Stemming the Panic of 1792
Alexander Hamilton, 25 March 1792
HAMILTON, Alexander (1757-1804). Autograph letter signed ("A Hamilton") as Secretary of the Treasury to William Seton, President of the Bank of New York, Philadelphia, 25 March 1792.
Five pages, 225 x 190mm, 2 bifolia with integral transmittal leaf addressed in his hand (first page lightly toned, a few marginal tears, loss from seal tear does not affect text).
Alexander Hamilton moves to quell the Panic of 1792: America's first financial crash. A highly-important letter written in the wake of his friend William Duer's financial collapse that caused a panic in early March 1792. To stem the crisis, Hamilton wanted to use moneys from the Sinking Fund. While the fund had been designed to help reduce government debt, it could also be used in certain instances to intervene in a crisis as a lender of last resort. Hamilton called a meeting of the Sinking Fund Commission, composed of five members including John Adams, Thomas Jefferson, Edmund Randolph, John Jay and himself. Only four members were present when Hamilton called the Commission to meet on 21 March (Jay was absent), and they found themselves evenly split (Jefferson and Randolph stood opposed). But with more dire news arriving from New York on a daily basis, Hamilton was determined to take action despite internal opposition. Writing to Seaton at the Bank of New York, which was under severe pressure as depositors withdrew funds, Hamilton advised that "If six per Cents should sink below par— you may purchase on account of the United States at part of the extent of 50,000 Dollars. You will not however declare on whose account you act – because though there is, as to a purchase on that principle, no difference of opinion among the Trustees the thing is not yet formally arranged and this is Sunday." Fortunately for Hamilton, Randolph switched sides on Monday 26 March, giving him more authority to act.
To further bolster confidence, Hamilton shares with Seaton the news that a major loan from the Netherlands had been secured and authorizes him to make it public. Hamilton assures Seton of the U.S. Treasury's solvency and its ability to act further if necessary. Yet Hamilton is bewildered by the scale of the panic: "Why then so much depression?" Answering his own question, he concludes it was due to "The immediate necessity for money. But if the banks are forbearing as to the Necessity of paying up—cannot the parties give each other mutual credit and avoid so great a press? If there are a few harpies, who will not concur on this forbearance let such be paid and let such be paid and execrated, and let others forbear." Hamilton's efforts over the coming weeks helped calm the markets, although the turmoil boiled over into the fall.
One of the most enduring legacies of the crisis was an agreement among about two dozen brokers who met under the shade of a buttonwood tree at 68 Wall Street to establish rules for securities trading—giving birth to the New York Stock Exchange. Economic historians have argued that Hamilton's actions during the crisis anticipated "Bagehot's Rules" for managing a financial crisis by nearly a century. (See Cowan, Sylla & Wright, "Alexander Hamilton, Central Banker: Crisis Management During the US Financial Panic of 1792" Business History Review, Spring 2009, pp. 61-86.) Published Harold C. Syrett, ed., The Papers of Alexander Hamilton. Vol. 11., pp. 191-192 (from Seaton's handwritten copy.) Provenance: Paul Richards, Catalogue No. 1, Lot 192 – H. P. Kraus – the consignor.