WEBVTT NOTE 69. Robert Morris and the Conservative Counter-Revolution in National Politics, 1780-1782 1 00:00:00.000 --> 00:00:13.000 Volume 4, Chapter 69, Robert Morris and the Conservative Counter-Revolution in National Politics, 1780-1782. 2 00:00:13.000 --> 00:00:24.000 During 1780, before their stirring successes in Massachusetts and Pennsylvania, the Conservatives dreamed of a national military dictatorship. 3 00:00:24.000 --> 00:00:45.000 General Philip Shuler raised the call for dictatorial powers to be given to George Washington in the spring of 1780, and such leading arch-conservatives as James Dwayne, Alexander Hamilton, soon to be the son-in-law of Shuler, and Washington himself were receptive to the idea. 4 00:00:45.000 --> 00:01:05.000 A convention at Boston in August, representing Massachusetts, Connecticut and New Hampshire, issued highly conservative resolves, including the payment of continentals by taxation, the creation of executive boards in Congress, and a virtual executive dictatorship. 5 00:01:05.000 --> 00:01:14.000 The Boston meeting inspired the New York legislature in mid-October to call for great internal power to be given to Washington. 6 00:01:14.000 --> 00:01:28.000 In November, the New England Convention met again at Hartford and urged great power to Congress, including taxation to pay interest on the public debt, and far greater power for Washington. 7 00:01:28.000 --> 00:01:38.000 In response to this rapid drift rightward, the Left tried to counterattack by proposing a radical decentralization of political rule. 8 00:01:38.000 --> 00:01:53.000 Throughout New York, for example, local precinct and county committees arose, and Albany County delegates called upon everyone to recommence acting by committees. But these vague phrases quickly proved abortive. 9 00:01:53.000 --> 00:02:00.480 Meanwhile, young Alexander Hamilton, who was emerging as the brilliant premier theoretician 10 00:02:00.480 --> 00:02:07.480 of the nationalist forces, adumbrated the long-range conservative nationalist program 11 00:02:07.480 --> 00:02:09.920 in a letter to James Duane. 12 00:02:09.920 --> 00:02:17.180 Ultimately, wrote Hamilton, a new constitutional convention must be called to endow a central 13 00:02:17.180 --> 00:02:23.660 government with complete sovereignty over the political, economic and military life 14 00:02:23.660 --> 00:02:30.500 of the several states. And above all, this political power must be based on the coercive 15 00:02:30.500 --> 00:02:38.300 economic power of various forms of taxation, which power Congress conspicuously did not 16 00:02:38.300 --> 00:02:44.780 have under the Articles. In the meantime, Congress must build up executive power by 17 00:02:44.780 --> 00:02:51.780 by establishing powerful executive departments under single heads and the army must be permanently 18 00:02:51.780 --> 00:02:59.520 riveted upon public life to serve as a disciplined coercive arm of the central government. 19 00:02:59.520 --> 00:03:05.720 One means would be to grant handsome lifetime pensions to its officers. 20 00:03:05.720 --> 00:03:13.360 The sharp political swing rightward from 1780 to 1781, however, meant that the conservative 21 00:03:13.360 --> 00:03:20.360 of oligarchs could achieve their aims without having to turn toward a military dictatorship. 22 00:03:20.360 --> 00:03:26.540 It was more satisfactory to them to work within the existing democratic forms to achieve at 23 00:03:26.540 --> 00:03:33.540 least their short-run goals. By early 1781, for example, John Matthews was content to 24 00:03:33.540 --> 00:03:39.820 abandon his proposed military dictatorship and instead called for dictatorial powers 25 00:03:39.820 --> 00:03:41.900 in Congress. 26 00:03:41.900 --> 00:03:49.060 In control of Congress in the 1781 session, the conservatives moved swiftly and efficiently 27 00:03:49.060 --> 00:03:54.260 to fasten their counter-revolutionary program upon the country. 28 00:03:54.260 --> 00:04:00.940 Their first step, spearheaded by James Duane of New York, was to build up a powerful executive 29 00:04:00.940 --> 00:04:06.820 by creating executive departments, each in the charge of one man. 30 00:04:06.820 --> 00:04:14.780 This meant not only the erection of quasi-independent departments manned by non-elected bureaucrats, 31 00:04:14.780 --> 00:04:20.540 but also the centering of power in one man rather than in the democratic revolutionary 32 00:04:20.540 --> 00:04:24.840 institution of boards or committees. 33 00:04:24.840 --> 00:04:30.420 On January 10, Congress decided to create a Department of Foreign Affairs to be run 34 00:04:30.420 --> 00:04:33.780 by a Non-Congressman Secretary. 35 00:04:33.780 --> 00:04:39.880 And on February 7, a similar decision was made to create departments and individuals 36 00:04:39.880 --> 00:04:44.700 Secretaries of War, Marine and Finance. 37 00:04:44.700 --> 00:04:51.200 Since the linchpin of the conservative nationalist program was financial, the finance appointment 38 00:04:51.200 --> 00:04:57.020 was the crucial one, and it went inevitably to the eminent leader of the conservative 39 00:04:57.020 --> 00:05:00.360 oligarchs, Robert Morris. 40 00:05:00.360 --> 00:05:06.880 So strong was his political position indeed that he was able to dictate to Congress the 41 00:05:06.880 --> 00:05:10.200 terms of his acceptance of the post. 42 00:05:10.200 --> 00:05:16.840 One, express advance sanction by Congress of any private business dealings that he might 43 00:05:16.840 --> 00:05:24.320 have while in office, thus forestalling anything like another ruinous Silas Dean affair. 44 00:05:24.320 --> 00:05:31.160 and to the absolute right not only to hire officials in his own department, but also 45 00:05:31.160 --> 00:05:36.520 to fire anyone in any other branch of government. 46 00:05:36.520 --> 00:05:42.240 By accepting these outrageous conditions, after a month of balking and grumbling, the 47 00:05:42.240 --> 00:05:48.300 supine Congress was well on its way to putting Morris on the road to being dictator of the 48 00:05:48.300 --> 00:05:50.240 United States. 49 00:05:50.240 --> 00:05:57.020 Assuming his post on May 14, Morris quickly gathered all manner of power unto himself. 50 00:05:57.020 --> 00:06:03.320 By August, instead of Congresses selecting a Secretary of the Marine, the entire department 51 00:06:03.320 --> 00:06:07.120 was placed directly under the financier. 52 00:06:07.120 --> 00:06:12.760 The various naval and admiralty boards were abolished, and their functions also placed 53 00:06:12.760 --> 00:06:19.480 incongruously but ominously under the Office of Finance. 54 00:06:19.480 --> 00:06:24.280 Most departments that he was not able to seize personally, Morris was able to place under 55 00:06:24.280 --> 00:06:29.320 the firm control of one of his friends or associates. 56 00:06:29.320 --> 00:06:35.040 At the War Department, Morris, seconded by Washington, tried to push Shuler to be its 57 00:06:35.040 --> 00:06:36.040 head. 58 00:06:36.040 --> 00:06:41.560 But Shuler's problems with Congress over his military rank and career precluded such 59 00:06:41.560 --> 00:06:43.920 a bald choice. 60 00:06:43.920 --> 00:06:50.320 At the end of October, General Benjamin Lincoln was finally selected as the compromise choice. 61 00:06:50.320 --> 00:06:57.240 But until Lincoln assumed his duties in January 1782, Morris ran the War Department through 62 00:06:57.240 --> 00:07:02.200 his old friend Richard Peters, Secretary of the Board of War. 63 00:07:02.200 --> 00:07:08.040 And afterwards, Morris was easily able to dominate the weak Lincoln, to allocate the 64 00:07:08.040 --> 00:07:14.720 of Vital War Contracts, and even to set policy in handling prisoners of war. 65 00:07:14.720 --> 00:07:20.480 The biggest fight over appointment was over the secretaryship of foreign affairs. 66 00:07:20.480 --> 00:07:26.920 Morris's man was Robert R. Livingston, the New York oligarch and Morris business associate. 67 00:07:26.920 --> 00:07:32.960 But here the left, headed by Sam Adams, made its last stand, fighting fiercely for the 68 00:07:32.960 --> 00:07:36.780 eminent radical author, Leah Virginia. 69 00:07:36.780 --> 00:07:42.180 After liberal doses of bribery were administered to Congress by the French ambassador, the 70 00:07:42.180 --> 00:07:50.180 Chevalier de la Lucerne, who was fiercely pro-right and anti-Adams-Lee, New Jersey and Pennsylvania 71 00:07:50.180 --> 00:07:55.300 changed sides, and even Virginia was induced to desert Lee. 72 00:07:55.300 --> 00:07:59.980 Livingston was chosen Foreign Secretary on August 8. 73 00:07:59.980 --> 00:08:06.740 Under Livingston's friendly aegis, most diplomatic functions were swiftly added to Morris's power, 74 00:08:06.740 --> 00:08:12.980 including corresponding with American ministers abroad, handling the proceeds of all foreign 75 00:08:12.980 --> 00:08:19.620 loans and the power to import or export goods on the account of the U.S. government at his 76 00:08:19.620 --> 00:08:22.060 own personal discretion. 77 00:08:22.060 --> 00:08:28.380 To cement his power further over all branches of the federal government, every Monday night 78 00:08:28.380 --> 00:08:34.460 Morris called together the major executive officers of government including assistant 79 00:08:34.460 --> 00:08:47.460 financier Gouverneur Morris, the Secretaries for War and Foreign Affairs, the Commander-in-Chief and the Secretary of Congress in an informal but effective cabinet meeting. 80 00:08:47.460 --> 00:08:59.460 Thus, in a few short months, Congress had surrendered much of its power to single executives, and this power was swiftly fused into the hands of Robert Morris. 81 00:08:59.460 --> 00:09:06.460 Before the end of 1781, observers were noting that virtually every function of government 82 00:09:06.460 --> 00:09:12.700 had been centralized in the hands of Morris, and that the business of government was thereby 83 00:09:12.700 --> 00:09:16.740 being highly simplified. 84 00:09:16.740 --> 00:09:22.580 Virtually Morris's first act in power was a bill submitted to Congress only three days 85 00:09:22.580 --> 00:09:35.580 His bold plan to create what was, at one and the same time, the first commercial bank in the history of the United States, as well as its first central bank. 86 00:09:35.580 --> 00:09:49.580 Inspired by the model of the Bank of England, created at the end of the 17th century, his object was to institutionalize a permanent interpenetration of public and private business. 87 00:09:49.580 --> 00:09:59.580 In a profound sense, to make permanent the interpenetration that Morris had personally achieved during the Revolutionary War. 88 00:09:59.580 --> 00:10:08.580 In both its temporary and permanent forms, this was an interpenetration through which public funds, 89 00:10:08.580 --> 00:10:17.580 whether obtained through taxation or creation of paper, could be channeled into the private pockets of Morris and his colleagues. 90 00:10:17.580 --> 00:10:24.580 Taxing would be necessary to redeem at par that body of depreciated public debt which 91 00:10:24.580 --> 00:10:28.780 Morris and his friends so extensively held. 92 00:10:28.780 --> 00:10:35.060 This new Bank of North America would prevent the nation from lapsing into an economy based 93 00:10:35.060 --> 00:10:40.400 on hard money and would be the device for returning to inflation. 94 00:10:40.400 --> 00:10:45.980 This time, however, it would be a more discreet inflation, controlled and managed for the 95 00:10:45.980 --> 00:11:04.980 The benefit of Morris and company. The razzle-dazzle of complexities and mysteries of high finance, as well as the supposed needs of the vanishing war effort, would serve as the cloak for the hard realities of subsidy to a specially privileged few. 96 00:11:04.980 --> 00:11:11.660 Once again, revolutionary America was being pushed far in the direction of the reactionary 97 00:11:11.660 --> 00:11:18.460 British reality against which the new nation had struggled to come into existence. 98 00:11:18.460 --> 00:11:24.720 And the Bank of North America would have a vital role in this counter-revolution. 99 00:11:24.720 --> 00:11:29.180 The idea of bringing to the United States a private central bank like that of England 100 00:11:29.180 --> 00:11:35.820 had been long in the air on the American right, and Alexander Hamilton, Gouverneur Morris, 101 00:11:35.820 --> 00:11:42.580 Pelletier-Webster and the learned Pennsylvania lawyer William Barton had all outlined plans 102 00:11:42.580 --> 00:11:44.820 for such a bank. 103 00:11:44.820 --> 00:11:50.580 Morris's bill incorporated a Bank of North America, which was to receive monopoly privileges 104 00:11:50.580 --> 00:11:53.460 from the central government in several ways. 105 00:11:53.460 --> 00:12:06.460 First, it would be able to issue banknotes payable on demand, which would be receivable in all duties and taxes to all state and federal governments, at a par equivalent to specie. 106 00:12:06.460 --> 00:12:13.460 In addition, at least temporarily, no other banks would be permitted to operate in the country. 107 00:12:13.460 --> 00:12:21.060 Although the bank was to begin modestly with a private capitalization of $400,000 in specie, 108 00:12:21.060 --> 00:12:28.260 Morris envisioned its notes expanding to become the sole medium of exchange in the country. 109 00:12:28.260 --> 00:12:33.460 In short, the bank would have the monopoly license to inflate. 110 00:12:33.460 --> 00:12:40.860 In return for its privileges, it would graciously lend its newly created money to the federal government. 111 00:12:40.860 --> 00:12:53.860 In short, instead of inflating by simply printing new money, the government would only be able to issue new money by borrowing it from the privately organized Bank of North America. 112 00:12:53.860 --> 00:12:58.860 The public debt holders were not to be forgotten in Morris's scheme. 113 00:12:58.860 --> 00:13:09.860 Congress would ensure the payment of interest and principal on its debt, and it could be deposited in the Bank of North America, thus becoming backing for the bank's notes. 114 00:13:09.860 --> 00:13:20.860 Thus the oligarchs were to benefit from issuing the new notes and from being able to deposit their public securities as supposed backing for the notes. 115 00:13:20.860 --> 00:13:28.860 Morris's far-reaching plan passed very quickly at the end of May and over only minimal and scattered opposition. 116 00:13:28.860 --> 00:13:36.860 Only Massachusetts, led by James Lovell and old General Artemis Ward, voted against the plan, 117 00:13:36.860 --> 00:13:43.060 Plan, although the moderate nationalist from Virginia, James Madison, balked slightly 118 00:13:43.060 --> 00:13:48.060 at the extreme concentration of power which went far beyond the power conferred by the 119 00:13:48.060 --> 00:13:49.540 articles. 120 00:13:49.540 --> 00:13:54.500 As a concession to the powers of the states, however, Congress allowed that the bank could 121 00:13:54.500 --> 00:14:00.500 not operate within those states which might forbid it and that it could merely recommend, 122 00:14:00.500 --> 00:14:06.500 not prescribe, that the states receive its notes for all dues and taxes. 123 00:14:06.500 --> 00:14:11.900 Founding owners and directors of the newly created Bank of North America included, apart 124 00:14:11.900 --> 00:14:18.020 from Morris himself, his old partner Thomas Willing as President of the Bank, and such 125 00:14:18.020 --> 00:14:25.740 old friends and business associates as John Swanwick, William Bingham, Cadwalder Morris, 126 00:14:25.740 --> 00:14:31.260 Gouverneur Morris, George Clymer and Jeremiah Wadsworth. 127 00:14:31.260 --> 00:14:37.660 Despite this impressive roster and all of Morris's power and cajolery, the financier 128 00:14:37.660 --> 00:14:46.660 was not able to raise anything like the modest legal minimum of $400,000 in specie capital. 129 00:14:46.660 --> 00:14:52.980 All that he could raise was $70,000, even with the aid of further financial juggling 130 00:14:52.980 --> 00:15:00.460 and subsidies to Morris and to his Pennsylvania friends. However, Morris was nothing, if not 131 00:15:00.460 --> 00:15:22.460 When 462,000 dollars in specie arrived as a loan to the United States government from France, he simply appropriated 254,000 dollars of it to subscribe to his own Bank of North America on behalf of the Federal Government. 132 00:15:22.460 --> 00:15:29.460 This unauthorized act of virtual embezzlement went almost completely uncriticized. 133 00:15:29.460 --> 00:15:37.060 For the remainder of his needed capital, he illegally secured pledges, and Congress incorporated 134 00:15:37.060 --> 00:15:38.280 the bank. 135 00:15:38.280 --> 00:15:42.820 It began operations on January 7, 1982. 136 00:15:42.820 --> 00:15:48.820 No sooner did it open its doors than Morris borrowed heavily from it for government operations. 137 00:15:48.820 --> 00:15:53.180 It could only land at short term, but its loans to the government during the Morris 138 00:15:53.180 --> 00:15:59.140 administration totaled over $1.2 million. 139 00:15:59.140 --> 00:16:04.440 Since the government had to keep repaying loans, however, total notes outstanding at 140 00:16:04.440 --> 00:16:09.780 any time did not exceed $420,000. 141 00:16:09.780 --> 00:16:14.620 Morris personally benefited in several ways from these varied operations. 142 00:16:14.620 --> 00:16:21.140 The bulk of the specie capital of his bank was supplied by Morris out of government funds. 143 00:16:21.140 --> 00:16:26.620 Then a multiple of these funds was borrowed back by Morris as government financier for 144 00:16:26.620 --> 00:16:33.040 for the Procuniary Benefit of Morris as Banker, and then he channeled the money largely into 145 00:16:33.040 --> 00:16:37.140 war contracts for his friends and associates. 146 00:16:37.140 --> 00:16:43.300 Despite Morris's power and eminence, the market, in its wisdom, knew that it was confronting 147 00:16:43.300 --> 00:16:49.020 notes inflated, however limited the extent, beyond specie backing. 148 00:16:49.020 --> 00:16:54.780 There was therefore a persistent tendency for the bank notes to depreciate, especially 149 00:16:54.780 --> 00:17:00.380 as they traveled from the bank's home base in Philadelphia. Indeed, it was forced to 150 00:17:00.380 --> 00:17:07.140 hire men at critical times to persuade redeemers of its notes not to ruin everything by insisting 151 00:17:07.140 --> 00:17:14.140 upon specie, a tacit admission of the bank's unsoundness and inherent bankruptcy as an 152 00:17:14.140 --> 00:17:20.260 issuer of deban notes beyond the specie available to redeem them. Apparently, Morris was not 153 00:17:20.260 --> 00:17:25.980 not opposed to government issued paper when he personally was the issuer. 154 00:17:25.980 --> 00:17:32.100 In addition to Bank of North America paper, financier Morris issued his own notes, Morris 155 00:17:32.100 --> 00:17:38.740 notes signed by Morris or his cashier in the Office of Finance as well as his private business 156 00:17:38.740 --> 00:17:41.340 partner John Swanwick. 157 00:17:41.340 --> 00:17:44.820 The Morris notes were payable in specie on demand. 158 00:17:44.820 --> 00:17:51.100 A second form of Morris Notes, better termed Morris Warrants, was payable at specified 159 00:17:51.100 --> 00:17:58.100 dates, usually in 30 to 60 days. Both forms of notes were receivable in dues and taxes 160 00:17:58.620 --> 00:18:04.480 and payable both by the government and then by Morris himself. He hoped that these notes 161 00:18:04.480 --> 00:18:10.980 would also help constitute the national currency medium. But Morris Notes were even more inclined 162 00:18:10.980 --> 00:18:17.980 The confidence in Morris' notes was never great, especially in New England, and hence these notes, rather than specie, were paid in taxes, and taxes were paid in cash. 163 00:18:40.980 --> 00:18:45.900 Tax collectors presented them to the Office of Finance for payment. 164 00:18:45.900 --> 00:18:55.180 Total Morris notes and Morris warrants issued during 1782 amounted to approximately $400,000. 165 00:18:55.180 --> 00:19:00.620 But by late August Morris, disheartened by the reception of the notes, decided to stop 166 00:19:00.620 --> 00:19:05.560 issuing them and to retire them as they were received in taxes. 167 00:19:05.560 --> 00:19:10.320 Even this contraction could not stop the depreciation of the notes in Massachusetts.