The first great financial panic of the United States rocked New York City in March and April in 1792 and had ripple effects throughout the nation. The panic began with a wave of speculation led by William Duer and Alexander Macomb. Duer had been an active revolutionary, member of the Second Continental Congress, secretary to the Board of Treasury of the Confederation government, and an assistant to Secretary of Treasury Alexander HamilToN. He was also a government supplier and speculator who repeatedly used insider information in his business deals. Unfortunately for Duer, he did not always succeed. He therefore was forever looking for the next scheme to recoup his losses.
Early in 1792 Duer and Macomb began speculating in the stock of the Bank oe the United States and the Bank of New York. They anticipated that the price would rise dramatically, and borrowed extensively to corner the market. Speculative fever swept through New York. Rich and poor investors extended the two businessmen credit at high interest rates. When the stock failed to rise as quickly as Duer and Macomb expected, they began to default on their loans. The United States government made matters worse by suing Duer for $250,000 in unsettled accounts from his days with the treasury. Duer stopped payment on his loans on March 9, 1792, and two weeks later he went to debtors prison. Macomb joined him on April 12. In the meantime countless New Yorkers lost money, prices collapsed, and many businesses went under.
The panic had an impact on the growing opposition to Alexander Hamilton’s plans to strengthen the federal government. Duer had been president of the Society for the Encouragement of Useful Manufacturers and invested some of its funds in his speculations. Any effort for federal support for manufacturing now became tainted. Moreover, as far as Thomas Jeeeerson and James Madison were concerned, Hamilton’s close connection to Duer suggested that he, too, was enmeshed in corruption. Economically, however, the panic had less lasting effects. By the fall of 1792, prices had recovered and the economy continued to expand. Duer, however, spent most of the rest of his life in debtors’ prison.
Further reading: Stanley Elkins and Eric McKitrick, The Age of Federalis-m: The Early American Republic, 17881800 (New York: Oxford University Press, 1993); Robert
F. Jones, “The King of the Alley:” William Duer, Politician, Entrepreneur, and Speculator, 1768-1799 (Philadelphia: American Philosophical Society, 1992).
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