3.2: The First Financier: Robert Morris and the Bank of North America

He was one of the wealthiest men in the colonies, so by extension, the United States of America.  Foreign-born to unwed parents, he had the reputation of being a financial wizard who understood commerce, markets, and how to maximize profit.  Victory at Yorktown would not have occurred were it not for the efforts of this man, who was Superintendent of Finance as the American Revolution drew to a close. Robert Morris  sought to place the finances of America on sound footing with the creation of the Bank of North America, an institution that was ahead of its time.

Key People
Robert Morris
John Dickinson
Alexander Hamilton

Key Events/Ideas
Bank of North America
Articles of Confederation
American Revolution

The third season of History: Beyond the Textbook focuses on the stories of individuals who shaped "America's Crucial Years" of 1783-1790, and runs from October 8-December 24. Catch up on Season One, "America's Colonial Era," and Season Two, "America's Revolution," wherever you listen to your podcasts!

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Transcript

He was one of the wealthiest men in the colonies, so by extension, the United States of America.  Foreign-born to unwed parents, he had the reputation of being a financial wizard who understood commerce, markets, and how to maximize profit.  Victory at Yorktown would not have occurred were it not for the efforts of this man, who also served as a delegate to the Constitutional Convention in Philadelphia and had the reputation of being quite the ladies man.  Sounds like Alexander Hamilton, right?  Not exactly…although the musical Hamilton! highlighted the contributions of the $10 bill guy, both financial and otherwise, we are one season away from devoting an entire episode to his contributions to our American story.  All of the characteristics I explained perfectly describe Robert Morris, but I left a few things out: he signed the Declaration of Independence and the Articles of Confederation, and was Superintendent of Finance as the American Revolution drew to a close.  Remember that our first three episodes of this season will focus on individuals who sought to fix problems left over from the war, and Morris was a key player who sought to place the finances of America on sound footing.  In this episode of History: Beyond the Textbook, we’ll examine the moneyman of early America: Robert Morris, and his attempts to create the Bank of North America.

Act I: Money Problems

Last season, which addressed America’s Revolution, we alluded to the dire financial straits that the United States found itself in well before the ink was dry on the Paris Peace.  And episode 3.1 made it clear that the Articles of Confederation, designed to provide a purpose for binding the states together beyond war with England, gave little power to Congress to adequately deal with military issues.  As we shall see, the same was true for financial issues.

Remember that, as the war progressed, the Continental Congress, which morphed into the Confederation Congress, printed their own money for distribution to residents of the United States.  However, this money, known as “continentals,” would basically prove to be worthless and drive many to do business with the more fiscally reliable British forces.  Even the so-called “Certificates” that Congress doled out as payment for goods amounted to nothing more than an “IOU” that was probably never going to be paid back.  The Confederation Congress attempted to raise some form of revenue by requesting funds from the states; indeed, the Articles of Confederation allowed for a “common treasury” in which each state would contribute based on their assessed property values.  However, acquiring accurate estimates from said states was easier said than done because, among other reasons, no state legislature was willing to send money to a distant government that they felt would misappropriate their precious dollars…didn’t we feel the same way about sending tax dollars to Parliament?  Plus, Article VIII of the Articles specifically stated that any taxes “shall be laid and levied by the authority and direction of the legislatures of the several States.”  The states truly held all of the cards in this new world, while Congress was on the hook for a debt of about $30-$40 million due mainly to loans from France, but also the Netherlands as the war came to a close.  The United States was in danger of losing whatever credibility it had globally with its inability to pay off its debts, and they were still struggling to make ends meet with regard to outfitting and paying their own armed forces.  As money is a central issue within this episode, it seems appropriate if we transition to Act II with a quote from Confederation Congressman Alexander Hamilton, who wrote a resolution in 1782 stating that “...JUSTICE cannot be done to the creditors of the United States…nor the future exigencies of the war provided for, but by the establishment of permanent and adequate funds to operate generally throughout the United States, to be collected by Congress.”  This, however, was something that Congress was legally barred from completing.

Act II: Becoming the Financier

In steps Robert Morris…and for the record, if you do a simple Internet search for more information about him, make sure you specify that you want to learn about Robert Morris the Founding Father.  Born to unmarried parents in Liverpool, England, Morris moved to the Colonies at age 13, where he joined his father in Maryland; it appears as though his mother was never really in the picture.  His stay with his father would last only two years as he was sent packing to that most cosmopolitan of cities (at least, “cosmopolitan for the colonies): Philadelphia.  Morris’s father was a somewhat successful tobacco merchant, so it made sense that his son would be apprenticed to an individual involved in commerce, Charles Willing.  He acquired his father’s property when the latter died in 1750, and he made good friends with the son of Charles Willing, Thomas.  These events helped his economic standing in two ways: his wealth now had a base on which to grow, and his relationship with young Thomas Willing gave Morris an advantage in his promotion to full partner in the firm of Willing, Morris, & Company.  This is not to say that Robert Morris didn’t possess talents of his own: he did.  His business (yes, we’re referring to it as his even though he had partners) eventually placed agents in every European capital, expanded their enterprise to the West Indies, and unfortunately, even became involved in the slave trade, a, action that has proven to be a stain on the legacy of Robert Morris.  However all of these factors meant that Willing, Morris, & Company pretty much always had ships operating on the high seas, and Morris became an exceptionally wealthy man.

In addition to his adept skill in examining and exploiting commercial markets, Morris appears to have attempted to be a “man of the people,” if we can use that cliche.  Sure, he was filthy rich, so he was probably socioeconomically disqualified from obtaining said title.  However, he was one of those individuals who seems to have appreciated the proverbial “little guy” during his rise to the top.  He could walk the docks and wharves of the CIty of Brotherly Love and address the workingmen by name; he enjoyed conducting business in the city’s taverns and inns “among the people” and was known to be financially generous with the waitstaff.  Sure, the tensions between Parliament and radical Americans wasn’t always the best for business, as the nonimportation agreements that protested the various laws could attest to, but he still made his money and ran his business successfully.  He even found time to wed in 1769, marrying wealthy Marylander Mary White, and he built an imposing estate just outside of Philadelphia known as The Hills.  And if his financial success and smooth charm weren’t enough, the man was six feet tall in an era when that was fairly uncommon, so he cut a pretty imposing future.  In other words, life was good if you were Robert Morris in early 1770’s America.

Act III: Financing the War

Well, it was good up until the mid-1770’s, and it’s not as if his life will turn bad at this time, it’s just that the American Revolution officially began, and war definitely has a way of complicating life.

A man of commerce, Robert Morris wasn’t much given to political theory; in fact, it doesn’t appear as though he even enjoyed reading books all that much.  However, a man so wealthy and influential as Morris could hardly expect to stay on the sidelines during this affair.  He wasn’t a fan of the Stamp Act and even went as far as to inform the appointee who was to collect the tax in Philadelphia that it would be most unwise for him to carry out his duties.  As a merchant, he understood that there was much truth in the cliche that “it’s about the money,” or perhaps “money talks” would be more appropriate.  At any rate, he believed that the economic boycotts of British goods known as “nonimportation agreements” were an effective method of persuading Parliament to change their ways; much more so than official petitions.  As the road to war accelerated, his adopted home of Philadelphia became ground zero for Patriot politics, and Robert Morris was appointed to the Second Continental Congress.  Morris had much in common with the subject of episode 3.1, John Dickinson: both were born elsewhere and came to Philadelphia to make their fortunes, which became sizable.  Both were considered to be political “moderates” who opposed a complete political separation from Great Britain, although Morris would sign the document despite voting against declaring independence.  Both men would ultimately throw themselves at the task of defeating their enemy once independence was declared, and each man would, generally speaking, be lost in the proverbial dustbin of history as key players who helped win the Revolution and help establish a nation.

At the end of 1776, the Continental Congress fled Philadelphia for Baltimore in preparation for a potential British invasion of America’s de facto capital, explaining why Thomas Paine found a nearly deserted city when he traveled there in December 1776 to find a printer for his American Crisis.  Morris stayed behind because he was tasked with supervising the completion of several ships that were to aid in the America war effort in the hopes that they would be put to sea prior to the arrival of the British.  His ample experience as a seabound merchant made him ideal for the task, and as he was pretty much the only Congressman left in town, he essentially was the government.  His contributions would go far beyond naval construction and evacuation supervision, of which he ensured was orderly and timely for the Patriots of Philadelphia.  So voluminous were his wealth and connections that he had the means to personally bankroll and supply the Continental Army during their darkest times.  For example, the Battles of Trenton and Princeton could not have been successful were it not for the behind-the-scenes machinations of Robert Morris in procuring supplies, and Morris also listened to the pleas of General Washington when the latter insisted that “Silver would be most convenient” in paying “a certain set of people who are of particular use to us.”  Translation: spies.  That’s right: Morris found the funding for the Revolutionary equivalent of the CIA, so in addition to understanding markets and economics, the man bankrolled America’s earliest espionage efforts.

The following years saw Morris attempt to focus on his business enterprises while inevitably being drawn back into the burgeoning world of American politics.  One of the biggest issues he had to contend with was the accusations that he was using the war as an excuse to accrue immense profits for himself, accusations that didn’t bear fruit.  Sure, he made money on the war, as so many businessmen did. But there wasn’t much evidence to back up that he had misused his political position to unfairly profit.  He also had to contend with the reality that, as the war dragged on and the American economy was in shambles, he was pretty much the leading contender to right the metaphorical ship.  Morris wasn’t exactly eager to accept this challenge as he had been out of office for several years, but the calls became too hard to ignore.  Ironically, the Pennsylvania Line Mutiny that we learned about last week compelled Congress to create special departments to deal with the specific issues of war, marine, finance, and foreign affairs.  Morris was unanimously appointed to become the Superintendent of FInance, and he accepted this role in May 1781.  One of his largest wartime accomplishments was one that is not so well-known: Morris appropriated federal funds, and wrote personal checks, to raise the necessary money to provide the Franco-American forces with the supplies and pay necessary to lay siege to Yorktown.  In short, the decisive battle of the war would not have been an American success without the tireless efforts of Robert Morris…but his job of shoring up American finances was far from over.

Act IV: Banking on a Solution

So Robert Morris, one of America’s wealthiest citizens, was now in charge of the Finance Department and he had to oversee a federal government who could expect an annual revenue of…well, that’s the problem.  We learned back in Act I that the United States was deep in debt, and to pay off this debt, taxation wasn’t an option because, per the Articles of Confederation, Congress had no power of taxation nor the ability to compel states to pay up.  He had to get creative and provide solutions that had never before been seen in America.  His initial solution was to create the Bank of North America, sometimes called the Bank of the United States, but given that we will cover the First Bank of the United States next season, we’ll simply call Morris’s creation the Bank of North America to avoid any confusion with that future institution.

Any successful “bank” relies upon the concept of “credit,” which, in simple terms, can be thought of as a sort of “buy now, pay later” ideology.  Consider any “credit card:” when you use a credit card to conduct any type of purchase, the company or bank through which you hold your card, such as Chase, Capital One, or American Express, pays the business on your behalf.  They are doing this on the condition that you will pay them back within a set amount of time: they are trusting that you will provide them with adequate compensation for their willingness to cover your purchase.  However, they can’t be too trusting, which is why they charge interest: should you fail to pay back the company in full within their provided time frame, you will have to pay them extra money, the amount of which is known as interest.  Granted, these are oversimplified explanations of how these concepts work, but many of us probably experience credit and interest on a daily basis without even thinking about it, whether it be credit cards or loans for houses, autos, or higher education.  The proliferation of the Internet into our everyday lives makes it easy to see credit in action, as well as preview what interest rates are.  Neither of these ideas were clear in 1781 America as finance was a concept that appeared to be reserved for a select few who operated in fancy buildings and made up numbers off the top of their heads.  This distrust of banking and financial institutions would persist in the United States for generations, and to a degree, still exists today.

This was the reality in which Morris made his proposal in May 1781, months before the siege of Yorktown.  In a pamphlet that circulated among the states, Morris described the Bank of North America as “a principal pillar of American Credit,” and he more or less would use it as a springboard to further national economic development.  To raise the revenue to start the bank, he would sell 1,000 shares at $400 per share, giving him a total of $400,000 in startup money.  Most of them were purchased by Morris, acting on behalf of the federal government using money procured from one of many loans from the French; the rest of the startup capital came from a variety of sources, including private associates which Morris convinced to purchase shares.  The bank would use the tax money collected from the states, part of his proposal, as well as monies collected on all imports, also part of his proposal, to stimulate economic growth by the circulation of banknotes nationwide.  Think of the bank notes as a type of paper money that would put an end to the problems of worthless Continentals as well as the confusing dynamic of dealing with different state currencies.  As part of his comprehensive financial plan, he also wanted to tax whiskey and allow the Congress to assume any war debt that was still held by the states: curiously enough, every single one of these ideas would be implemented by Alexander Hamilton when he became America’s first Secretary of the Treasury.  However, none of these would really come to fruition at the moment: we know that the Articles of Confederation prevented the imposition of any type of national tax, and the states couldn’t be forced to pay anything they didn’t want to pay.  Additionally, the import tax, or tariff, that would help fill the bank’s coffers was stymied by the lone holdout: Rhode Island.  The bank’s charter was also revoked in 1785, three years following its issue, though shares in this now private bank were among the initial shares traded in the New York Stock Exchange.  Far ahead of his time in his national vision, Robert Morris’s Bank of North America was nowhere near as effective as he had hoped, and it would take the elimination of the Articles of Confederation to allow for the full implementation of his vision.

As for the rest of Morris’s days?  Well, he was commonly believed to be one of the ringleaders of the “Newburgh Conspiracy” that we learned about last episode, the one in which Washington had to convince his officers not to mutiny against the Congress, although he would deny any involvement in the affair.  He would serve as a delegate to the Philadelphia Convention in May 1787 that resulted in the drafting of the U.S. Constitution.  His main contributions were as follows: he officially opened the proceedings, he nominated George Washington to be the head of the convention, and he signed the document; we already know that he wasn;t much for reading or political theory, so he left the debates up to the more politically astute.  So for those of you keeping track at home, Robert Morris affixed his signature to the Declaration of Independence, Articles of Confederation, and the U.S. Constitution.  Morris would decline the office of Treasury Secretary, instead serving as one of Pennsylvania’s first Senators.  And when the national capital was temporarily in Philadelphia, Robert Morris greeted President Washington with his personal residence: the city rented it out to the new federal government, so his mansion became our nation’s first White House.  Hard times would befall Morris in the early 1800’s, and he would land in debtor’s prison for 3.5 years.  The fact that his death in 1806 occurred without any public remembrances indicates that his contributions would go unnoticed for generations: Robert Morris gained much as an American, but he lost much as well.

In our next episode, we’ll conclude our three-episode arc of so-called “Forgotten Founding Fathers,” who dealt with problems bridging the gap between the American Revolution and the creation of the American republic.  Episode 3.3 will focus on a man who is probably most remembered as the man who wrote a couple of Federalist essays, but contributed so much more: John Jay, America’s early negotiator and treaty-maker whose failed attempts at a Spanish treaty ushered in a new era of America foreign policy.