Schiller Institute on YouTube Schiller Institute on Facebook RSS

Home >

This Week in History
January 11-17, 2015

Hamilton's Singular Genius vs. Wall Street's Rage

Presented in Celebration of Alexander Hamilton's Birthday, January 11, 1755

By David Shavin


Bob Wesser
Alexander Hamilton.

Hamilton's National Bank opened for business on July 4, 1791, in New York City. Wall Street was fashioned on March 21, 1792.[1] Therein lies a story.

In the summer and fall of 1791, Hamilton moved to put the credit of the new Federal union upon a sound footing. The best example of  the type of infrastructure development, as articulated in his December 5th "Report on Manufactures", was his project to build the city of  Paterson, New Jersey, centered around the harnessing of water power to run factories. This was the centerpiece project of Hamilton's newly-formed "Society for the Establishment of Useful Manufactures" (SEUM). Hamilton's prospectus for SEUM was written back in April, 1791, as part and parcel of his plans for the July 4th opening of the National Bank. (Amongst other things, investors in the Paterson project would be required to invest by use of the government securities.) Regarding SEUM, Hamilton noted on April 20th: “The more I have considered the thing, the more I feel persuaded that it will equally promote the Interest of the adventurers & of the public and will have an excellent effect on the Debt.” [2] 

However, the financial powers of Amsterdam and London had their own plans, centered around a speculative mania created around the National Bank's issuances, and the specific targeting of Hamilton and his SEUM. Hamilton's crushing intervention, in February and March of 1792, upon the speculators, is what instigated the founding of the Wall Street institution. And at the Buttonwood Group's newly-constructed trading floor - called the Tontine Coffeehouse - at the corner of Water and Wall Streets, was also the center of the "Republican" factionalists  (today's "Democratic Party"). "Anti-federalism" was simply the organized revolt against Hamilton's National Bank strategy and against  Washington's embrace of Hamilton's policy. Put another way, if Congress could keep on mission, and deliberate over their strategies to develop the general welfare, the tendency for factionalization never would have solidified into today's "party" game. But, to accomplish that, leaders would have to see through and counter the various strategems of imperial corruption. Hence, the unique leadership model of Alexander Hamilton, largely overlooked today, becomes a current strategic issue.

The second, and related, story is how the rage of the speculators targeted Hamilton for destruction, precisely because Hamilton was the unique statesman of the time who refused to compromise on the unique experiment that the U.S. Constitution had brought onto the world stage. The "Reynolds Affair" was such a targeting, along classic Venetian methodology - as in the 1785 case of Casanova in Vienna, and the 1785/6 case of Cagliostro in Paris. A lesser man would have chosen a more 'practical' course (e.g., along the lines of 'damage control' and 'career management'), but Hamilton forged ahead, relying upon the 'better angel' of man's nature.

Lincoln's concluding sentence from his (1861) First Inaugural was an invocation of the memory and sacrifice of those Founding Fathers, of whom none more deservedly than Hamilton: "The mystic chords of memory, stretching from every battlefield and patriot grave to every living heart and hearthstone all over this broad land, will yet swell the chorus of the Union, when again touched, as surely they will be, by the better angels of our nature." May the better angels of our nature be revived, as Hamilton's thematic statecraft takes on full symphonic form with the BRICS.

The National Bank

First Bank of the United States (1797-1811), Stephen Girard’s Bank (May, 1811-1831), subsequent banks, and owned since 1955 by the National Park Service. Location: 116 South 3rd Street, Philadelphia, PA 19106. Photographed in 2009.

We'll pick up the story in late 1790, with Hamilton's (12/14/1790) submission to Congress of his "Report on a National Bank".  Congress votes up the National Bank on February 2, 1791 - and Jefferson, the Secretary of State, and Madison, a leader in Congress, threaten trouble for Washington if he signs the bill. While Jefferson, never strong on the "general welfare" principle, had always been a  "states-righter", Madison, previously, had ridiculed states-rightists' attempts to treat the Constitution as nothing more than a permission slip, restricting the government to do only what is EXPLICITLY stated on the slip. However, for Madison, the period (1787/8) of his collaboration with Hamilton on the "Federalist Papers", and of his fight for the Constitution, was now over. Instead, beginning in the 1789/90 period, the new Virginia congressman, Madison, became 'practical'. He calculated that his career was dependent upon catering to the slave-owning landed class of Virginia.

Washington turns to Hamilton to put the argument on a solid basis, and in short order (by February 23, 1791), Hamilton has produced his masterful "Opinion on the Constitutionality of a National Bank." Hamilton's no-nonsense approach, that the establishment of the constitutional United States is no joke, no game - but that government really had the power to do what it was called into existence to do: “Now it appears to the Secretary of the Treasury, that this general principle is inherent in the very definition of Government and essential to every step of the progress to be made by that of the United States, namely—that every power vested in a Government is in its nature sovereign, and includes by force of the term, a right to employ all the means requisite, and fairly applicable to the attainment of the ends of such power: and which are not precluded by restrictions and exceptions specified in the constitution, or not immoral, or not contrary to the essential ends of political society."[3] Washington had captured the strategic high ground, and, two days later, signed the National Bank into law. Jefferson never forgave Washington for this, even insulting Washington to his face that Hamilton was using ideas to bamboozle Washington.

The "Gang of Four"

James Madison.
Aaron Burr.
Robert R. Livingston (1755-1828), portrait attributed to Gilbert Stuart.
Thomas Jefferson, portrait by Rembrandt Peale, 1805.

By April, with the aid of his assistant Treasury secretary, Tench Coxe, Hamilton had pulled together his plan and prospectus for the Society for the Establishment of Useful Manufactures. Hamilton's ideas including breaking the British control over the textile industry. Coxe had arranged for a student of Arkwright, one George Parkinson, to design and construct a flax mill. The patent for this was granted on March 24, 1791.

Jefferson and Madison decided that they had to defeat Hamilton and Washington. In May, they made a special trip to meet the powerful Robert R Livingston and the opportunistic Aaron Burr. They proceeded to factionalize amongst Hamilton's political base in New York State and New England. Robert Troup reported to Hamilton: "There was every appearance of a passionate courtship between the Chancellor [Livingston], Burr, Jefferson and Madison when the two latter were in town. 'Delenda est Carthago', I suppose, is the maxim adopted with respect to you." Troup precisely identified that this "Gang of Four" had united around the central mission to destroy Hamilton at all costs. Troup would be proved correct.

The counter-organizing of this 'Gang of Four' that summer was based upon sowing seeds of distrust - that a strategic plan for a nation was simply a grab for power, that Hamilton really wanted to be our own King George III. Basically, Hamilton had, what nowadays is thrown around as, an "authoritarian personality". Their mindless opposition to the National Bank, in their joint trip northward, can be designated as the beginning of the institutionalization of the 'party system' - a factionalization not contemplated under the Constitutional system. Everything described below is the result of not joyfully taking up the challenge of Hamilton's nation-building strategy, of not even debating Hamilton's articulated principles and plans on their merits.

Background on the Speculation Problem

Grist for the mill had been the 1790-91 activity of speculators in Revolutionary War debt. Veterans of the fight to establish the  nation were approached by speculators to sell their decade-old, unredeemed IOU's from the wartime Congress for as little as 10% of face value. Hamilton's announced plan (in his January 9, 1790 "Report on Public Credit") had made it clear that the IOU's would be made good at 100% of value. Speculators could only plow their trade by sowing doubts, amongst those who had held those notes for a decade, that Hamilton's plan would work.[4]

Two characters in this cynical trade would play key roles in the Hamilton vs. Wall Street brawl: William Duer and James Reynolds. In December, 1790, Duer partnered with Leonard Bleecker - later, one of the Wall Street founders - in buying up Revolutionary debt in South Carolina. And Reynolds was employed by New York speculator William J. Vredenburgh to travel around Virginia and North Carolina to buy up the same. Evidently, Vredenburgh had a source inside the Treasury in 1789 (during Duer's employment) that provided him with lists of names of officers and soldiers in those states, with the amounts of pay due to them. It was Reynold's wife, Maria Reynolds, who would show up on Hamilton's door-step with a phony 'lady-in-distress' story, in the days just prior to the opening of the National Bank. The history books love to relate the "Reynolds Affair", without ever inquiring as to whom might have put the Reynolds pair up to the project. But first, Duer.

Duer: Mr. Insider Trader

William Duer (1747-1799), contemporary portrait. Engraving by Max Rosenthal.

Duer would be the central public figure in the 1791/2 financial schemes against the National Bank. In March, 1792, Hamilton would  have to crush his former friend and colleague, resulting in the jailing of Duer and the popping of the bubble. However, for seven months, from September, 1789 to March, 1790, Duer had actually worked as Hamilton's Assistant Secretary at the Treasury, before Duer was forced to resign.

The curious association of Hamilton with Duer was certainly, in part, due to Duer being 'vetted' by Hamilton's father-in-law, Philip  Schuyler. Duer certainly had a colorful past. In brief, he had studied the classics at Eton, and had argued against the war against the colonies. As a young man, he worked for the East India Company in Bengal. Then he helped manage a family plantation in Antigua, before he bought land near the Schuyler's in upstate New York. He made money from selling flour, beef, and alcohol to the revolutionaries - but then,  after Yorktown, also to the British forces in New York City. In the 1780's, he joined the Manumission Society (to end slavery) along with  Hamilton's colleagues, Robert Troupe, Nicholas Fish and Hercules Mulligan. He was also made an honorary member of the Society of Cincinnatus. Duer married a cousin of Hamilton's wife, Betty Schuyler. From 1786-89, he was the Secretary of the pre-Constitution Board of Treasury (prior to Hamilton's Treasury). During this period, Hamilton attempted to recruit Duer as part of the team writing the "Federalist Papers"; however Hamilton had to reject Duer's only two submissions.

It seems that Duer had other priorities. In 1788/9, while running the affairs of the Board of Treasury, Duer took loans from Boston  financier Andrew Craigie, with the money trail commingled with Board of Treasury activity. Craigie was the 'junior partner' with Boston  lawyer Christopher Gore in perhaps the biggest speculation on Continental securities. (Later, according to Hamilton's colleague, Pinckney,  Duer went on to be a player with Gore, Craigie and Daniel Parker, in a land scheme, which backfired - due to Amsterdam bankers outmaneuvring the upstart American speculators.) During his Board of Treasury period, Duer was also involved with the scoundrel, William Playfair, in setting up the secretive Scioto Company. It sold Ohio land to Parisians - but without any of the internal improvements needed to make the development work. The settlers were unprepared and the project misfired. Further, Playfair absconded from Paris with monies.

Hamilton had a strict and explicit policy that no Treasury employee could deal in securities. Hamilton may have thought Duer's  knowledge of the previous three years of the Board of Treasury was valuable, but it took seven months after Hamilton assumed office to force Duer out. Speculators had relied upon Duer to provide insider information. One example led to Amsterdam. Noah Webster cited Duer, in writing to his brother-in-law, the Amsterdam speculator James Greenleaf, regarding details obtained from "the outdoor talk of Col. Duer, the Vice-Secretary".[5] Duer's blabbing was also thought to be source for enticing Congressmen to use insider knowledge. After leaving the Treasury, from April, 1790 to December, 1791, Duer is involved in medium-level money-games - at which point he enters into a grand conspiracy, attempting to undermine both Hamilton's SEUM and his National Bank.

Reynolds: The Pimp

James Reynolds, sometime in early 1791, interrupts his Southern travels, to move, with his wife Maria, to Hamilton's neighborhood in  Philadelphia (the new home of the Federal government). In the 'early summer' - that is, just about the time that the National Bank is to open  - Maria comes to Hamilton's home with a story about being deserted by her husband, and wanting Hamilton, a fellow New Yorker, to help her get back to her family. Hamilton submits to her charms. Hamilton began an affair with Maria that summer, when his dear Elizabeth was in the country with the children, an affair which was continued through the Fall. It would be his only dalliance, and he would find that Maria and James made it difficult for him to end the affair.

Elizabeth Schuyler Hamilton, wife of Alexander Hamilton, 1787, by Ralph Earl (1751-1801).

At this point, all that Reynolds proposes to Hamilton is that he be employed by the Treasury. Hamilton refuses to consider it. This  is not unimportant, as later accusations have it that Hamilton knew all along about the insider trading operations of 1789-90, involving  Duer, Reynolds and Vredenburgh. However, all evidence is that he forced out of office anyone with just the appearance of impropriety, never having any dealings, himself, in insider-trading. In fact, it was Madison and Jefferson (and presumably Burr and Livingston) who knew as early as April, 1790, that Reynolds was in the employ of Vredenburg. [6] That is, Madison was fully aware as to the identity of James Reynolds over a year before Maria knocked upon Hamilton's door. And Madison had collaborated with Jefferson in June, 1790, to oppose Reynold's and Vredenburg's activities. The Gang of Four - Jefferson, Madison, Burr and Livingston - who as of May, 1791, were on a full offensive targeting Hamilton, have to be near the top of anyone's list of suspects, in any inquiry as to who brought James and Maria Reynolds into Hamilton's life.

Back to the Story: Hamilton wins Round One

Meanwhile, on July 4, 1791, the National Bank opens for business, with stock issued at $25 per share. Shortly afterwards, Hamilton goes to New York for the launching of SEUM's first stock offering, followed up by the inaugural board meeting in New Brunswick, NJ. Scouts are delegated to locate the best water-power sites in New Jersey. The manufacturing plans are going forward, however Duer has inserted himself into fundraising for SEUM - an action Hamilton would come to regret.

By early August, after only four weeks, the Bank stock shares have shot up to $300! The subsequent crash, on August 11th, drives the price down to $110. Hamilton pushes the Bank of New York to intervene to buy the stock, beginning the stabilization of the price. Further, on August 17th, Hamilton focuses in upon Duer. He warns Duer about the infamous South Sea bubble, and suggests that a realistic, actual valuation process of the stock would properly be not $110 nor $300, but perhaps in the range of $190. Hamilton also requested his ally, Sen. Rufus King, to speak out against the financial gaming, so as to help "counteract delusions". The Bank shares settle in around $145 by September. Hamilton had won his first skirmish; however, a more deadly assault on the Bank stock was afoot.

It is worth noting that, as of this Summer of 1791, the American movement internationally had damaged, but real prospects: in the Austro-Hungarian Empire, with Mozart's interventions ("La clemenza di Tito" with Emperor Leopold II and the "Magic Flute" with the broader population) and in France, with LaFayette's National Guard. However, Mozart and Leopold were dispatched that winter[7], and LaFayette flinched while King Louis XVI, fleeing France, lost his head... and then lost his head. It puts into relief Hamilton's unique role in saving the American experiment that fall and winter. One should not think it 'normal' that over the 19th and 20th centuries, only one nation fought the imperial system and established a constitutional system - nor that it was 'automatic' that the United States succeeded in doing so.

Report on Manufactures

That Fall, Jefferson recruited Philip Freneau to run an anti-Hamilton newspaper in Philadelphia, supporting Freneau with State Department largesse. (This involved giving Freneau printing jobs, and paying him as a State Department translator - even though the only language Freneau could translate was French, the only foreign language Jefferson didn't need translated. Jefferson recognized the illegality of his actions when, later, he attempted to simply deny what everyone knew was true.) Freneau's "National Gazette" appears in October, but doesn't get really nasty until January, 1792.

Drawing of Paterson, NJ in 1880. Note the picture of the Great Falls of the Passaic, top center, the source of water power for the mills in the city.

As Hamilton makes final preparations for his December "Report on Manufactures" for Congress, Duer forms a secret partnership with the wealthy land-speculator, Alexander Macomb[8], which involves diverting the SEUM funds and setting up a vast investing cabal. Not everything is known about this, but one major component seems to be a scheme to monopolize the government's 6% bonds, earning them the moniker, the "Six Per Cent Club". However, the core activity seems to be vast speculative transactions based upon feeding a frenzy of public 'get-rich' schemes. Hamilton would label the consequent (January-February, 1792) orgy as 'bancomania'.

Hamilton's December 5th "Report on Manufactures" was his elaboration of the General Welfare clause of the Constitution. Public  infrastructure was critical, and import duties would help promote American industries of copper, coal, wood, gran, milk, glass, etc.  Hamilton's presentation included a physical exhibit in the Congress that day. Jefferson went to Washington, specifically on the "general welfare" clause, claiming that Hamilton was guilty of permitting "Congress to take everything under their management which should deem for the public welfare." (Evidently, Washington agreed.) Jefferson (and Freneau) went public with the accusations that Hamilton's supporters where twenty monied men in Congress. It did not faze him that, of the twenty-five representatives who held government securities, fourteen voted with Hamilton and eleven with Madison's (and Jefferson's) faction. Freneau's attacks hone in upon Hamilton's SEUM project. Ten days later, on December 15th, Hamilton receives his first written communication from James Reynolds, who has, belatedly, found  offense in the situation. He demands money and Hamilton pays. Then Hamilton breaks off all contact with Maria and James.


On Monday, January 16, 1792, at Corre's Hotel, Duer's partner, Macomb, goes public, floating shares in his new "Million Bank". (Corre's, at 24 Broadway, is - per Google Map - a 3-minute walk form the present NY Stock Exchange at 11 Wall Street.) We'll see that Joseph Corre, a confectioner, had a rash of short-lived banks established at his locale (all, apparently, with less substance than his famous confections). At that time, founding a bank was not like putting up a MacDonald's franchise. Congress had created one in Philadelphia in 1781, the Bank of America. Then under the Articles of Confederation, a few state banks were created - notably Hamilton's Bank of New York and the Bank of Massachusetts, both in 1784. The 1791 National Bank, called the Bank of the United States, was the outgrowth of the US Constitution. If a bank existed in the early United States, it had a recognizable mission. The "Million Bank" had a disguised mission of merging with, and neutralizing, the Bank of New York. By noon on that Monday, $10 million was subscribed - that is, ten times the designated subscribed. Hamilton immediately labeled it "bancomania".

The next day, Tuesday, a new "Tammany" Bank popped up, attracting $2 million in subscriptions. Tuesday evening, a second "Million Bank" meeting took place at Corre's, as some shocked semi-realists attempted to scale matters back. A committee of four was formed to trim back the subscriptions; and a new vehicle, called the "Merchant's Bank" was put forward for those just excluded from the "Million" Bank. It would take a full 36 hours for the formation of "Merchant's Bank" with a modest $1 million subscription. Three banks in four days.

In the midst of bancomania, on Tuesday, January 17th, James Reynolds pops up anew with Stage II of the "Reynolds Affair". His December extortion of $1,000 from Hamilton had ended Stage I. He writes a touching missive to Hamilton: Maria misses him, and (with no mention of his December outrage and extortion) he would now welcome Hamilton to come visit Maria. Evidently, the only difference would be that Reynolds would not pretend to not know. For the next two months, while he was at war with the speculators, Hamilton receives various begging notes from Maria, in various stages of distress. He refused any contact. Notable for Stage II is that Reynolds is now teamed up with one Jacob Clingman, formerly a clerk to the House Speaker Frederick Muhlenberg; and it is apparently important for them to get Clingman to witness Hamilton at the Reynolds abode. It is likely that, if the "Gang of Four" were involved, it would be Jefferson's man, Beckley, who would have been involved in the insertion of Clingman. However, it is also the case that Reynolds left his new friend, Clingman, 'alone' with Maria - suggesting that Reynold's modus operandi of whoring his wife - was also a part of the joint enterprise entrapment.[9]

On Wednesday, January 18th, Hamilton wrote to his close collaborator, William Seton, the head of the Bank of New York (BONY) - the bank that Hamilton had set up in 1784: "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." These developments are a "dangerous tumour" to the economy. Seton replied that the "madmen"  behind the "Million Bank" were organizing a run against BONY, to coerce an unwanted merger. Late in January, Hamilton commented: "The rapid and extraordinary rise... was in fact artificial and violent such as no discreet calculation of probabilities could have presupposed." And  then on February 10th, to Seton: "The superstructure of credit is now too vast for the foundation." From the end of January and through the  course of February, as Duer and his crowd required more and more liquidity for their bubble addiction, Hamilton and Seton dried out credit to  the "madmen", followed up by issuances of carefully selected credit to normal business.

Meanwhile, Madison's analysis, in Freneau's "National Gazette", was: "a government operated by corrupt influence, substituting the motive of private interest in place of public duty." By March, after Hamilton had undercut the bubble, Madison's attack expanded to: Hamilton's  coddling of the speculators, inflating the national debt, distorting the Constitution, and scheming to bring aristocracy to America. (One must  make the effort to recall that, despite all of Jefferson's and Madison's outrages and rhetorical exercises, the status quo that they were defending was the British-controlled Southern-aristocracy plantation system.) Jefferson went to Washington on February 28th, complaining that Hamilton's economic system is the root of all problems. It was also the case that the land-speculators, led by the Chancellor Livingston of the "Gang of Four", spent February taking opposite positions to the paper-speculators - betting that Duer's group would run out of room and  implode. One should not look for heroes on either side of that game.

Round Two to Hamilton: "Putting Toothpaste Back in the Tube"

In March, Hamilton moved to directly shut down the game: "'Tis time, there must be a line of separation between honest Men & knaves,  between respectable Stockholders and dealers in the funds, and mere unprincipled Gamblers." Hamilton had his comptroller of the Treasury,  Oliver Wolcott, Jr., prepare action against Duer. A week later, on Friday, March 9th, Duer stopped paying on the short-term notes he'd been  using to leverage. Before sunset, twenty-five financiers went bust. On Monday, March 12th, Wolcott ordered the New York district  attorney to recover monies Duer had improperly obtained (from his days at the Board of Treasury in the 1786-9 period) - or, if uncollectable, to file suit.

Duer made a dramatic appeal to Hamilton to stop actions against him. On March 14, Hamilton wrote Duer that he'd been "affected beyond measure" by his troubles and had "experienced all the bitterness of soul on your account...", but Duer had to "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." On March 23rd, Duer was in debtor's prison, to be joined there by the unfortunate Livingston, Walter. (He had co-signed twenty-eight of Duer's notes.) MaComb joined them in April. Duer died in 1799, still in prison.

Wall Street Circles Their Wagons

On Tuesday, March 20th, a committee of branch directors from Hamilton's National Bank meet with the directors of the Bank of New  York, mapping out their war plans. The very next day, Wednesday, March 21st, a group of Wall Street traders meet at Corre's Hotel to plan  their response. They draw up a private club, which is the founding of what we know today as the New York Stock Exchange. Today, their  self-styled 'narrative' ignores this meeting, and traces the origin to what was just a staged, public-relations event two months later (May 17th), where a group of twenty-four traders[10] meet under the Buttonwood (Sycamore) tree outside of 68 Wall Street.

The leader on the list of 24 is Leonard Bleecker, whom we had met when, back in November 1790, he had formed a partnership with Duer to purchase the IOU's of South Carolina war veterans. Bleecker also had employed (from December 1790 to October, 1791) John Pintard in these endeavors - at which point Pintard joined Duer directly in his paper flotation scheme. Pintard's office was set up at 22 Wall Street. Another of the 24 was Peter Anspach, a major player from 1789-1792 in buying up Continentals. However, much yet remains to be known about the March 21st meeting. The March 28th issue of the "Gazette of the US" reported: "A meeting was held at Corre's Hotel, ...of the merchants and dealers in stocks, when they came to a resolution, that after the 21st of April next, they will not attend any sale of stocks at public auction; and also appointed a committee to provide a proper room for them to assemble in, and to report such regulations relative to the mode of transacting their business, as in their opinion may be proper."[FT11 ] The chosen name of their meeting hall - "Tontine" - emphasized the private nature of their 'self-regulated' club. That is, what happens on Wall Street was to stay on Wall Street.

Between the March 21st organizational meeting and their May 17th public unveiling, the twenty-four public names are pulled together.  The "Buttonwood" group has to face a wave of anger over speculation schemes. For example, both New York and Pennsylvania assemblies  entertained a host of regulatory actions that March and April. One such case reads: "An Act to prevent the pernicious Practice of Stock Jobbing, and for regulating Sales at Public Auction". It would forbid sale at public venue of public securities, and declare void any contract, written or verbal, that took place before the actual transfer. That is, it nullified what we call "futures" contracts. Wall Street was institutionalized to attempt to pre-empt exactly the type of actions Hamilton had just taken to crush a speculative bubble.

Entrapment: The "Reynolds Affair"

On Friday, March 23, the day Duer was placed in debtor's prison, Hamilton wrote Duer about the SEUM funds from last December: "I  trust they are not diverted... The public interest and my reputation are deeply concerned in this matter." But, in fact, Duer had drained the  SEUM of those funds. For the next two months, Hamilton struggled to revive the Paterson, NJ project. In his encouragement for the Bank of New York to begin expanding credit for real business, Hamilton singled out the water-powered project for investment. While he does manage to revive the project, James and Maria Reynolds keep escalating.

On Saturday, March 24, Reynolds demands that Hamilton meet him Sunday regarding Maria's psychological problems, as Maria is desperate over Hamilton's neglect of her. During the previous two months of bancomania, Duer has represented to Clingman that Hamilton had made $30,000 from Duer's dealings. This same type of operation has just been successfully carried out against the French population in the matter of Marie Antoinette and the "Necklace Affair". There, in brief, the speculative manipulations had targeted a staple such as bread, and the predictable rage of the population was given a manufactured target, the Queen's supposed purchase of an exorbitantly expensive necklace. In the United States, the manipulations of veterans, and of the public credit, was to be tied to the image of their Treasury secretary, Alexander Hamilton. There didn't have to be a shred of evidence.

This new charade began as Reynolds, having re-established contact over his concern for the psychological health of his wife, initially made very modest monetary requests - $30 here, $45 there - which can be delivered by courier. Then, twice in April, Reynolds says that he has to come to Hamilton's office. On May 2, Reynolds complains to Hamilton: "am I a person of Such a bad Carector, that you would not wish to be seen in Coming in my house in the front way." Later, Hamilton explained: "It was probably necessary to the project of some deeper treason against me that I should be seen at the house. Hence was it contrived, with all the caution on my part to avoid it, that Clingman should occasionally see me." Reynolds escalated the money amounts as summer came on, but Hamilton refused, and avoided any connection.

Who's the Monarchist?

Meanwhile, by mid-May, Hamilton's actions had stabilized the monetary system, even though Jefferson and the Attorney General Edmund  Randolph (a real clinical case, in his own right!) had done their reckless best to undermine Hamilton's governmental actions at critical  moments. On May 23, Jefferson wrote Washington, listing twenty-one problems which Hamilton had created for the government. Jefferson claimed that the "ultimate objective" of Hamilton's system was "to prepare the way for a change from the present republican form of government to that of a monarchy." Madison's public version, in Freneau's "National Gazette", was that Hamilton's stabilization actions, in buying government securities at bargain basement prices, had done nothing but to benefit speculators. Hamilton wrote (privately, to Edward  Carrington) that it "left no doubt in anyone's mind that Mr. Madison was actuated by personal and political animosity... That Mr. Madison  cooperating with Mr. Jefferson is at the head of a faction decidedly hostile to me and my administration and actuated by views in my judgment  subversive of the principles of good government and dangerous to the union, peace and happiness of the country... My subversion, I am now  satisfied, has been long an object with them." And regarding the charges of secretly planning a restoration of monarchy: "I am affectionately  attached to the republican theory. I desire above all things to see the equality of political rights, exclusive of all hereditary distinction, firmly established by a practical demonstration of its being consistent with the order and happiness of society... [Indeed, if I'd wanted to impose a monarch,] I would mount the hobbyhorse of popularity, I would cry out usurpation, danger to liberty etc. etc. I would endeavour to prostrate the national government, raise a ferment, and then ride in the whirlwind and direct the storm." A rather prescient description of the demagoguery of the next ten years, associated with such names as Napoleon, Jefferson and Burr.

Hamilton's Third Victory

By early July, Hamilton has managed to reorganize SEUM. Pierre l'Enfant was hired to design the new city of Paterson. Spinning and weaving operations were initiated. Freneau's July 4th front page displays the "rules" needed to create an "unlimited hereditary" government, the  rules being a recasting of Hamilton's actions. Jefferson meets with Washington, warning him of the royalist plot. He implies that Hamilton  has been fooling Washington with his economic policies - but Washington has had enough. He tells Jefferson that it should be clear that he agrees with  Hamilton's policies - that to persist in thinking otherwise would mean that the President was "too careless to attend to them or too stupid  to understand them."

In 1792, Vice-President John Adams was fully in sync with Washington and Hamilton. Abigail Adams expressed their thinking at the  time: "The southern members are determined if possible to ruin the Secretary of the Treasury, destroy all his well-built systems, if possible  give a fatal stab to the funding system... All the attacks upon the Secretary of the Treasury and upon the government come from that quarter  [Virginia], but I think whilst the people prosper and feel themselves happy, they cannot be blown up." The new Madison/Jefferson faction fails to dislodge Hamilton, and cannot unseat Washington, but they conspire to replace Adams. Burr and Gov. Clinton both want the position. Adams is home in Braintree for long periods, seeing little need to be involved in the fights in the Philadelphia capital. Hamilton expends no little effort to get Adams to get back into town.

In September, Elias Boudinot, a lawyer in Newark, described to Hamilton the political opposition to the SEUM, coming from Madison and  Jefferson: There was "a strong" faction forming in the capital "against the Secretary of the Treasury... [and one unnamed Virginian was] very violent on the subject." This was very likely Jefferson, who had just addressed Washington, yet again, on Hamilton's system, which "flowed from principles adverse to liberty and was calculated to undermine and demolish the republic...". Hamilton, you know, favors a king and a House of Lords.

Washington, however, simply wanted an end to such factionalizing. Hamilton had to tell him that Jefferson had simply gone too far: "I cannot doubt, from the evidence that I possess that the 'National Gazette' was instituted by him for political purposes and that one leading object of it has been to render me and all the measures connected with my department as odious as possible... [It's my duty to] unmask this  antigovernment coterie... [and] draw aside the veil from the principal actors."

Jefferson retreats to his Monticello estate, where Madison and James Monroe gather. Jefferson composes seven letters, his 'talking  points' in defense of none other than Jefferson. They are published in six essays, but under the names of Monroe and Madison. However, Hamilton is no longer in a contest with Jefferson. He has to secure a second Washington administration, with Adams still as the vice-president. Aaron Burr, as a completely unprincipled manipulator, is the key threat. Burr is angling for the Vice-presidency designation at the party gathering in mid-October.

Hamilton writes, on September 21st: "I fear [Burr...] is unprincipled both as a public and private man. When the constitution was in deliberation... his conduct was equivocal... In fact, I take it he is for or against nothing but as it suits his interest or ambition. He is determined, as I conceive, to make his way to be the head of the popular party and to climb... to the highest honors of the state and as much higher as circumstances may permit... I am mistaken if it be not his object to play the game of confusion and I feel it a religious duty to oppose his career." And a few days later: "...[I]f we have an embryo-Caesar in the United States 'tis Burr." Then, writing under the name, "Catyllus", he calls upon his reading of Shakespeare to characterize Burr: Compare the "plain simple unambitious republican... [to Caesar] - when Caesar, coyly refusing the proffered diadem, is seen as Caesar rejecting the trappings, but tenaciously gripping the substance of imperial domination."

In October, Hamilton succeeds in derailing Burr, while Washington delivers the nail in the coffin to Jefferson. First, on October 1st,  Jefferson travels to Mt. Vernon to testify to Washington that Hamilton had told him that the "Constitution was a shilly-shally thing of mere  milk and water, which could not last and was only good as a step to something better." For the last time, Washington told Jefferson in no  uncertain terms, that the "idea of transforming this government into a monarchy" was ridiculous, and that he fully supported Hamilton's  funding system. It had worked. And if some legislators owned government debt, it was inescapable that there would be some self-interest.  This, along with the Burr's defeat by Clinton at the Republican caucus in mid-October, sealed the deal. Hamilton had to be exposed as an  inside-trader, as greedy as everyone else. The talents of Jefferson's "Jay Edgar Hoover", John Beckley, would be brought forth.

Operation 'Destroy Hamilton'

Top left: James Monroe in 1817, the year of his inauguration.
Top right: Abraham Bedford Venable (1758-1811).

Left: Frederick A.C. Muhlenberg, by Samuel B. Waugh (after Joseph Wright's 1790 portrait), 1881.
Collection of the U.S. House of Representatives

Beckley was officially the Clerk of the House, and unofficially, the collector of written and oral secrets, and manufacturer and  distributor of gossip.[12] On October 16th, at the Republican caucus, Beckley stressed to Madison that Hamilton was the problem, and that he had a blackmail solution. "There is no inferior degree of sagacity in the combinations of this extraordinary man... I think I have a clue to something far beyond mere suspicion on this ground, which prudence forbids a present disclosure of." This would be less than two months before the smear and blackmail operation, or what is generically referred to as the "Reynolds Affair". Obviously, Beckley was in on the operations of Clingman, whom he had worked with when Clingman was the clerk to the House Speaker, Muhlenberg. This puts into some perspective Clingman's association with Reynolds, no later than January, 1792 - at the time of Hamilton's closing down Stage I of the "Reynolds Affair". The Reynolds option was being picked up, not as a 'sex scandal' but as a 'financial insider' scandal.

Though the story gets quite involved, some parts are fairly clear. Wolcott, probably in consultation with Hamilton, arrested  Reynolds and Clingman in mid-November in the matter of a separate fraud. (The pair tried to assume executorship of the estate of a veteran, claiming he was dead. The very much alive Ephraim Goodenough took exception.) Reynolds countered with accusations that Hamilton had given him monies to speculate with, secretively, on Hamilton's behalf. The House Speaker, Muhlenberg, steps in, supposedly on behalf of Clingman, but he has, for some reason, brought Aaron Burr along with him. (Muhlenberg later offered that he had decided to speak with Hamilton in the company of Burr, with no further explanation.) Regardless, in exchange for a dismissal of the case, Reynolds and Clingman are allowed to restore the absconded funds and to divulge their source in the Treasury for their list of veterans.

But Jefferson, Burr and Beckley had no interest in dropping the matter. The new administration of Washington/Adams/Hamilton has been secured. On December 12, Muhlenberg consults with Burr, and then goes to Virginians James Monroe and Abraham Venable. The next day, they have Clingman commit to paper his story Hamilton's financial hypocrisy. Clingman's story: "A little after Duer's failure [March, 1792], Reynolds told Clingman in confidence that that if Duer had held up three days longer, he [Reynolds] should have made 1500 pounds, by the assistance of Col. Hamilton; that Col. Hamilton had informed him that he was connected with Duer. Mr. Reynolds also said that Col. Hamilton had made 30,000 dollars by speculation; that Col. Hamilton had supplied him with money to speculate... Mr. Reynolds has once or twice mentioned to Clingman that he had it in his power to hang Col. Hamilton; that if he wanted money he was obliged to let him have it... That on one occasion Clingman... went with him, saw him go into Col. Hamilton's; that after he came out", he had money. Soon after, more was paid to Reynolds "from Col. Hamilton, after his return from Jersey, having made a visit to the manufacturing society there..." That same day, this document, along with a very selective portion of Reynolds' correspondence with Hamilton, was handed by Monroe to Beckley to copy the documents,[13] for the presentation to Washington.

Statue of Alexander Hamilton in New York City.  His economic concepts are in harmony with the initiatives of the BRICS countries today.  Picture credit: EIRNS/Stuar Lewis  
President George Washington sided with Treasury Secretary Alexander Hamilton to the chagrin of his enemies.

The problem for Jefferson, Burr and Beckley is that none of them would be an effective candidate to present the case to Washington. And of the remaining possibilities, Muhlenberg and Venable were not comfortable without presenting the case to Hamilton first. The actions in those few days of the 'get Hamilton' cabal suggest that those two were, to their credit, dupes, and possibly accepted the Reynolds/Clingman  representations at face value. The others, including Madison and Monroe, very likely knew they were involved in a 'constructive fraud'. Regardless, Muhlenberg, Venable and Monroe confront Hamilton, on December 15th, with the Clingman evidence. Hamilton proceeded to explain to them, at length, that it was a personal failing of an affair with Reynolds' wife, Maria; and he showed them all of the letters written by the two to him. They requested if they could make copies of his evidence, to which he agreed - with the gentleman's understanding that this would go no further. Hamilton explained that all three understood, at the end of the meeting, that there was no insider trading. "Mr. Muhlenberg and Mr. Venable, in particular, manifested a degree of sensibility on the occasion. Mr. Monroe was more cold, but entirely explicit."

However, Monroe was being duplicitous. His own memo recounted: "We left him under an impression our suspicions were removed." Monroe had Beckley make copies of these documents from Hamilton, and Monroe continued meetings with Clingman in hopes of further pursuing the case. The report to Jefferson of the December 15th meeting is reflected in Jefferson's notes, two days afterward: "The affair of Reynolds and his wife. - Clingham Muhlenb's clerk, testifies to F. A. Muhl. Monroe Venable... Known to J M [James Madison]. E R [Edmund Randolph]. Beckley and Webb." Jefferson is careful to keep a record as to whom is in on the matter.

Muhlenberg and Venable would not take the case to Washington, as they knew, now, that there was no case. Jefferson's list is  undoubtedly the same list as those who had the 'Beckley file' on Hamilton. Jefferson does not include Burr on his list, but it is quite unlikely that Burr would not have obtained a copy. Though Burr's former dupe, Muhlenberg, might have lost his usefulness for Burr, it is very likely that Beckley would have been provided Burr a copy. When Hamilton called for the originals to be returned to him, it was with the understanding that it was the three in the meeting, and only they, who had copies of the documents; and that they had explicitly told him that it was clear this was a personal matter, and no failing of his work at the Treasury.


For more than four years, the 'Beckley file' was the source of some gossip, and a few public feints in the direction of Hamilton, shots over the head. Then, in the summer of 1797, Beckley's collaborator, James Callendar, opened up a full-scale assault upon Hamilton, in the summer of 1797. The documents were used selectively, in pamphlets, to assert and prove Hamilton's financial cupidity. That is a whole other story; however, of note here, is that most all of what we know today of the 1792 story comes from Hamilton's boldly honest 'outing' of himself in 1797. He first attempted to get Monroe to counter the slander, by stating publicly what had been proven to him back in 1792. Monroe refused to do so, and refused to reveal how the documents got copied. If he had been honest, Hamilton would not have been forced into his next step. But, Hamilton publicly declared that, though he had failed in his morals in sleeping with James Reynolds' wife, he had never failed in his rigorous fight for the general welfare, the public good, or the integrity of the credit of the United States. Hamilton had no confusion what was at stake here. The proper level of statecraft really did include a question best addressed in the Hamilton case: Can a man swear an oath to the Constitution and make decisions for the public good, regarding the generation of credit, without putting his private concerns first? Even the possibility of Congress doing their sovereign duty (under Article I, Section 8[14]) regarding minting, coining and regulating the credit of the country, depended upon the behavior of our first Treasury secretary.

Commentators then and now snicker that Hamilton wasn't very good at 'career management', that he didn't know when to quit, and that somehow he would bore people by telling them more than they wanted to know. However, it is their world-weary cynicism that doesn't allow them to take seriously, or benefit from, Hamilton's strategic genius. Judge for yourself the prescience of Hamilton's analysis, his command of the situation, his refusal to fight the enemy on his terms, and his 'second nature' to lead with the underlying reality. From Hamilton's 1797 "The Charge of Speculation against Alexander Hamilton... is Fully Refuted. Written by Himself", let us allow Hamilton the last word as to what the slander campaign was really about - from the very opening of his pamphlet:

"The spirit of jacobinism, if not entirely a new spirit, has at least been cloathed with a more gigantic body and armed with more  powerful weapons that it ever before possessed. It is perhaps not too much to say, that it threatens more extensive and complicated mischiefs  to the world than have hitherto flowed from the three great scourges of mankind, War, Pestilence and Famine. To what point it will ultimately  lead society, it is impossible for human foresight to pronounce; but there is just ground to apprehend that its progress may be marked with  calamities of which the dreadful incidents of the French revolution afford a very faint image. Incessantly busied in undermining all the  props of public security and private happiness, it seems to threaten the political and moral world with a complete overthrow."

"A principal engine, by which this spirit endeavours to accomplish its purposes is that of calumny. It is essential to its success  that the influence of men of upright principles, disposed and able to resist its enterprises, shall be at all events destroyed. Not content  with traducing their best efforts for the public good, with misrepresenting their purest motives, with inferring criminality from actions  innocent or laudable, the most direct falsehoods are invented and propagated, with undaunted effrontery and unrelenting perseverance. Lies  often detected and refuted are still revived and repeated, in the hope that the refutation may have been forgotten or that the frequency and  boldness of accusation may supply the place of truth and proof. The most profligate men are encouraged, probably bribed, certainly with  patronage if not with money, to become informers and accusers. And when tales, which their characters alone ought to discredit, are refuted  by evidence and facts which oblige the patrons of them to abandon their support, they still continue in corroding whispers to wear away the  reputations which they could not directly subvert..."

In summary

Beyond the traditional war, pestilence and famine is institutionalized jacobinism - a prescient analysis of Bonapartism. But it is not unique to the French. Whether it be called organized genocide, Malthusianism, fascism or Cheney-esque 'beastmen', Hamilton was convinced that the systematic assault upon the Constitution and the Republic of the United States, if successful, would doom the world to that path. In that context, he located the operation run against him as a prime example of the "calumny" method, the proto-typical way that such fascists operate. In going with 'the whole truth and nothing but the truth', he wasn't defending himself or his career. Rather, he knew that the enemy had a weak flank in their assumption that principles do not work, that men are not capable of acting on principle, and that a republic with the power of credit generation rooted in sovereign decisions over the general welfare is not possible. Hamilton firmly believed in the better angels of our nature. So, don't settle for merely singing "Happy Birthday" to Alexander this year. Rather, may our "mystic chords of memory... yet swell the chorus of the Union", as the American Revolution theme is fully developed with Hamiltonian methods throughout the BRICS-led world and beyond.


[1]. The original Wall Street formation entitled themselves the "Buttonwood Group". Not coincidentally, when the Second National Bank  succeeded in opening on January 7, 1817, the Buttonwood Group responded by expanding their operational capabilities, and two months later (on March 8, 1817), became known as the "New York Stock Exchange".

[2]. Papers of Alexander Hamilton, vol. 8 (20 April 1791), p. 300.

[3]. Hamilton's "Report on Manufactures" as quoted in Nancy Spannaus' July 11, 2014 EIR article "Bankruptcy Reorganization for a Credit System". ... model.html
This same issue has the following useful references:

Lyndon H. LaRouche, Jr., “Hamilton in Today’s World & the Crisis Today: The Principle of Natural Economy II, EIR, Feb.28, 2014.

Nancy Spannaus, “A Matter of Principle: Alexander Hamilton’s Economics Created Our Constitution, EIR, Dec. 10, 2010.

Michael Kirsch, “Draft Legislation to Restore the Original Bank Of the United States: Returning the U.S. Economy to the Principles of the U.S. Credit System,” “Introduction to Draft Legislation,” EIR, March 8, 2013.

“Three LaRouche PAC Videos: The Hamiltonian Basis of a Global Credit System,” EIR, Aug.14, 2009.

“200 Years Since Hamilton’s ‘Report on Manufactures,’”EIR, Jan. 3, 1992. Entire issue devoted to Hamilton and his international influence. 

[4]. In the Fall of 1789, as Hamilton was devising his strategy on redeeming the IOU's, Henry ("Light Horse Harry") Lee tried to glean insider info from Hamilton, writing that he didn't think he was doing anything improper in trying to profit personally from such. Hamilton diplomatically reminded him of "Caesar's wife", and the need for both integrity and even the appearance of integrity. (And, for what it is worth, it was Henry's son, Robert E Lee, who would become perhaps the clinical case for the fatal flaw of states-right-ism.)

[5]. Greenleaf was involved, at that time, with the van Aschats, the Amsterdam banking family. Later, in 1794, he became a business partner with Thomas Law in speculations in Washington, DC real estate. (Law's riches had derived from his work in Bengal with the East India Company. Law had become a favorite of Lord Cornwallis, Governor-General in India, and Law had held the double position as revenue officer and chief magistrate, over two million people, in Bahar.) It was this Greenleaf/Law grouping that Aaron Burr approached in 1794 for help on his own land speculating. Curiously, in 1813, Jefferson would write to Law, regarding his opposition to a second national bank.

[6]. April 20, 1790 letter from Gustavus B Wallace to James Madison. "Yours of the 10th. I receiv’d... Mr. Reynolds is now on his way to Newyork from what he inform’d me his partner got the Lists from a Clerk of the Treasury. Since I wrote you he receve’d some other Lists amounting to 3000 dollars due to the offi[c]ers of this state. The person that he corresponds with from this place and remits the Soldiers powers of Attorney to is William J. Vriedenburg No. 40 great Dock Street N.Y..." (Curiously, Wallace also related to Madison that their circles in Richmond had been excited by the report that South Carolina's Aedanus Burk had shot Hamilton dead in a duel.)

[7]. To put a point on it, Mozart - and Austria - died the same day (December 5, 1791) in Vienna that Hamilton introduced his "Report on Manufactures" to Congress in Philadelphia.

[8]. Alexander Macomb made his initial fortune in fur-trading with the British during the American Revolution. In the 1780's, Macomb dealt heavily in land speculation, peaking in 1791 with "Macomb's Purchase", 3.7-million acres in New York State. After 1792, he never recovered his fortune. However, several of his sons did fight against the British in the War of 1812. Perhaps this family improved from losing their fortune.

[9]. Of course, in 1793, after this entrapment operation played out, the Reynolds divorced. The divorce lawyer just happened to be one Aaron Burr. And, to complete this soap opera, Maria followed the divorce with her marriage with none other than Clingman!

[10]. The full list: Leonard Bleecker, G N Bleecker, Armstong & Barnewall, Bernard Hart, Ephraim Hart, Andrew D Barclay, Benjamin Seixas, John A Hardenbrook, Benjamin Winthrop, Gulian McEvers, Charles McEvers, Jr, Peter Anspach, David Reedy, Hugh Smith, Samuel March, Alexander Zuntz, Sutton & Hardy, John Henry, Samuel Beebe, John Ferrers, Isaac M Gomez, Augustine H Lawrence, John Bush, Robinson & Hartshorne.

[11]. The committee had constructed an imposing brick structure on the corner of Wall and Water, named "The Tontine tavern and coffee-house". One entered into "a large public room which is the Stock Exchange of New York, where all bargains are made..."

[12]. A staple of Hoover's methods involved collecting dirt, and selectively releasing it through Hollywood gossip rags, or wherever it would do the most damage. Beckley, while employed as Clerk of the House, managed to a) call for the impeachment of George Washington for, among other things, stealing from public funds; and b) manage Jefferson's electoral campaign in Pennsylvania.

[13]. Beckley would meet, then, with two new arrivals on the scene - William Cobbett and James Thomson Callender. Cobbett would publish his "Peter Porcupine Gazette" as a British voice, and, in particular, a bastion of anti-Federalism. Callender would be the vehicle for Beckley et al for the 1797 assault upon Hamilton. Jefferson then provided financial support for Callender, and worked with him on an anti-Federalist tract, "The Prospect Before Us". Callender was convicted of sedition for this tract, and was pardoned by Jefferson. However, Jefferson, now President, would not continue financial support - and Callender turned on him. He published Jefferson's letters to him, exposing Jefferson's role in Callender's pamphlets. In 1803, when Hamilton defended the publisher, Harry Croswell, for printing the charge that Jefferson had paid Callender to defame Washington, Callender was expected to testify. However, he died under suspicious circumstances, apparently drowning in Richmond, in a 3-foot high portion of the James River.

[14]. In particular: "The Congress shall have Power To... provide for the ... general Welfare of the United States... To borrow Money on the credit of the United States; To regulate Commerce with foreign Nations, and among the several States... To coin Money, regulate the Value thereof, and of foreign Coin..."