of lowlife tricksters. The man accused by his enemies of bottomless craft could be a most credulous dupe. Whenever his interest flagged, Maria Reynolds regained his sympathy by telling him that her husband was abusing her or, more pointedly, that he had threatened to spill the story to Eliza. For Hamilton, Maria Reynolds always remained a curious amalgam of tragicomic figure and confidence woman.

Whatever Maria Reynolds’s initial intentions, Hamilton must have seemed elegant, charming, and godlike compared to her vulgarian husband. It is hard to imagine that some genuine feeling for Hamilton did not enter sporadically into her emotions. She wrote him numerous letters—Hamilton ruefully called her a “great scribbler”11—notable for atrocious grammar, spelling, and punctuation. Some letters seemed to consist of a single run-on sentence. In these missives, Maria Reynolds portrayed herself as a wretched, lovelorn creature, desperate to see Hamilton again and pining away with loneliness. While such letters may have persuaded Hamilton that her emotions were sincere, their hysterical excesses should have alerted him that he was dealing with a perilously unstable woman.

We know very little about the background of Maria Reynolds. She was born Mary Lewis in Dutchess County, New York, in 1768, married James Reynolds at fifteen, and two years later gave birth to a daughter named Susan. (At some point, she switched her name from Mary to Maria.) She told Hamilton that her sister Susannah had married Gilbert J. Livingston, which endowed her with respectable Hudson Valley connections. One Philadelphia merchant, Peter A. Grotjan, described her as smart, sensitive, and genteel, but this picture conflicts with an affidavit from Richard Folwell, whose mother was her first landlady in Philadelphia. Folwell etched a portrait of Maria Reynolds that tallies more closely with Hamilton’s account of a mercurial personality prone to wild mood swings:

Her mind at this time was far from being tranquil or consistent, for almost at the same minute that she would declare her respect for her husband, cry and feel distressed, [the tears] would vanish and levity would succeed, with bitter execrations on her husband. This inconsistency and folly was ascribed to a troubled, but innocent and harmless mind. In one or other of these paroxysms, she told me, so infamous was the perfidy of Reynolds, that he had frequently enjoined and insisted that she should insinuate herself on certain high and influential characters—endeavor to make assignations with them and actually prostitute herself to gull money from them.12

After leaving the Folwell residence, Maria and James Reynolds lived on North Grant Street, where they occupied separate beds (or even rooms) while Maria dabbled in prostitution. Gentlemen left letters in her entryway, Folwell said, and “at night she would fly off as was supposed to answer their contents.”13

Folwell’s testimony confirms both the sincerity and the patent insincerity of the mixed-up Maria Reynolds. There seems little question that she approached Hamilton as part of an extortion racket, delivering an adept performance as a despairing woman. It was also clear, however, that she was too flighty to stick to any script. Since she despised her husband, she may have nourished fantasies that Hamilton would rescue her even as she preyed upon him. Fact and fiction may have blended imperceptibly in her mind. Hamilton later concluded of his paramour, “The variety of shapes which this woman could assume was endless.”14

Maria Reynolds was the antithesis of the sturdy, sensible, loyal Eliza. The more depressing then to survey the letters Hamilton sent to Eliza that summer to keep her at bay. On August 2, he expressed satisfaction that she had arrived safely in Albany and showed concern (“Take good care of my lamb”) for their three-year-old son, James, who was ill. At the same time, Hamilton pressed her to stay in Albany: “I am so anxious for a perfect restoration of your health that I am willing to make a great sacrifice for it.”15 At one point, when Eliza seemed about to return on short notice, Hamilton, worried that he might be taken by surprise, exhorted her to “let me know beforehand your determination that I may meet you at New York.”16 In late August, when her return seemed imminent, Hamilton advised that “much as I long for this happy moment, my extreme anxiety for the restoration of your health will reconcile me to your staying longer where you are…. Think of me—dream of me—and love me my Bestsey as I do you.”17 Finally, in September, with Hamilton suffering from his old kidney ailment and taking warm baths to soothe it, Eliza decided to return with the children. One last time, Hamilton urged her, “Don’t alarm yourself nor hurry so as to injure either yourself or the children.”18

It is easy to snicker at such deceit and conclude that Hamilton faked all emotion for his wife, but this would belie the otherwise exemplary nature of their marriage. Eliza Hamilton never expressed anything less than a worshipful attitude toward her husband. His love for her, in turn, was deep and constant if highly imperfect. The problem was that no single woman could seem to satisfy all the needs of this complex man with his checkered childhood. As mirrored in his earliest adolescent poems, Hamilton seemed to need two distinct types of love: love of the faithful, domestic kind and love of the more forbidden, exotic variety.

In his later confessions, Hamilton tried to explain the mad persistence of this affair by citing his terror that James Reynolds might blurt out the truth to Eliza. As he phrased it, “No man tender of the happiness of an excellent wife could, without extreme pain, look forward to the affliction which she might endure from the disclosure, especially a public disclosure, of the fact. Those best acquainted with the interior of my domestic life will best appreciate the force of such a consideration upon me. The truth was that…I dreaded extremely a disclosure—and was willing to make large sacrifices to avoid it.”19 In the end, his desire to spare Eliza led him only to hurt her the more.

When Eliza returned to Philadelphia that fall, Hamilton could no longer receive Maria Reynolds at his residence and resorted to her home. (The Hamiltons had by now moved to Market Street, near the presidential mansion.) How he squeezed in time for these carnal interludes while compiling his Report on Manufactures is a wonder. That he inserted these trysts into such a tight schedule only strengthens the impression that Hamilton was ensnared by a sexual obsession. It was as if, after inhabiting a world of high culture for many years, Hamilton had regressed back to the sensual, dissolute world of his childhood. There is again a Dickensian quality to his story: the young hero escapes a tawdry life only to be lured back into it by a pair of unscrupulous swindlers.

If Hamilton thought he could commit adultery without paying a penalty, he learned otherwise when James Reynolds materialized again late that fall. During the Revolution, Reynolds had worked as a skipper on a Hudson River sloop and supplied provisions to patriotic troops, meeting William Duer and other purveyors. He then went to sea before settling in New York, and he had sought employment at the new Treasury Department in 1789. Though he wangled a reference letter from Robert Troup, he was rejected for a job, possibly giving him an extra motive for vengeance against Hamilton. The following year, some New York speculators sent Reynolds south to buy up claims that the government owed to veterans in Virginia and North Carolina.

On December 15, 1791, ten days after Hamilton submitted his Report on Manufactures to Congress, his earlier charade of friendship with James Reynolds abruptly ended. “One day, I received a letter from [Maria Reynolds]…intimating a discovery [of the sexual liaison] by her husband,” Hamilton was to recall. “It was a matter of doubt with me whether there had been really a discovery by accident or whether the time for the catastrophe of the plot was arrived.”20 James Reynolds displayed a sure sense of timing: the hubbub over the manufacturing report made it an ideal moment to threaten Hamilton, who was much in the newspapers.

On the unforgettable afternoon of Thursday, December 15, 1791, Maria Reynolds warned Hamilton that her husband had written to him and that if he didn’t receive a reply, “he will write Mrs. Hamilton.” Maria, as usual, was overcome with emotion: “Oh my God I feel more for you than myself and wish I had never been born to give you so mutch unhappisness do not rite to him no not a Line but come here soon do not send or leave any thing in his power Maria.”21 Hamilton had indeed received a thinly veiled blackmail note from James Reynolds that began: “I am very sorry to find out that I have been so Cruelly trated by a person that I took to be my best friend instead of that my greatest Enimy. You have deprived me of every thing thats near and dear to me.” A master of crude melodrama, Reynolds told Hamilton that Maria had been weeping constantly, that this had made him suspicious, and that he had trailed a black messenger who carried one of her letters to Hamilton’s home. Upon confronting Maria, “the poor Broken harted woman” had confessed to the affair. Here James Reynolds worked himself up into self-righteous wrath:

instead of being a Friend. you have acted the part of the most Cruelist man in existence. you have made a whole family miserable. She ses there is no other man that she Care for in this world. now Sir you have bin the Cause of Cooling her affections for me. She was a woman. I should as soon sespect an angiel from heven. and one where all my happiness was depending. and I would Sacrefise almost my life to make her Happy. but now I am determed to have satisfation.22

Hamilton summoned Reynolds to his office that afternoon. He did not know whether Reynolds had proof of the affair or was bluffing, so he played it cagey. He later wrote that he neither admitted nor denied the affair, telling Reynolds “that if he knew of any injury I had done him, entitling him to satisfaction, it lay with him to name it…. It was easy to understand that he wanted money and to prevent anexplosion, I resolved to gratify him…. He withdrew with a promise of compliance.”23 Hamilton was a rank amateur in adultery. By allowing James Reynolds to be seen in his office, he had given the blackmailer the upper hand.

On Saturday evening, December 17, James Reynolds wrote to Hamilton and charged him with alienating Maria’s affections: “I find the wife always weeping and praying that I wont leve her. And its all on your account, for if you had not seekd for her Ruin it would not have happined.”24 Reynolds demanded some compensation for his ruined marriage and arranged to meet with Hamilton the next day. Hamilton was so alarmed that he sent a note to an unnamed correspondent stating, “I am this moment going to a rendezvous which I suspect may involve a most serious plot against me…. As any disastrous event might interest my fame, I drop you this line that from my impressions may be inferred the truth of the matter.”25

At their meeting, Reynolds was very businesslike, and Hamilton asked him to name his price. The day after, Reynolds said that one thousand dollars would be a proper salve to his “wounded honor.”26 He contended that he could never regain his wife’s love and that he planned to leave town with their daughter. Hamilton was forced to pay the now considerable blackmail money in installments, making one payment on December 22 and a second on January 3. James Reynolds, if poor at spelling, was able to fathom Hamilton’s insatiable sexual appetite for his wife and his dread of exposure.

At this point, Hamilton tried to terminate the shabby affair, which formed such an odd counterpoint to the splendor of his public life. Briefly, he ceased all contact with Maria. This frightened James Reynolds, who saw future income fast fading away. On January 17, 1792, he wrote to Hamilton and urged him to visit the house and regard his wife as a “friend.” Suddenly, he was no longer the wronged spouse but a philanthropist concerned with his wife’s welfare, not a grief-stricken husband but a shameless pimp for his wife. It is hard to believe that at this juncture Hamilton did not abruptly end this hazardous affair. Of Reynolds’s invitation, Hamilton wrote: “If I recollect rightly, I did not immediately accept the invitation, nor till after I had received several very importunate letters from Mrs. Reynolds.” Subsequent letters from husband and wife were “a persevering scheme to spare no pains to levy contributions upon my passions on the one hand and upon my apprehensions of discovery on the other.”27

Even as Hamilton had indulged his lust for Maria Reynolds, his imagination was conjuring up a futuristic industrial city, a microcosm of the manufacturing society that he envisioned to counter Jefferson’s nation of citizen-farmers. At a time when nineteen of twenty Americans tilled the soil, Hamilton feared that if America remained purely agrarian, it would be relegated to eternally subordinate status vis-à-vis European societies.

It was already an age of scientific wonders that promised to reshape economies and boost productivity. From the first steam engine that James Watt built in Great Britain in the 1760s to the hot-air balloons that floated across French skies in the 1780s to Eli Whitney’s invention of the cotton gin and the use of interchangeable parts in the 1790s, it was a time of technological marvels. No industry was being transformed more dramatically than British textiles. Sir Richard Arkwright had devised a machine called the water frame that used the power of rushing water to spin many threads simultaneously. By the time Hamilton was sworn in as treasury secretary, Arkwright’s mills on the Clyde in Scotland employed more than 1,300 hands.

As much as the Bank of England, the British Exchequer, and the Royal Navy, these industrial breakthroughs had catapulted Britain to a leading position in the world economy. The British treated such economic discoveries as precious state secrets, which they guarded jealously against rival nations. Laws were passed to outlaw the export of textile machinery, and ships were stopped midocean if they contained such contraband cargo. Skilled mechanics who worked in textile factories were forbidden to emigrate upon pain of fine and imprisonment—for even if they couldn’t smuggle out blueprints, they could memorize methods and peddle this valuable information abroad. All of this Hamilton watched with rapt fascination. “Certainly no other man in America saw so clearly the significance of the change that was taking place in English industrialism,” Vernon Parrington wrote of Hamilton, “and what tremendous reservoirs of wealth the new order laid open to the country that tapped them.”28 The treasury secretary intuited that the future strength of nation-states would be proportionate to their industrial prowess, and he celebrated the early growth of American industry, whether it was entrepreneurs making wool hats or glass in Pennsylvania or watchmakers in Connecticut.

Contrary to his image as a tool of England, Hamilton enlisted early on in a scheme to challenge British supremacy in textiles. In January 1789, excited investors crowded into Rawson’s Tavern on Wall Street to feast on wine and cake and consecrate the New York Manufacturing Society. Two months later, Hamilton’s name appeared among charter subscribers investing in a new woolen factory scheduled to open on Crown Street (later Liberty Street) in lower Manhattan. In the end, the facility suffered from a fatal shortage of water power and closed a year or two later, but the experience initiated Hamilton into the mysteries of the new industrial order.

Around this time, a young man named Samuel Slater slipped through the tight protective net thrown by British authorities around their textile business. As a former apprentice to Sir Richard Arkwright, Slater had sworn that he would never reveal his boss’s trade secrets. Flouting this pledge, he sailed to New York and made contact with Moses Brown, a Rhode Island Quaker. Under Slater’s supervision, Brown financed a spinning mill in Rhode Island that replicated Arkwright’s mill. Hamilton received detailed reports of this triumph, and pretty soon milldams proliferated on New England’s rivers. With patriotic pride, Brown predicted to Hamilton that “mills and machines may be erected in different places, in one year, to make all the cotton yarn that may be wanted in the United States.”29

Hamilton’s policies were consistent with the drive for autarky and trade on equal terms with England that had fired the American Revolution in the first place. The colonists had rebelled against an imperial system that restricted their manufactures and forced them to hawk their raw materials to the mother country, stifling their economic potential. Before the Revolution, England had imposed a law banning the export to America of any tools that might assist in the manufacture of cotton, linen, wool, and silk. The British manufacturers of hats, nails, steel, and gunpowder had impeded American efforts to make comparable articles. It was Hamilton’s vision of America as a manufacturing behemoth, not Jefferson’s of a society of yeomen farmers, that threatened the British.

The shape of Hamilton’s future industrial policy was foreshadowed in May 1790 when Tench Coxe replaced William Duer as assistant treasury secretary. The move possessed vast symbolic meaning, for Coxe was a well-known advocate of manufacturing and eager to raid Britain’s industrial secrets. That February, he had written a long letter to Hamilton, praising America’s maiden efforts at industry but citing a shortage of both capitalists and large-scale capital as retarding the introduction of labor-saving machinery. He regretted that because of Britain’s pugnacious defense of her technological superiority in textiles the United States was not “yet in full possession of workmen, machines and secrets in the useful arts.”30

Hamilton and Coxe teamed up in a daring assault on British industrial secrets. Coxe decided that the best way to achieve industrial parity with England was to woo knowledgeable British textile managers to America, even if this meant defying English law. Right before joining Treasury, he posted a man named Andrew Mitchell to England to snoop around factories and surreptitiously make models of textile machinery. Additionally, on January 11, 1790, Coxe had signed an agreement with a British weaver, George Parkinson, who also had studied at Arkwright’s feet and bragged openly that he “possessed…the knowledge of all the secret movements used in Sir Richard Arkwright’s patent[ed] machine.”31 In exchange for passage to Philadelphia, Parkinson agreed to provide Coxe with a working model of a flax mill that incorporated Arkwright’s designs. On March 24, 1791, the U.S. government granted patents for Parkinson’s flax mill, even though he had admitted that they were “improvements upon the mill or machinery…in Great Britain.”32 Clearly, the U.S. government condoned something that, in modern phraseology, could be termed industrial espionage. Building upon this precedent, Hamilton put the full authority of the Treasury behind the piracy of British trade secrets.

By April 1791, Hamilton had lent his prestige to Coxe’s plan for a manufacturing society operated by private interests that would enjoy the general blessings of government. It would be a pilot project, a laboratory for innovation. The Society for Establishing Useful Manufactures (SEUM) was lauded by a later historian as “the most ambitious industrial experiment in early American history.”33 It was almost certainly Hamilton, with an assist from Coxe, who wrote the eloquent prospectus for the society that appeared on April 29. He left no doubt as to how he envisaged America’s future, writing that “both theory and experiences conspire to prove that a nation…cannot possess much active wealth but as a result of extensive manufactures.”34

The society intended to create more than a single mill. It projected an entire manufacturing town, with investors profiting from the factory’s products and the appreciation of the underlying real estate. The prospectus listed a cornucopia of goods—including paper, sailcloth, cottons and linens, women’s shoes, thread, worsted stockings, hats, ribbons, blankets, carpets, and beer—that the society might manufacture. Hamilton hoped that through the “spirit of imitation,” the society would spawn comparable domestic businesses.35 Thus far, the major hindrance to such enterprise had been “slender resources,” but lack of capital had now been remedied by the government’s funded debt. Once again, Hamilton used one program to advance the fortunes of another in an ever expanding web of economic activity. The society needed five hundred thousand dollars in seed capital, and the prospectus pointed out that it could be paid for partly in government bonds, promoting public debt and the industrial city at one stroke. “Here is the resource which has been hitherto wanted,” Hamilton boasted.36 That Hamilton was prepared to ransack European industrial secrets was made plain when the prospectus said that “means ought to be taken to procure from Europe skilful workmen and such machines and implements as cannot be had here in sufficient perfection.”37

Hamilton did not lend his prestige to the scheme from afar. In July 1791—the same month investors gobbled up bank scrip and he began his dalliance with Maria Reynolds—he traveled to New York to drum up support for the society’s first stock offering, which sold out instantly. He then attended the subscribers’ inaugural meeting in New Brunswick, New Jersey, in August. In choosing directors later that year, Hamilton blundered by turning to his freewheeling companion, the speculator William Duer. He packed the board with local financiers—seven directors from New York, six from New Jersey—instead of striving for broad geographic representation. The board was also excessively crammed with financiers when men with industrial credentials were sorely needed.

Early on, Hamilton and Coxe settled on New Jersey as the optimal place for this venture. The state was densely populated, possessed cheap land and abundant forests, and enjoyed easy access to New York money. Most critically, it was well watered by rivers that could spin turbine blades and waterwheels. That August, Hamilton dispatched scouts to investigate these waterways. He and other society members were swamped with appeals from local landlords, touting the wonders of their riverside properties. It was later on concluded, largely at Duer’s insistence, that the Great Falls of the Passaic in northern New Jersey offered “one of the finest situations in the world.”38

Hamilton knew the secluded spot well. One day during the Revolution, he, Washington, and Lafayette had picnicked by the falls, enjoying a “modest repast” of cold ham, tongue, and biscuits in a sylvan setting that momentarily banished thoughts of war. The Great Falls mark a scenic bend in the Passaic River, the foaming water—up to two billion gallons per day—plunging seventy feet into a deep, narrow gorge of brownish-black basalt, blowing a rainbow-forming spray into the air. The society decided to call the new town Paterson to flatter Governor William Paterson. On November 22, 1791, the governor returned the favor, granting the society a charter (likely written by Hamilton) that gave it monopoly status and a ten-year tax exemption. The society bought seven hundred acres and carved it up into parcels, not just for factories but for a brand-new town—one that became the third largest city in New Jersey.

Incredibly, Hamilton, with his ever growing roster of projects, personally recruited supervisors for the first cotton spinning mill. This glorified adviser hired as foreman the same George Parkinson who had plundered British secrets for flax-spinning machinery; the Treasury subsidized Parkinson’s living expenses. In July, Hamilton had received an extraordinary letter from another renegade employee of Sir Richard Arkwright, Thomas Marshall, who also came to America armed with British textile secrets. Having been superintendent at Arkwright’s huge Derbyshire mill, he bragged to Hamilton that he had toured the mill again on a reconnaissance mission the previous fall: “I was all over his works and am consequently fully acquainted with every modern improvement.” Marshall had no misgivings about snatching English mechanics for the society’s projects and suggested that a “master of his business in the weaving branch and in possession of all or most of the fashionable patterns now worn in England will be very useful.”39 That August, Hamilton negotiated contract after contract with British textile refugees, including William Hall, who had learned to stain and bleach fabrics, and William Pearce, who had erected a Yorkshire cotton mill. That December, when the society’s board met to consider personnel for the new operation, it rubber-stamped all of Hamilton’s choices.

Hamilton wasn’t content just to demonstrate the practicality of American manufacturing on a New Jersey riverbank. He felt compelled to make the theoretical case, which he did in his classic Report on Manufactures, submitted to Congress on December 5, 1791. The capstone of his ambitious state papers, it had fermented in his brain for some time. Nearly two years earlier, the House had asked him to prepare a report on how America might promote manufacturing. Hamilton now generated a full-blown vision of the many ways that the federal government could invigorate such economic activity. The report was the first government-sponsored plan for selective industrial planning in America, the tract in which, in the words of one Hamilton chronicler, he “prophesied much of post–Civil War America.”40

The impetus for the report had been largely military and strategic in nature. Washington had admonished Congress that a “free people” ought to “promote such manufactories as tend to render them independent [of] others for essential, particularly for military supplies.”41 Remembering the scarcity of everything from gunpowder to uniforms in the Continental Army—a by-product of Britain’s colonial monopoly on most manufacturing—Hamilton knew that reliance on foreign manufacturers could cripple America in wartime. “The extreme embarrassments of the United States during the late war, from an incapacity of supplying themselves, are still matter of keen recollection,” he noted in the report.42

To prepare for this study, the indefatigable Hamilton canvassed manufacturers and revenue collectors, quizzing them in detail about the state of production in their districts. As usual, he aspired to know everything: the number of factories in each district, the volume of goods produced, their prices and quality, the spurs and checks to production provided by state governments. To obtain a firsthand feel for American wares, he even wanted to touch them, to feel them. “It would also be acceptable to me,” he told revenue supervisors, “to have samples in cases in which it could be done with convenience and without expence.”43 As he accumulated swatches—wool from Connecticut, carpets from Massachusetts—Hamilton, with a flair for showmanship, laid them out in the committee room of the House of Representatives, as if operating a small trade fair, an altogether new form of lobbying.

Hamilton’s previous state papers had been purely the coinage of his own mind—he never employed ghostwriters—whereas he received critical assistance on the Report on Manufactures from Tench Coxe, who had drafted an early sketch urging American self-sufficiency in gunpowder, brass, iron, and other items. Eventually, Hamilton came to regard Coxe as a conceited, devious fellow who overrated his own talents. He later said, “That man is too cunning to be wise. I have been so much in the habit of seeing him mistaken that I hold his opinion cheap.”44 But at this juncture, Coxe’s expertise was vital. Hamilton revised and elaborated Coxe’s preliminary paper. He embroidered Coxe’s proposals with esoteric economic theory and an assertive vision of American political might through manufacturing. Far more than just a technical document, the Report on Manufactures was a prescient statement of American nationalism.

In his advocacy of manufacturing, Hamilton knew that he would encounter stout resistance from those who feared that factories might hurt agriculture and menace republican government. His opponents cited abundant land and deficient capital and labor as reasons that America should remain a rural democracy. Jefferson, in particular, foresaw an enduring equation between American democracy and agriculture. Shortly before returning from France, he wrote that circumstances rendered it “impossible that America should become a manufacturing country during the time of any man now living.”45

From the outset, Hamilton emphasized that he was not scheming to replace farms with factories and that agriculture had “intrinsically a strong claim to preeminence over every other kind of industry.” Far from wishing to harm agriculture, manufacturing would create domestic markets for surplus crops. All that he recommended was that farming not have “an exclusive predilection.”46 Since manufacturing and agriculture obeyed different economic cycles, a downturn in one could be offset by an upturn in another. Throughout the report, he contested the influence of the Physiocrats, the school of French economists that extolled agriculture as the most productive form of human labor and condemned government attempts to steer the economy. Hamilton refuted their belief that agriculture was inherently productive while manufacturing was “barren and unproductive.”47 Displaying an intimate familiarity with Adam Smith’s The Wealth of Nations, Hamilton demonstrated that manufacturing, no less than agriculture, could increase productivity because it subdivided work into ever simpler operations and lent itself to mechanization. He also insisted that America’s focus on agriculture was not just a natural by-product of geography but had been foisted on the country by European trading practices.

Hamilton evoked a thriving future economy that bore scant resemblance to the static, stratified society his enemies claimed he wanted to impose. His America would be a meritocracy of infinite variety, with a diversified marketplace absorbing people from all nations and backgrounds. Though slavery is nowhere mentioned in the report, Hamilton’s ideal economy is devoid of the feudal barbarities of the southern plantations. Hamilton’s list of the advantages of manufacuturing has a quintessentially American ring: “Additional employment to classes of the community not ordinarily engaged in the business. The promoting of emigration from foreign countries. The furnishing greater scope for the diversity of talents and dispositions which discriminate men from each other. The affording a more ample and various field for enterprise.”48 Manufacturers and laborers would flock to a country rich in raw materials and favored with low taxes, running streams, thick forests, and a democratic government. And that influx of workers would eliminate one of the most pressing obstacles to American manufacturing: high wages.

While Hamilton’s emphasis on “diversity” may please modern ears, his stress on child labor is more jarring. Of the productive British cotton mills, he commented: “It is worthy of particular remark that, in general, women and children are rendered more useful, and the latter more early useful, by manufacturing establishments than they would otherwise be.” In Britain’s cotton mills, it was “computed that 4/7 nearly are women and children, of whom the greatest proportion are children and many of them of a very tender age.”49 Hamilton’s approval of this may sound callous, and it is certainly fair to fault him for not foreseeing the brutality of nineteenth-century mills. On the other hand, child labor in farms and workshops was then commonplace—Hamilton himself had started clerking in his early teens, and his mother had worked. Hamilton didn’t see himself as inflicting grim retribution upon the indigent so much as giving them a chance to earn decent wages. For Hamilton, a job could be an ennobling experience: “When all the different kinds of industry obtain in a community, each individual can find his proper element and can call into activity the whole vigour of his nature.”50 Hamilton did not equate child or female labor with exploitation.

In the best of all possible worlds, Hamilton preferred free trade, open markets, and Adam Smith’s “invisible hand.” He wrote late in life, “In matters of industry, human enterprise ought doubtless to be left free in the main, not fettered by too much regulation, but practical politicians know that it may be beneficially stimulated by prudent aids and encouragements on the part of the government.”51 At this early stage of American history, Hamilton thought aggressive European trade policies obligated the United States to respond in kind. He therefore supported temporary mercantilist policies that would improve American self-sufficiency, leading to a favorable trade balance and more hard currency. For a young nation struggling to find its way in a world of advanced European powers, Realpolitik trumped the laissez-faire purism of Adam Smith.

Reluctant to tinker with markets, Hamilton knew that he had to present a cogent brief for any government direction of investment. There was an obvious objection: wouldn’t smart entrepreneurs spot profitable opportunities and invest capital without bureaucratic prompting? Yes, Hamilton agreed, entrepreneurs react to market shifts, but for psychological reasons they sometimes respond at a sluggish pace. “These,” he wrote, “have relation to the strong influence of habit and the spirit of imitation; the fear of want of success in untried enterprises; the intrinsic difficulties incident to first essays toward a competition with those who have already attained to perfection in the business to be attempted.”52 Young nations had to contend with the handicap that other countries had already staked out entrenched positions. Infant industries needed “the extraordinary aid and protection of government.”53 Since foreign governments plied their companies with subsidies, America had no choice but to meet the competition.

After doing the intellectual spadework for government promotion of manufactures, Hamilton listed all the products he wanted to promote, ranging from copper to coal, wood to grain, silk to glass. He also enumerated policies, including premiums, bounties, and import duties, to protect these infant industries. Wherever possible, Hamilton preferred financial incentives to government directives. For instance, knowing that tariffs taxed consumers and handed monopoly profits to producers, Hamilton wanted them to be moderate in scale, temporary in nature, and repealed as soon as possible. He preferred bounties because they didn’t raise prices. In some cases, he even wanted lowertariffs—on raw materials, for instance—to encourage manufacturing. And to speed innovation, he wanted to extend patent protection to inventors and adopt the sort of self-protective laws that Britain had used to try to hinder the export of innovative machinery.

For Hamilton, the federal government had a right to stimulate business and also, when necessary, to restrain it. As Arthur Schlesinger, Jr., has observed, “Hamilton’s enthusiasm over the dynamics of individual acquisition was always tempered by a belief in government regulation and control.”54 In arguing, for instance, that government inspection of manufactured articles could reassure consumers and galvanize sales, he anticipated regulatory policies that were not enacted until the Progressive Era under Theodore Roosevelt: “Contributing to prevent fraud upon consumers at home and exporters to foreign countries—to improve the quality and preserve the character of the national manufactures—it cannot fail to aid the expeditious and advantageous sale of them and to serve as a guard against successful competition from other quarters.”55 He also recommended that the government inspect flour exports at all ports, “to improve the quality of our flour everywhere and to raise its reputation in foreign markets.”56 Endorsing still another form of government activism, Hamilton claimed that nothing had assisted Britain’s industry more than its network of public roads and canals. He therefore touted internal improvements—what we would today call public infrastructure—to meld America’s scattered regional markets into a single unified economy.

Even though he devoted only two skimpy paragraphs to the manufacture of gunpowder, Hamilton never lost sight that his Report on Manufactures was initially driven by the need for self-sufficiency in arms. Determined not to be caught shorthanded in case of war, Hamilton supported “an annual purchase of military weapons” to aid “the formation of arsenals.”57 So vital were supplies to national security that Hamilton did not rule out government-owned arms factories.

In closing, Hamilton made clear that the energetic programs he described were not suited to all countries at all times but were devised for an early stage of national development: “In countries where there is great private wealth much may be effected by the voluntary contributions of patriotic individuals. But in a community situated like that of the United States, the public purse must supply the deficiency of private resources.”58

Hamilton’s Report on Manufactures ultimately came to naught. Unlike his magnificent state papers on public credit, the mint, and the central bank, this report charted a general direction for the government, not solutions to specific, urgent problems. The House of Representatives shelved the report, and Hamilton made no apparent effort to resurrect it from legislative oblivion. For a document never translated into legislation, the report aroused exceptional apprehension because of its broad conception of federal power. As always, Hamilton cited constitutional grounds for his program, invoking the clause that gave Congress authority to “provide for the common defenceand general welfare.59 Owing in part to Hamilton’s generous construction of this clause, it was to acquire enormous significance, allowing the government to enact programs to advance social welfare.

Madison was deeply alarmed by these arguments. Thus far, he said, those expounding a liberal interpretation of the Constitution had argued only for leeway in the means to attain ends spelled out in the Constitution. But no mention was made of manufacturing as an end of government. “If not only the means, but the objects are unlimited,” Madison groaned, “the parchment had better be thrown into the fire at once.”60 Nor could Jefferson conceal his horror at the report, which called for an even more sweeping arrogation of power than had Hamilton’s bank. In one postbreakfast talk with Washington, Jefferson mentioned Hamilton’s latest position paper and wondered somberly whether Americans still lived under a limited government. He dreaded the powers that would accrue to government under his colleague’s loose reading of the Constitution. He grumbled that “under color of giving bounties for the encouragement of particular manufactures,” Hamilton was trying to insinuate that the “general welfare” clause “permitted Congress to take everything under their management which they should deem for the public welfare.”61 For Jefferson, this opened wide the floodgates to government activism.

When the craving for bank scrip had created a speculative bubble in the summer of 1791, Hamilton had cooled off the contagion before it got out of hand. The relief had proved short-lived. The very prosperity that his ebullient leadership engendered—reflected in rising exports, a booming demand for American bonds in Europe, and a rush of newly chartered companies—generated effervescent optimism that fed yet another mad scramble for government securities and bank scrip, pushing their prices to new highs during the winter of 1791–1792.

Once again, the main protagonist was Hamilton’s old chum William Duer, always a restless soul beneath his bonhomie. Duer’s wife, Lady Kitty, had long been chagrined by her husband’s compulsive gambling. She once admonished him, “I fear…your mind will be too much harassed with the variety of business and speculations you undertake to allow you…inward quiet.”62 In a similar vein, Duer’s friend, Samuel Chase of Maryland, pleaded with him to control his acquisitive impulses: “I know the activity of your soul and fear your views…and schemes are boundless…. I sincerely wish that you would set limits to your desires.”63

Unfortunately, nobody could cure William Duer’s speculative bent. He was now the colossus of New York financial markets and derisively crowned “King of the Alley” by Jefferson.64 In late 1791, determined to corner the market in government bonds and bank shares, he formed a secret partnership with Alexander Macomb, a wealthy land speculator. Hamilton had just chosen Duer as governor of the Society for Establishing Useful Manufactures, where Macomb also served as a director. Now, to finance stock manipulation, the reckless Duer borrowed vast sums on his personal notes and drew other SEUM backers into an investing cabal nicknamed the Six Per Cent Club because of its plan to monopolize 6 percent government bonds.

In January 1792, Hamilton was monitoring financial markets in New York with foreboding when hectic trading in bank scrip received a sudden fillip from the announcement of three new banks being formed. Aside from the Bank of New York and a projected branch of the Bank of the United States, New York at this time had no other banks. The Million Bank was to be organized by Macomb and Hamilton’s old adversary from the New York Ratifying Convention, Melancton Smith. At a time when banks had political colorings, the Million Bank was seen as a vehicle to boost the fortunes of Governor George Clinton. “The bank mania rages violently in this city,” James Tillary told Hamilton, “and it is made an engine to help the governor’s re-election.”65 When the bank’s shares were floated on January 16, they were ten times oversubscribed within hours, as “bancomania” gripped the city. In rapid succession, proposals emerged for a State Bank and Merchants’ Bank, culminating in a grand proposal to amalgamate the three new banks into one gigantic institution.

As treasury secretary, Hamilton had hoped to spur banking, but he rejected these new banks as so many brazen speculative vehicles. The instant he heard about the Million Bank, he wrote a vehement letter to William Seton of the Bank of New York, who had helped him to quell the panic the previous summer. Testifying to “infinite pain” at the news of this “dangerous tumour” in New York’s economy, Hamilton warned, “These extravagant sallies of speculation do injury to the government and to the whole system of public credit by disgusting all sober citizens and giving a wild air to everything…. I sincerely hope that the Bank of New York will listen to no coalition with this newly engendered monster.”66 Seton replied that the “madmen” behind the Million Bank were trying to coerce the Bank of New York into an unwanted merger by unscrupulous means: withdrawing enough money from the bank to topple it. “The folly and madness that rages at present is a disgrace to us,” he reported.67 Hamilton wasn’t blind to the speculative hazards of creating credit. “The superstructure of credit is now too vast for the foundation,” he warned Seton. “It must be gradually brought within more reasonable dimensions or it will tumble.”68 Hamilton later conceded that share trading “fosters a spirit of gambling and diverts a certain number of individuals from other pursuits.”69 Yet this had to be weighed against the larger social benefits conferred by ready access to capital.

For Thomas Jefferson, bancomania wasn’t an unavoidable flaw in an otherwise sound system but a canker at the heart of the Hamiltonian enterprise. He warned Washington that paper money was “withdrawing our citizens from…useful industry to occupy themselves and their capitals in a species of gambling, destructive of morality, and which had introduced its poison into the government itself.”70 Jefferson’s fears were understandable, if often misplaced. He suspected Duer of trading on inside information and wrongly assumed that Hamilton was his constant, willing accomplice. When Jefferson wrote to Washington, accusing Hamilton of “the dealing out of Treasury-securities among his friends in what time and measure he pleases,” he made a baseless charge that he and his political followers were to repeat ad nauseam.71

Buoyed by credit, the prices of government and bank securities soared to a peak in late January 1792, exceeding any sane levels of valuation. As Hamilton recalled, “The rapid and extraordinary rise…was in fact artificial and violent such as no discreet calculation of probabilities could have presupposed.”72 Then euphoria turned to doubt and doubt to despair as shares began a precipitate five-week slide. Duer desperately put up more money to cover his obligations and borrowed sizable sums from all quarters. He pried loose loans from wealthy New Yorkers and petty cash from butchers and shopkeepers and even took money from a “noted bawd, Mrs. McCarty,” said one merchant.73 He raised a half-million dollars on his personal notes. “Widows, orphans, merchants, mechanics, etc. are all concerned in the notes,” Robert Troup informed Hamilton.74 Scenting blood, Duer’s creditors squeezed him with usurious interest rates that climbed as high as 6 percent per month. Duer had led a band of bulls betting on higher stock prices; three members of the Livingston family headed a counterclique of bears, who drove down share prices by yanking bank deposits and instigating a severe credit shortage that pushed interest rates to speculators to as high as 1 percent per day. This struck a fatal blow at the deeply indebted Duer. He began to jettison shares to repay loans, and this only worsened the downward spiral of bond prices.

On March 9, his resources exhausted, the embattled Duer stopped payment to some creditors. He owed so much money to so many people that his failure provoked financial mayhem. Twenty-five New York financiers went bust the next day as panic spread. Duer’s undoing was money he owed the government. From his days as secretary to the old Board of Treasury, Duer had carried a huge outstanding debt of $236,000. On March 12, with Hamilton’s blessing, Oliver Wolcott, Jr., comptroller of the treasury, wrote to New York’s district attorney and ordered him to recover the money from Duer or file suit against him. As soon as Duer heard of this letter, he knew he was doomed unless he got it revoked. Distraught, he sent a hurried message to Hamilton: “For heaven’s sake, use for once your influence to defer this [letter] till my arrival, when it will not be necessary…. Every farthing will be immediately accounted for. Of this I pledge my honor. If a suit should be brought on the part of the public…my ruin is complete.”75

Hamilton waited to reply until March 14. In all likelihood he wanted to be able to inform Duer that Wolcott’s instructions had been sent before he could recall them. In his note to Duer, Hamilton did nothing to impede the threatened lawsuit and refused to compromise his official integrity. In a spirit of friendship, he told Duer that he was “affected beyond measure” by his plight and had “experienced all the bitterness of soul on your account which a warm attachment can inspire.” At the same time, he delivered this stern judgment: “Act with fortitude and honor. If you cannot reasonably hope for a favorable extrication, do not plunge deeper. Have the courage to make a full stop. Take all the care you can in the first place of institutions of public utility and in the next of all fair creditors.”76 The letter again refutes the caricature of Hamilton as a stooge for the monied interests. Meanwhile, Jefferson grumbled to his son-in-law that “the credit and fate of the nation seem to hang on the desperate throws and plunges of gambling scoundrels.”77

Instead of bailing out Duer, Hamilton had the Treasury purchase large amounts of government securities in the marketplace. By doing so, he steadied the market and also bought back public debt at bargain prices. The money came from the sinking fund he had set up to redeem public debt. Sensitive to perceptions, Hamilton told William Seton to purchase the bonds piecemeal at the securities auctions held twice daily at the Merchant’s Coffee House and “to keep up men’s spirits by appearing often, though not much at one time.”78 He also wanted Seton to conceal the buyer’s identity, allowing rumors to magnify the effect: “It will be very probably conjectured that you appear for the public. And the conjecture may be left to have its course but without confession.”79 Instinctively, Hamilton understood the creative ambiguity necessary for a central banker coping with a crisis. As was the case the previous summer, Hamilton had no training or tutors, yet he reacted with the sangfroid of an experienced central banker. He restored temporary calm to the marketplace, though milder gyrations continued through the fall.

The travail of William Duer was a public drama that transfixed New Yorkers for days. There were constant meetings at Duer’s mansion to try to rescue him from creditors. “This poor man is in a state of almost complete insanity,” Troup told Hamilton, “and his situation is a source of inexpressible grief to all his friends.”80 Duer portrayed himself as an innocent lamb, gored by his pitiless creditors. In an agitated, sometimes incoherent mood, he took refuge at Baron von Steuben’s, where he vainly awaited a reprieve from Hamilton. With an invincible capacity for self-delusion, Duer assured one friend, “I am now secure from my enemies and feeling the purity of my heart I defy the world.”81 The day after he made this brave declaration, he was packed off to debtors’ prison. Before long, Alexander Macomb failed and was also imprisoned.

By this point, Duer may have welcomed prison as a refuge from vengeful mobs howling that they wanted to disembowel him. Their animosity was so great that it was feared they might storm the jail and lynch him. On the night of April 18, hundreds of aggrieved creditors and investors ringed the jail and hurled stones at it. One newspaper wrote of the “frequent shouts and menaces” they uttered and said that many were “crying aloud, We will have Mr. D[ue]r, he has gotten our money”— words that “must have terrified the prisoner exceedingly and made him suppose that the vengeance of the injured citizens was immediately coming upon him.”82 Duer still expected to be freed by Hamilton’s miraculous intervention. In fact, the treasury secretary had already decided to make an example of Duer, informing a friend, “There should be a line of separation between honest men and knaves, between respectable stockholders and dealers in the funds and mere unprincipled gamblers. Public infamy must restrain what the laws cannot.”83 Hamilton’s letters to William Seton during these weeks mingle sadness and horror as he contemplated the plight of those destroyed by the panic.

Hamilton’s critics gloated over these events as vindicating their critique of his system. For the slaveholding south, this was irrefutable proof of northern depravity. Jefferson inveighed against the “criminality of this paper system” and said people would now return to “plain unsophisticated common sense.”84 With a touch of schadenfreude, he computed that the five million dollars squandered by speculators equaled the combined value of all New York real estate. Madison observed with satisfaction, “The gambling system…is beginning to exhibit its explosions. D[uer]…the prince of the tribe of speculators has just become a victim of his enterprises.”85 Hamilton was appalled to learn of Madison’s allegation that his purchases of government securities to steady the market had been made at high prices to benefit speculators. This complete misconception of his virtuoso performance was hard for Hamilton to stomach, and he told a Virginia friend it “left no doubt in anyone’s mind that Mr. Madison was actuated by personal and political animosity.”86

That Hamilton did not exaggerate the vindictive mood of Madison and the southern congressmen is confirmed in a letter Abigail Adams wrote about the panic to her sister: “The southern members are determined if possible to ruin the Secretary of the Treasury, destroy all his well-built systems, [and] if possible give a fatal stab to the funding system.” Her husband, the vice president, had managed to “harmonize” the Senate, but this did not stem the regional rancor. “I firmly believe, if I live ten years longer, I shall see a division of the southern and northern states unless more candour and less intrigue, of which I have no hopes, should prevail,” she wrote.87

William Duer’s downfall exposed the magnitude of the securities market that Hamilton had opened up. It also showed how easily the market for government bonds could be rigged by swindlers planting false rumors and exploiting the auction system for stock trades. To provide more orderly markets, two dozen brokers gathered on May 17 under the shade of a buttonwood tree at 68 Wall Street and drew up rules to govern securities trading. This historic Buttonwood Agreement set a minimum for brokers’ commissions and laid the foundations for what became the New York Stock Exchange. It attested to the extraordinary, if sometimes combustible, vigor of the capital markets that Hamilton had singlehandedly brought into being.

A year later, trading in government bonds grew so brisk that the Buttonwood group adjourned to an upstairs room of the new Tontine Coffee House, a three-story brick structure at Wall and Water Streets, right near Hamilton’s New York home. Its first president was Archibald Gracie, whose East River mansion was to house New York mayors. Local wits christened the Tontine Coffee House “Scrip Castle” in honor of Hamilton’s bank scrip, which had triggered expanded share trading. Henceforth, Wall Street would signal much more than a short, narrow lane in lower Manhattan. It would symbolize an industry, a sector of the economy, a state of mind, and it became synonymous with American finance itself.

On July 4, 1792, a full-length portrait of Hamilton, painted by John Trumbull on the commission of New York’s grateful merchants, went up in City Hall. Lest he seem self-aggrandizing, Hamilton consented to the project with one caveat: that the painting “appear unconnected with any incident of my political life.”88 Trumbull painted Hamilton frequently—two original portraits and fifteen replicas—and captured him here in his prime, with only the slightest shadow of a double chin. The treasury secretary gazes off into the distance with visionary confidence. Very refined, he stands by his desk in a pale suit, his body slim and shapely, one bare hand poised on his desk, the other elegantly gloved and holding a second glove; his black cloak is draped over a nearby chair. In tribute to Hamilton’s literary powers, a pen is dipped in an inkwell. With his face illuminated by a good-natured smile, he radiates a quiet, buoyant energy and seems ready for many more triumphs.

The 1792 financial panic came on the heels of the two great projects by which Hamilton hoped to excite the public with the shimmering prospects for American manufacturing: the Society for Establishing Useful Manufactures and submission of his Report on Manufactures. The outlook for both was badly damaged by the panic. Even a short list of the worst offenders in the share mania—William Duer, Alexander Macomb, New York broker John Dewhurst, Royal Flint—included so many SEUM directors that it almost sounded like a company venture. Duer’s notoriety was especially detrimental since he had been SEUM governor, its largest shareholder, and its chief salesman in hawking securities. When Hamilton dispatched his friend Nicholas Low to sound out Duer in prison, the unyielding financier refused to resign as SEUM governor or account for the whereabouts of society funds. People who had pledged to purchase shares retreated in droves as the society’s good name was muddied.

The remaining SEUM directors rummaged through its books to assess the damage and were dismayed to learn that Duer had emptied the society’s bank accounts for his own use. “I trust they are not diverted,” Hamilton had warned Duer in a letter. “The public interest and my reputation are deeply concerned in this matter.”89 When the panic had hit, Duer had had ten thousand dollars of society funds in his possession, and that money now simply vanished. It turned out he had taken a liberal fifty-thousand-dollar loan from the SEUM treasury (though much of this was recouped when shares he pledged as collateral were sold), and another fifty thousand to buy textile machinery had gone to John Dewhurst, who had absconded with the funds to Pennsylvania. When the society board held its quarterly meeting in New Brunswick, New Jersey, that April, the New York directors were so distracted by the mayhem that not a single one showed up. Deputy Governor Archibald Mercer appealed to Hamilton to “assist us in our operations as far as [it is] in your power.”90

To revive the board’s spirits, Hamilton promised to try to arrange loans for the society and suggested it hire needed workmen from Europe. What quickly became apparent was that the board was rife with financiers who were abysmally ignorant of industrial matters. “For my part, I confess myself perfectly ignorant of every duty relating to the manufacturing business,” Mercer admitted to Hamilton while begging him to attend a special society meeting in mid-May. Intent upon salvaging the enterprise, Hamilton stole several days from his Treasury schedule to confer with the board.

How exactly would the SEUM, its coffers cleaned out by Duer, pay for its property on the Passaic River? Hamilton privately approached William Seton at the Bank of New York and arranged a five-thousand-dollar loan at a reduced 5 percent interest rate. He cited high-minded reasons, including the public interest and the advantage to New York City of having a manufacturing town across the Hudson, but more than the public interest was at stake: “To you, my dear Sir, I will not scruple to say in confidence that the Bank of New York shall suffer no diminution of its pecuniary faculties from any accommodations it may afford to the Society in question. I feel my reputation concerned in its welfare.”91 The SEUM’s collapse, Hamilton knew, could jeopardize his own career. In promising Seton that he would see to it as treasury secretary that the Bank of New York was fully compensated for any financial sacrifice entailed by the SEUM loan, Hamilton mingled too freely his public and private roles.

For several days in early July 1792, Hamilton huddled with the society directors to hammer out a new program. “Perseverance in almost any plan is better than fickleness and fluctuation,” he was to lecture one superintendent, with what could almost have been his personal motto.92 Rewarding his efforts, the society approved wide-ranging operations: a cotton mill, a textile printing plant, a spinning and weaving operation, and housing for fifty workers on quarter-acre plots. Never timid about his own expertise, Hamilton pinpointed the precise spot for the factory at the foot of the waterfalls that had so impressed him with their strength and beauty during the Revolutionary War.

It was an index of the hope generated by Hamilton that the SEUM, at his suggestion, hired Pierre Charles L’Enfant, the architect who had just laid out plans for the new federal city on the Potomac River, to supervise construction of the society’s buildings and plan the futuristic town of Paterson. At the same time, it was an index of Hamilton’s persistent anxiety that he dipped into managerial minutiae befitting a factory foreman rather than an overworked treasury secretary. For instance, he instructed the directors to draw up an inventory of tools possessed by each worker and stated that, if any were broken, the parts should be returned and “a report made to the storekeeper and noted in some proper column.”93 With his reputation at stake, Hamilton even subsidized the venture with his own limited funds, advancing $1,800 to the mechanics. Despite the Duer fiasco, the SEUM commenced operations in spinning, weaving, and calico printing.

The subsequent society records make for pretty dismal reading, as Hamilton was beset by unending troubles. L’Enfant was the wrong man for the job. Instead of trying to conserve money for the cash-strapped society, he contrived extravagant plans for a seven-mile-long stone aqueduct to carry water. He was enthralled by the idea of creating a grand industrial city on the pattern of the nascent Washington, D.C., with long radiating avenues, rather than with building a simple factory. By early 1794, L’Enfant shucked the project and spirited off the blueprints into the bargain. To find qualified textile workers, the society sent scouts to Scotland and paid for the laborers’ passage to America. Even the managers clamored for better pay, and SEUM minutes show that some disgruntled artisans personally hired by Hamilton began to sabotage the operation by stealing machinery. One of the saddest parts of the story relates to the employment of children. Whatever hopeful vision Hamilton may have had of children performing useful labor and being educated simultaneously, they had neither the time nor the money to attend school. To remedy the problem, the board hired a schoolmaster to instruct the factory children on Sundays—which, as Hamilton must have known, was scarcely a satisfactory solution.

By early 1796, with Hamilton still on the board, the society abandoned its final lines of business, discontinued work at the factory, and put the cotton mill up for sale. Hamilton’s fertile dream left behind only a set of derelict buildings by the river. At first, it looked as if the venture had completely backfired. During the next two years, not a single manufacturing society received a charter in the United States. Hamilton’s faith in textile manufacturing in Paterson was eventually vindicated in the early 1800s as a “raceway” system of canals powered textile mills and other forms of manufacturing, still visible today in the Great Falls Historic District. The city that Hamilton helped to found did achieve fame for extensive manufacturing operations, including foundries, textile mills, silk mills, locomotive factories, and the Colt Gun works. Hamilton had chosen the wrong sponsors at the wrong time. In recruiting Duer and L’Enfant, he had exercised poor judgment. He was launching too many initiatives, crowded too close together, as if he wanted to remake the entire country in a flash.

The SEUM’s problems after the 1792 panic also occurred at a moment when Hamilton’s political fortunes were starting to change. His never-ending reports and innovations were rattling the country. As one Jeffersonian writer said after Duer’s comeuppance, Hamilton had “talked to them so much of imports…funds…banks…and…manufactures that they are considered as the cardinal virtues of the Union. Hence liberty, independence…have been struck out from the American vocabulary and the hieroglyphs of money inserted in their stead.”94 In September 1792, Elisha Boudinot—a Newark lawyer and brother of Elias—told Hamilton of rising political protests against the SEUM and warned that “a strong party” was forming in Philadelphia “against the Secretary of the Treasury.” He reported that one unidentified Virginian was “very violent on the subject” and was trying to see what could be done “with regard to displacing” him.95 For many Americans, the sheer profusion of Hamilton programs added up to a picture of America’s future that frightened them.

The financial turmoil on Wall Street and the William Duer debacle pointed up a glaring defect in Hamilton’s political theory: the rich could put their own interests above the national interest. He had always betrayed a special, though never reflexive or uncritical, solicitude for merchants as the potential backbone of the republic. He once wrote, “That valuable class of citizens forms too important an organ of the general weal not to claim every practicable and reasonable exemption and indulgence.”96 He hoped businessmen would have a broader awareness and embrace the common good. But he was so often worried about abuses committed against the rich that he sometimes minimized the skulduggery that might be committed by the rich. The saga of William Duer exposed a distinct limitation in Hamilton’s political vision.

And what ever became of William Duer? After the 1792 panic, he lingered in prison for seven years—the remainder of his life. Until the end, he sent Hamilton heartrending notes, pleading for trifling loans of ten or fifteen dollars, which Hamilton granted. During one yellow-fever epidemic, Hamilton arranged for Duer to be transferred to another wing of the prison to protect him from the disease. Duer did not seem to blame his old friend for his imprisonment, and Hamilton seemed forgiving toward the man who had all but wrecked his manufacturing society and very nearly his reputation. Right before Duer died in 1799, he wrote movingly to Hamilton, “My affection for yourself and my sensibility for whatever interested your happiness has been ever sincere and I have felt with pain any appearance of your withdrawing from me.”97