ABA Banking Journal - July/August 2017 - 58
> FROM THE VAULT
The Banker Who
BY JOHN STEELE GORDON
IT'S A CHINESE saying that "wars are fought with silver bullets." And in the
spring of 1813, in a war with Great Britain, we didn't have any. The Treasury was
empty, the country's ability to borrow was small. The territorial integrity, perhaps
the very independence, of the United States was in deep jeopardy.
In 1811 Congress had refused to
renew the charter of the Bank of the
United States, which had been the
prime means by which the federal
government borrowed money. The
following year, Congress declared
war on the only country on the planet
capable of attacking the United States,
offered generous pay and enlistment
bonuses for men joining the army and
then adjourned without making any
provision to pay for the war.
By March of 1813 the federal
government was broke. A series
of military reverses had made the
country's prospects for winning the
war dubious. That made the public
reluctant to buy government bonds,
fearing that the government, defeated
in war, would default. Treasury
Secretary Albert Gallatin had offered
a $16 million bond issue. He had
structured it to make it easy for small
investors to participate. But too
few had. If the whole issue was not
subscribed, then no bonds would be
sold and the war effort would collapse.
birth or soon afterwards. It bulged
from the socket like a fish eye. Shy as
a result, he never allowed his portrait
to be painted in his lifetime. After a
short career as a sea captain, venturing
as far as California, he settled in
Philadelphia in 1776.
A shrewd and aggressive trader,
Girard by middle age had created the
greatest fortune in the United States.
When the Bank of the United States
lost its charter in 1811, Girard bought
its assets, including its Philadelphia
headquarters, and established a
private bank. It was there that Gallatin
met him and asked him to take the
unsubscribed portion of the bond
offering. He was, quite literally, the
country's only hope.
With the deadline for the bond
offering looming, Gallatin went to
Philadelphia on April 5 and called on
But even for Girard, that was asking a
lot. Of the $16 million total, only $5.8
million had been sold to the public.
John Jacob Astor and some of his
friends had subscribed to $2 million,
but only provided that Girard take the
rest of the issue, more than $8 million.
In the early 19th century a fortune of
$50,000 was enough for a man to be
considered very well off. There were
probably fewer than a dozen men with
assets over $1 million.
Born in France, the son of a sea
captain, Girard had been born with
a deformed right eye, sightless from
Girard could have driven the hardest of
bargains or simply refused. He did not.
He agreed to buy the bonds provided
ABA BANKING JOURNAL | JULY/AUGUST 2017
only that the funds be deposited in his
bank until withdrawn as needed by the
government and that he receive a small
commission on the bonds he was able
to resell to other investors.
Eight million dollars was more than
Girard's net worth, so he was taking
an enormous gamble. Were the war
to continue to go badly, he might well
have been bankrupted. Fortunately
it did not go badly and, despite the
burning of Washington in the summer
of 1814, the United States was able to
get a draw out of a war it should never
have started and to pay its debts.
Girard did not risk his life for his
country, but he did risk his fortune. It
was a brave act indeed.
JOHN STEELE GORDON is an
acclaimed economic historian.
His books include An Empire
of Wealth, Hamilton's Blessing
and The Great Game.