Chapter 18

BANKS AND BRIBERY

1791-1812

During the early years of the last century, efforts to incorporate banks in New York were characterised by such an utter disregard of moral methods, that the period was long remembered as a black spot in the history of the State. Under the lead of Hamilton, Congress incorporated the United States Bank in 1791; and, inspired by his broad financial views, the Legislature chartered the Bank of New York in the same year, the Bank of Albany in 1792, and the Bank of Columbia, located at Hudson, in 1793. These institutions soon fell under the management of Federalists, who believed in banks and were ready to aid in their establishment, so long as they remained under Federalist control.

Republicans, on the other hand, disbelieved in banks. They opposed the United States Bank; and by George Clinton's casting vote defeated an extension of its charter, which expired by limitation on March 4, 1811. To them a bank was a combination of the rich against the poor, a moneyed corporation whose power was a menace to free institutions, and whose secret machinations were to be dreaded. At the same time, Republican leaders recognised the political necessity of having Republican banks to offset the influence of Federalist banks, and in order to overcome the deep seated prejudice of their party and to defeat the opposition of Federalists, inducements were offered and means employed which unscrupulous men quickly turned into base and shameless bribery.

In his partisan zeal Burr began the practice of deception. The Republicans needed a bank. The only one in New York City was controlled by the Federalists, who also controlled the Legislature, and the necessities of the rising party, if not his own financial needs, appealed to Burr's clever management. Under the cover of chartering a company to supply pure water, and thus avoid a return of the yellow fever which had so recently devastated the city, he asked authority to charter the Manhattan Company, with a capital of two million dollars, provided "the surplus capital might be employed in any way not inconsistent with the laws and Constitution of the United States and of the State of New York." The people remembered the terrible yellow fever scourge, and the Legislature considered only the question of relieving the danger with pure and wholesome water; and, although the large capitalisation aroused suspicion in the Senate, and Chief Justice Lansing called it "a novel experiment,"[157] the bill passed. Thus the Manhattan Bank came into existence, while wells, brackish and unwholesome, continued the only sufficient source of water supply.

[Footnote 157: "This, in the opinion of the Council, as a novel experiment, the result whereof, as to its influence on the community, must be merely speculative and uncertain, peculiarly requires the application of the policy which has heretofore uniformly obtained--that the powers of corporations relative to their money operations, should be of limited instead of perpetual duration."--Alfred B. Street, _New York Council of Revision_, p. 423.]

That was in 1799. Four years later, the Republicans of Albany, realising the importance of a bank and the necessity of avoiding the opposition of their own party, obtained a charter for the State Bank, by selling stock to Republican members of the Legislature, with an assurance that it could be resold at a premium as soon as the institution had an existence. There was a ring of money in this proposition. Such an investment meant a gift of ten or twenty dollars on each share, and immediately members clamoured, intrigued, and battled for stock. The very boldness of the proposition seemed to save it from criticism. Nothing was covered up. To put the stock at a premium there must be a bank; to make a bank there must be a charter; and to secure a charter a majority of the members must own its stock. The result was inevitable.

It seems incredible in our day that such corruption could go on in broad daylight without a challenge. At the present time a legislator could not carry a district in New York if it were known that his vote had been secured by such ill-gotten gains. Yet the methods of the Republican promoters of the State Bank seem not to have brought a blush to the cheek of the youngest legislator. No one of prominence took exception to it save Abraham Van Vechten, and he was less concerned about the immorality of the thing than the competition to be arrayed against the Federalist bank in Albany. Even Erastus Root, then just entering his first term in Congress, saw nothing in the transaction to shock society's sense of propriety or to break the loftiest code of morality. "There was nothing of mystery in the passage of the bank," he wrote. "The projectors sought to push it forward by spreading the stock among the influential Republicans of the State, including members of the Legislature, and carry it through as a party measure. It was argued by the managers of the scheme that the stock would be above par in order to induce the members of the Legislature to go into the measure, but nothing in the transaction had the least semblance of a corrupt influence. No one would hesitate from motives of delicacy, to offer a member, nor for him to take, shares in a bank sooner than in a turnpike or in an old canal."[158]

[Footnote 158: Jabez D. Hammond, _Political History of New York_, Vol. 1. Appendix, p. 583, Note J.]

One can hardly imagine Erastus Root serious in the expression of such a monstrous doctrine. His life had been pure and noble. He was a sincere lover of his country; a statesman of high purpose, and of the most commanding talents. No one ever accused him of any share in this financial corruption. Yet a more Machiavellian opinion could not have been uttered. On principle, Republican members of the Legislature opposed banks, and that principle was overcome by profits; in other words, members must be bought, or the charter would fail. That the stock did go above par is evident from Root's keen desire to get some of it. As an influential Republican, he was allowed to subscribe for fifty shares, but when he called for it the papers could not be found. The bank was not a bubble. It had been organised and its stock issued, but its hook had been so well baited that the legislators left nothing for outsiders. Subsequently the directors sent Root a certificate for eight shares, and John Lamb, an assemblyman from Root's home, gave up eight more; but the Delaware congressman, angry because deprived of his fifty shares, refused to accept any. "I had come prepared to take the fifty," he wrote, "and in a fit of more spunk than wisdom, I rejected the whole."[159]

[Footnote 159: Jabez D. Hammond, _Political History of New York_, Vol. 1. Appendix, p. 582, Note S.]

Two years after, in 1805, the Federalists desired to charter the Merchants' Bank of New York City. But the Legislature, largely Republican, was led by DeWitt Clinton, now at the zenith of his power, who resented its establishment because it must become a competitor of the Manhattan, an institution that furnished him fat dividends and large influence. Clinton had undoubtedly acquired a reputation for love of gain as well as of power, but he had never been charged, like John Taylor, with avarice. He spent with a lavish hand, he loaned liberally to friends, and he borrowed as if the day of payment was never to come; yet he had no disposition to help opponents of a bank that must cripple his control and diminish his profits. In this contest, too, he had the active support of Ambrose Spencer, who fought the proposed charter in the double capacity of a stockholder in the Manhattan and the State, and a member of the Council of Revision. Three banks, with five millions of capital and authority to issue notes and create debts for fifteen millions more, he argued, were enough for one city. He had something to say also about "an alarming decrease of specie," and "an influx of bills of credit," which "tended to further banish the precious metals from circulation."[160]

[Footnote 160: Alfred B. Street, _New York Council of Revision_, p. 427.]

Governor Lewis would have been wiser had he joined Clinton and Spencer in their opposition. But Lewis would not play second fiddle in any game with Clinton, and so when he discovered that Clinton opposed the bank, he yielded party principle to personal prejudice and favoured it. With this powerful recruit the managers still lacked a majority, and, to influence others, Ebenezer Purdy, a Republican senator, employed his gifts in offering his legislative associates large rewards and rich benefits. As a statesman, Purdy seems to have been without any guiding principle, or any principle at all. He toiled and pushed and climbed, until he had landed in the Senate; then he pulled and bargained and promised until he became a member of the Council of Appointment, and, later, chairman of the legislative caucus that nominated Chancellor Lansing for governor; but not until the Merchants' Bank wanted a charter did Purdy find an opportunity to develop those aldermanic qualifications which distinguish him in history. He was getting on very well until he had the misfortune to confide his secret to Stephen Thorn, a senator from the eastern district, and Obadiah German, the well-known assemblyman from Chenango, whose views were not as liberal as Erastus Root's. "No one would hesitate, from motives of delicacy, to offer a member shares in a bank," said Root. This was Purdy's view also; but Thorn and German thought such an offer had the "semblance of a corrupt influence," and they made affidavits that Purdy had attempted to corrupt their votes. According to these affidavits the Senator promised German fifty shares of stock, with a profit of twenty dollars a share, and Thorn thirty shares, with a profit of twenty-five dollars a share. Similar affidavits were made by other members.

Erastus Root took exception to such transactions. "The Merchants' Bank in 1805," he says, "had powerful opposition to encounter, and, of course, made use of powerful means to accomplish the object. Then the shares and the assurance became down-right corruption."[161] But it is not easy to observe the difference between the methods of the State Bank managers, which Root affirms "had not the least semblance of a corrupt influence," and those of the Merchants' Bank, which he pronounces "down-right corruption," except that the one was open bribery and the other secret bribery. In either case, votes were obtained by the promise of profits. It is likely the methods of the Merchants' would have escaped notice, as did those of the State Bank, had not Clinton, determined to beat it, complained of Purdy's bribery. The latter resigned to escape expulsion, but the bank received its charter. This aroused the public conscience, and in the following winter the Legislature provided suitable punishment for the crime of bribery.

[Footnote 161: Jabez D. Hammond, _Political History of New York_, Vol. 2. Appendix, p. 582.]

It was not until 1812 that any one had the hardihood to suggest another bank. Then the Federalists sought a charter for the Bank of America, with a capital of six millions, to be located in New York City. The applicants proposed to pay the school fund four hundred thousand dollars, the literature fund one hundred thousand, and the State one hundred thousand, provided no other bank be chartered for twenty years. In addition to this extravagant bonus, its managers agreed to loan the State one million dollars at five per cent. for the construction of canals, and one million to farmers at six per cent. for the improvement of their real estate. This bold and liberal proposal recalls John Law's South Sea Bubble of the century before; for, although the Bank of America sought no monopoly and promised the payment of no national debt, it did seem to be aiming its flight above the clouds, since, counting the Manhattan at two, the united capital of the banks of the State did not exceed five millions. The promoters, anticipating an outcry against the incorporation of such a gigantic institution, employed David Thomas of Washington and Solomon Southwick of Albany to visit members of the Legislature at their homes with the hope of enlisting their active support.

It is doubtful if two men better equipped to supply the necessary legislative majority could have been found in the State. Both were stalwart Republicans, possessing the confidence of DeWitt Clinton and an extensive acquaintance among local party managers. Thomas had caution and rare sagacity. Indeed, his service of four years in the Legislature and eight years in Congress had added to his political gifts such shrewdness and craft that he did not scruple, on occasion, to postpone or hasten an event, even though such arrangement was made at the expense of some one else. This characteristic had manifested itself in the removal of Abraham G. Lansing as treasurer of state. The Chancellor's brother, by long service, had won the confidence of the people as a keeper of the State's money, and, although his family had followed the fortunes of Governor Lewis, it did not occur to the Legislature to dispossess him of his office until David Thomas wanted a position. Then, the silent, crafty Washingtonian developed so artfully the iniquity of Lansing's political perfidy that he succeeded in obtaining the office for himself. It was because of this craftiness, this unscrupulous use of every weapon of political warfare, that the bank hired him. His gifts, his schemes, his faults, his vices, were alike useful.

Solomon Southwick belonged to a different type. He lacked the caution of Thomas, but nature had given him the appearance and manners which well fitted him for the task of attracting those who came within the range of his influence. He was singularly handsome and graceful. No stranger came near him without feeling an instant desire to know him. He was all the more attractive because there seemed to be nothing artificial or made up about him. He had his intimates, but with an unstudied and informal dignity, he was hail-fellow with every one, keeping none at a distance, and concealing his real feelings behind no mask of conventionalism. It was said of him at this time that he knew more men personally than any other citizen in the State. He had been four times elected clerk of the Assembly, he had served as sheriff of his county, and he was now sole editor and proprietor of the Albany _Register_, the leading and most influential Republican paper. To ability as a writer he also added eloquence of speech. Southwick could not be called a great orator, but he had grace, wit, imagination, and a beauty of style that appealed to the hearts and sympathies of his hearers. In the conduct of his business affairs, nobody could be more careful, more methodical, more precise. Indeed, we may take it for granted, without any biographical information on the subject, that in 1811 Solomon Southwick was on the road to the highest honours in the gift of his State.

But his connection with the Bank of America covered him with suspicion from which he never entirely recovered. It must have occurred to him, when accepting the bank's retainer, that his opposition to the Merchants' Bank would be recalled to the injury of his consistency. In 1805, he had boldly declared in the _Register_ that any Republican who voted for a Federalist bank was justly censurable; in 1812, he so far changed his mind as to hold that any one "who supports or opposes a bank upon the grounds of Federalism or Republicanism, is either deceiver or deceived, and will not be listened to by any man of sense or experience." A little later in the contest, when partisan fury and public corruption were the opposing forces, several sub-agents of the bank were indicted for bribery, among them a former clergyman who was sent to the penitentiary. Then it was whispered that David Thomas, following the example of Purdy in 1805, had scattered his purchase-money everywhere, sowing with the sack and not with the hand. Finally, Casper M. Rouse, a senator from Chenango, accused Thomas of offering him ten shares of stock, with a profit of one thousand dollars, adding that Thomas had told him to call upon Southwick in Albany. Southwick had evidently fallen into bad company, and, although Rouse disclaimed having seen the Albany journalist, a week or two later Alexander Sheldon, speaker of the Assembly, made a charge against Southwick similar to Rouse's accusation against Thomas. Both men were indicted, but the jury preferred accepting the denial of the defendants, since it appeared that Rouse and Sheldon, instead of treating the accused as bribers and men unworthy of confidence, had maintained their former relations with them, subsequently voting for Thomas for treasurer of state, and for Southwick as regent of the State University. As positive proof of bribery was limited in each case to the prosecuting witness, we may very well accept the defendants' repeated declarations of their own integrity and uprightness, although the conditions surrounding them were too peculiar not to leave a stigma upon their memory.

These charges of crime, added to the bank's possession of a solid majority in both branches of the Legislature, aroused the opposition into a storm of indignation and resentment. Governor Tompkins had anticipated its coming, and in a long, laboured message, warned members to beware of the methods of bank managers. Such institutions, he declared, "facilitate forgeries, drain the country of specie, discourage agriculture, swallow up the property of insolvents to the injury of other creditors, tend to the subversion of government by vesting in the hands of the wealthy and aristocratic classes powerful engines to corrupt and subdue republican notions, relieve the wealthy stockholder from an equal share of contribution to the public service, and proportionally enhance the tax on the hard earnings of the farmer, mechanic and labourer." He spoke of the "intrigue and hollow pretences" of applicants, insisting that the gratification of politicians ought not to govern them, nor the "selfish and demoralising distribution of the stock." "Nor ought we to be unmindful," he continued, "that the prominent men who seek the incorporation of new banks, are the very same men who have deeply participated in the original stock of most of the previously established banks. Having disposed of that stock at a lucrative advance, and their avidity being sharpened by repeated gratification, they become more importunate and vehement in every fresh attempt to obtain an opportunity of renewing their speculations." As if this were not reason enough, he exhorted them not to be deceived by the apparent unanimity of sentiment about the capital, since it "is no real indication of the sentiments of the community at large," but so to legislate as "to retain and confirm public confidence, not only in the wisdom, but also in the unbending independence and unsullied integrity of the Legislature."[162]

[Footnote 162: _Governors' Speeches_, January 28, 1812, pp. 115-8.]

The Governor's arguments were supplemented by others from Ambrose Spencer, whose bank holdings seemed more likely than ever to suffer if this gigantic combination succeeded. Spencer's opposition to the Merchants' Bank in 1805 had been earnest, but now his whole soul was aflame. To counteract the influence of Southwick's _Register_, he established the Albany _Republican_, which ceased to exist at the end of the campaign, but which, during its brief life, struck at every head that favoured the bank. Its editorials, following the line of his objections in the Council of Revision, lifted into prominence the injurious effect likely to flow from such an alarming extension of banking capital at a time when foreign commerce was stagnant, and when the American nation was on the eve of a war in defence of its commercial rights. This was mixed with a stronger personal refrain, discovering the danger to his bank-holdings and revealing the intensity of a nature not yet inured to defeat. A bank controlling three times as much capital as any other, he argued, with unlimited power to establish branches throughout the State, must be a constant menace to minor institutions, which were established under the confidence of governmental protection and upon the legislative faith that no further act should impair or destroy their security. "A power thus unlimited," he declared, "may be exercised not only to prejudice the interests, but to control the operations, destroy the independence, and impair the security of every bank north of the city of New York. A bill thus improvisory and alarming, giving undefined and unnecessary powers, and leaving the execution of those powers to a few individuals, would materially weaken the confidence of the community in the justice, wisdom, and foresight of the Legislature."[163]

[Footnote 163: Alfred B. Street, _New York Council of Revision_, p. 432.]

With Tompkins and Spencer stood John Taylor, whose fear for his stock in the State Bank, of which he was president, made his opposition more conspicuous than it appeared in 1805, when he assaulted Purdy, knocking him down as he left the senate chamber; but in this contest, he did not strike or threaten. He moved among his associates in the Senate with the grace of a younger man, his tall, spare form bending like a wind-swept tree as he reasoned and coaxed. In the same group of zealous opponents belonged Erastus Root, who had just entered the Senate, and whose speech against the Bank of America was distinguished for its suppressed passion and its stern severity. He had waked up, at last, to the scandalous barter in bank charters.

There was, however, one Republican in Albany whose course excited more serious censure than was meted out to all others. At a moment when the methods of bank managers aroused the most bitter hostility of his closest political allies, DeWitt Clinton became conspicuous by his silence. At heart he opposed the Bank of America as bitterly as Ambrose Spencer and for the same reasons; nor did he recognise any difference in the conditions surrounding it and those which existed in 1805 when he drove Ebenezer Purdy from the Senate; but, consumed with a desire to get a legislative indorsement for President, before Madison secured a congressional nomination, he refused to take sides, since the bank people, who dominated the Legislature, refused such an indorsement until the passage of their charter. In vain did Spencer threaten and Taylor plead. He would vote, Clinton said, against the bank if opportunity presented, but he would not be drawn into the bitter contest; he would not denounce Southwick; he would not judge Thomas; he would not even venture to criticise the bank. For fourteen years Clinton and Spencer had been fast political friends; but now, at the supreme moment of Clinton's ambition, these brothers-in-law were to fall under the guidance of different stars.

Governor Tompkins, whose desire to enter the White House no longer veiled itself as a secret, understood the purpose and importance of Clinton's silence, and to give President Madison an advantage, he used a prerogative, only once exercised under the Constitution of 1777, to prorogue the Legislature for sixty days. Ostensibly he did it to defeat the bank; in reality he desired the defeat of Clinton. It is not easy to appreciate the wild excitement that followed the Governor's act. It recalled the days of the provincial governors, when England's hand rested heavily upon the liberties of the people; and the friends of the bank joined in bitter denunciation of such a despotic use of power. Meantime, a congressional caucus renominated Madison. But whatever the forced adjournment did for Clinton, it in no wise injured the bank, which was chartered as soon as the Legislature reassembled on May 21.

While the Bank of America was engrossing the attention of the Legislature and the nomination of a presidential candidate convulsed Congress, George Clinton closed his distinguished career at Washington on the 20th of April, 1812. If he left behind him a memory of long service which had been lived to his own advantage, it was by no means lived to the disadvantage of his country or his State. He did much for both. Perhaps he was better fitted for an instrument of revolution than a governor of peace, but the influence which he exercised upon his time was prodigious. In the two great events of his life--the revolt of the Colonies and the adoption of a Federal Constitution--he undoubtedly swayed the minds of his countrymen to a degree unequalled among those contemporaries who favoured independence and state supremacy. He lacked the genius of Hamilton, the scholarly, refined integrity of Jay, and the statesmanship of both; but he was by odds the strongest, ablest, and most astute man of his party in the State. Jay and Hamilton looked into the future, Clinton saw only the present. The former possessed a love for humanity and a longing for progress which encouraged them to work out a national existence, broad enough and strong enough to satisfy the ambition of a great nation a century after its birth; Clinton was satisfied to conserve what he had, unmoved by the great possibilities even then indistinctly outlined to the eye of the statesman whose vision was fixed intently upon an undivided America. But Clinton wisely conserved what was given to his keeping. As he grew older he grew more tolerant and humane, substituting imprisonment for the death penalty, and recommending a complete revision of the criminal laws. His administration, too, saw the earliest attempts made in a systematic way toward the spread of education among the multitudes, his message to the Legislature of 1795 urging a generous appropriation to common schools. This was the first suggestion of state aid. Colleges and seminaries had been remembered, but schools for the common people waited until Clinton had been governor for eighteen years.