By John Steele Gordon
Of all of the world’s nice city facilities, solely a only a few are surrounded by salt water. New York is certainly one of them. Within the colonial period, wells equipped New York with the water it wanted. As town started to develop quickly after the Revolution, increasingly more wells had been dug, however the water was increasingly more contaminated by the ever-increasing variety of privies.
The wealthy might afford to purchase ingesting water introduced into town by wagon, in addition to utilizing the water that ran off their roofs into cisterns. The poor, nevertheless, had no alternative however to make use of the properly water. If town was to proceed to develop, it wanted to unravel its water drawback.
What, you would possibly ask, has this to do with banking? You is likely to be stunned.
Aaron Burr, then a New York state assemblyman, noticed a golden alternative within the metropolis’s water travails. There have been solely two banks in operation in New York Metropolis within the 1790: the Financial institution of New York and the Bank of the United States. Each had been based by Alexander Hamilton, Burr’s political enemy and eventual sufferer.
In these days, one wanted an act of laws to open a financial institution, and that meant politics would all the time play a giant position. The state authorities was underneath the management of the Federalists, led by Hamilton, and Burr was a Democratic Republican, the get together led by Thomas Jefferson. Burr knew that he would by no means get a banking constitution although the legislature, and he badly wanted a supply of funds to hold on his varied actions.
So Burr proposed the institution of an organization that may lay pipes and usher in recent water from the Bronx River, to be known as the Manhattan Firm. Even Hamilton thought this a good suggestion and helped push it via.
Then, ready till the final minute to submit the invoice to make sure little scrutiny, Burr quietly slipped into the invoice a further clause. “And be it additional enacted,” it learn, “that it shall and could also be lawful for the stated firm to make use of all such surplus capital as could belong or accrue to the stated firm within the buy of public or different inventory, or in another monied transactions or operations . . . for the only good thing about the corporate.”
In different phrases, apart from being within the water enterprise, the Manhattan Firm might have interaction in any lawful enterprise it wished to. What enterprise Burr had in thoughts, after all, was banking—a foreshadowing of latter-day debates over the blending of banking and commerce.
The invoice was signed into legislation on April 7, 1799. The corporate raised $2 million within the nascent inventory market that operated on Wall Avenue and solely 5 months later, earlier than the corporate had laid a single size of pipe, it opened the Financial institution of the Manhattan Firm. By the point Burr stepped down as a director, whereas serving as U.S. vp, he owed the financial institution $64,903.63, a snug fortune by the requirements of the day.
The corporate did get round to offering a rudimentary water system that served maybe a thousand homes. It ran via pipes created from hollowed out tree trunks closely tarred inside and outside. (Chunks of those pipes nonetheless flip up often in excavations in decrease Manhattan).
In 1808 the corporate unloaded the water enterprise, promoting it to town for $1 million. Now purely a financial institution, it flourished as New York turned the best boomtown the world has ever recognized. In 1955, it merged with the far bigger Chase Nationwide Financial institution, turning into Chase Manhattan Financial institution, which in flip merged with J. P. Morgan and Co. to turn into JPMorgan Chase, the biggest financial institution within the nation.