69. Robert Morris and the Conservative Counter-Revolution in National Politics, 1780-1782

0:00Volume 4, Chapter 69, Robert Morris and the Conservative Counter-Revolution in National Politics, 1780-1782. During 1780, before their stirring successes in Massachusetts and Pennsylvania, the Conservatives dreamed of a national military dictatorship. 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.

0:45A 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. The Boston meeting inspired the New York legislature in mid-October to call for great internal power to be given to Washington. 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. In response to this rapid drift rightward, the Left tried to counterattack by proposing a radical decentralization of political rule.

1:38Throughout 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. Meanwhile, young Alexander Hamilton, who was emerging as the brilliant premier theoretician of the nationalist forces, adumbrated the long-range conservative nationalist program in a letter to James Duane. Ultimately, wrote Hamilton, a new constitutional convention must be called to endow a central government with complete sovereignty over the political, economic and military life of the several states. And above all, this political power must be based on the coercive economic power of various forms of taxation, which power Congress conspicuously did not have under the Articles. In the meantime, Congress must build up executive power by by establishing powerful executive departments under single heads and the army must be permanently riveted upon public life to serve as a disciplined coercive arm of the central government.

2:59One means would be to grant handsome lifetime pensions to its officers. The sharp political swing rightward from 1780 to 1781, however, meant that the conservative of oligarchs could achieve their aims without having to turn toward a military dictatorship. It was more satisfactory to them to work within the existing democratic forms to achieve at least their short-run goals. By early 1781, for example, John Matthews was content to abandon his proposed military dictatorship and instead called for dictatorial powers in Congress. In control of Congress in the 1781 session, the conservatives moved swiftly and efficiently to fasten their counter-revolutionary program upon the country.

3:54Their first step, spearheaded by James Duane of New York, was to build up a powerful executive by creating executive departments, each in the charge of one man. This meant not only the erection of quasi-independent departments manned by non-elected bureaucrats, but also the centering of power in one man rather than in the democratic revolutionary institution of boards or committees. On January 10, Congress decided to create a Department of Foreign Affairs to be run by a Non-Congressman Secretary. And on February 7, a similar decision was made to create departments and individuals Secretaries of War, Marine and Finance.

4:44Since the linchpin of the conservative nationalist program was financial, the finance appointment was the crucial one, and it went inevitably to the eminent leader of the conservative oligarchs, Robert Morris. So strong was his political position indeed that he was able to dictate to Congress the terms of his acceptance of the post. One, express advance sanction by Congress of any private business dealings that he might have while in office, thus forestalling anything like another ruinous Silas Dean affair. and to the absolute right not only to hire officials in his own department, but also to fire anyone in any other branch of government.

5:36By accepting these outrageous conditions, after a month of balking and grumbling, the supine Congress was well on its way to putting Morris on the road to being dictator of the United States. Assuming his post on May 14, Morris quickly gathered all manner of power unto himself. By August, instead of Congresses selecting a Secretary of the Marine, the entire department was placed directly under the financier. The various naval and admiralty boards were abolished, and their functions also placed incongruously but ominously under the Office of Finance. Most departments that he was not able to seize personally, Morris was able to place under the firm control of one of his friends or associates.

6:29At the War Department, Morris, seconded by Washington, tried to push Shuler to be its head. But Shuler's problems with Congress over his military rank and career precluded such a bald choice. At the end of October, General Benjamin Lincoln was finally selected as the compromise choice. But until Lincoln assumed his duties in January 1782, Morris ran the War Department through his old friend Richard Peters, Secretary of the Board of War. And afterwards, Morris was easily able to dominate the weak Lincoln, to allocate the of Vital War Contracts, and even to set policy in handling prisoners of war.

7:14The biggest fight over appointment was over the secretaryship of foreign affairs. Morris's man was Robert R. Livingston, the New York oligarch and Morris business associate. But here the left, headed by Sam Adams, made its last stand, fighting fiercely for the eminent radical author, Leah Virginia. After liberal doses of bribery were administered to Congress by the French ambassador, the Chevalier de la Lucerne, who was fiercely pro-right and anti-Adams-Lee, New Jersey and Pennsylvania changed sides, and even Virginia was induced to desert Lee. Livingston was chosen Foreign Secretary on August 8.

7:59Under Livingston's friendly aegis, most diplomatic functions were swiftly added to Morris's power, including corresponding with American ministers abroad, handling the proceeds of all foreign loans and the power to import or export goods on the account of the U.S. government at his own personal discretion. To cement his power further over all branches of the federal government, every Monday night Morris called together the major executive officers of government including assistant 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.

8:47Thus, 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. Before the end of 1781, observers were noting that virtually every function of government had been centralized in the hands of Morris, and that the business of government was thereby being highly simplified. Virtually Morris's first act in power was a bill submitted to Congress only three days 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.

9:35Inspired 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. In a profound sense, to make permanent the interpenetration that Morris had personally achieved during the Revolutionary War. In both its temporary and permanent forms, this was an interpenetration through which public funds, whether obtained through taxation or creation of paper, could be channeled into the private pockets of Morris and his colleagues. Taxing would be necessary to redeem at par that body of depreciated public debt which Morris and his friends so extensively held.

10:28This new Bank of North America would prevent the nation from lapsing into an economy based on hard money and would be the device for returning to inflation. This time, however, it would be a more discreet inflation, controlled and managed for the 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. Once again, revolutionary America was being pushed far in the direction of the reactionary British reality against which the new nation had struggled to come into existence.

11:18And the Bank of North America would have a vital role in this counter-revolution. The idea of bringing to the United States a private central bank like that of England had been long in the air on the American right, and Alexander Hamilton, Gouverneur Morris, Pelletier-Webster and the learned Pennsylvania lawyer William Barton had all outlined plans for such a bank. Morris's bill incorporated a Bank of North America, which was to receive monopoly privileges from the central government in several ways. 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.

12:06In addition, at least temporarily, no other banks would be permitted to operate in the country. Although the bank was to begin modestly with a private capitalization of $400,000 in specie, Morris envisioned its notes expanding to become the sole medium of exchange in the country. In short, the bank would have the monopoly license to inflate. In return for its privileges, it would graciously lend its newly created money to the federal government. 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.

12:53The public debt holders were not to be forgotten in Morris's scheme. 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. 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. Morris's far-reaching plan passed very quickly at the end of May and over only minimal and scattered opposition. Only Massachusetts, led by James Lovell and old General Artemis Ward, voted against the plan, Plan, although the moderate nationalist from Virginia, James Madison, balked slightly at the extreme concentration of power which went far beyond the power conferred by the articles.

13:49As a concession to the powers of the states, however, Congress allowed that the bank could not operate within those states which might forbid it and that it could merely recommend, not prescribe, that the states receive its notes for all dues and taxes. Founding owners and directors of the newly created Bank of North America included, apart from Morris himself, his old partner Thomas Willing as President of the Bank, and such old friends and business associates as John Swanwick, William Bingham, Cadwalder Morris, Gouverneur Morris, George Clymer and Jeremiah Wadsworth. Despite this impressive roster and all of Morris's power and cajolery, the financier was not able to raise anything like the modest legal minimum of $400,000 in specie capital.

14:46All that he could raise was $70,000, even with the aid of further financial juggling and subsidies to Morris and to his Pennsylvania friends. However, Morris was nothing, if not 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. This unauthorized act of virtual embezzlement went almost completely uncriticized. For the remainder of his needed capital, he illegally secured pledges, and Congress incorporated the bank.

15:38It began operations on January 7, 1982. No sooner did it open its doors than Morris borrowed heavily from it for government operations. It could only land at short term, but its loans to the government during the Morris administration totaled over $1.2 million. Since the government had to keep repaying loans, however, total notes outstanding at any time did not exceed $420,000. Morris personally benefited in several ways from these varied operations. The bulk of the specie capital of his bank was supplied by Morris out of government funds. Then a multiple of these funds was borrowed back by Morris as government financier for for the Procuniary Benefit of Morris as Banker, and then he channeled the money largely into war contracts for his friends and associates.

16:37Despite Morris's power and eminence, the market, in its wisdom, knew that it was confronting notes inflated, however limited the extent, beyond specie backing. There was therefore a persistent tendency for the bank notes to depreciate, especially as they traveled from the bank's home base in Philadelphia. Indeed, it was forced to hire men at critical times to persuade redeemers of its notes not to ruin everything by insisting upon specie, a tacit admission of the bank's unsoundness and inherent bankruptcy as an issuer of deban notes beyond the specie available to redeem them. Apparently, Morris was not not opposed to government issued paper when he personally was the issuer.

17:25In addition to Bank of North America paper, financier Morris issued his own notes, Morris notes signed by Morris or his cashier in the Office of Finance as well as his private business partner John Swanwick. The Morris notes were payable in specie on demand. A second form of Morris Notes, better termed Morris Warrants, was payable at specified dates, usually in 30 to 60 days. Both forms of notes were receivable in dues and taxes and payable both by the government and then by Morris himself. He hoped that these notes would also help constitute the national currency medium. But Morris Notes were even more inclined 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.

18:40Tax collectors presented them to the Office of Finance for payment. Total Morris notes and Morris warrants issued during 1782 amounted to approximately $400,000. But by late August Morris, disheartened by the reception of the notes, decided to stop issuing them and to retire them as they were received in taxes. Even this contraction could not stop the depreciation of the notes in Massachusetts.