years in banking, would get singed in this 1792 boom and bust. From that he would learn the lesson well enough to guide the BUS intact and barely scathed through almost two decades of solid growth and profitability.
By early 1792, speculators everywhere had recovered from the 1791 bust— in part because Treasury Secretary Alexander Hamilton effectively scrambled to rescue markets from the very sins he had assured Congress did not exist— and they had reentered the market. So the price of BUS stock began to rise, along with the stocks of the handful of other American banks.
New speculations, projects, companies and banks were planned and started. There was a Pennsylvania canal company, a Boston bridge company and new banks in Providence, Boston, New Hampshire and Albany. In New York City alone, three new banks were planned; these were to be in addition to the Bank of New York and the BUS’ s New York branch, scheduled to open in April, although the New York legislature refused to charter these new banks due to opposition from its more radical members.
Not all states were as opposed to new commercial ventures as New York, however, and from October 1791 to April 1792, 17 new corporations were chartered in the United States— as many as in the previous seven years combined. All of them required capital, largely obtained by selling new shares.
The Lending Begins
This is where Willing and the BUS came in. Almost immediately after it opened its doors on December 12, it began lending money. Although those loans totaled only a small portion of its capacity, it was an overwhelming amount compared to the credit already extended by existing banks. Within a week, Willing and the BUS had made $ 683,078 in private-sector loans, a number that grew to $ 1.34 million by January 2, 1792 and to $ 1.88 million just a week later.
Because the BUS’ s other four branches— located in New York, Boston, Baltimore and Charleston— did not open until a little later in the year, this initial flooding of the lending market took place entirely at its main office in Philadelphia. By the end of January, less than two months into its existence, the Bank had an astounding
$ 2.68 million of loans on its books. In comparison, all other banks combined had only about $ 5 million in outstanding loans, meaning that overall lending in the nation increased by roughly 50 % in a matter of weeks.
These loans took the form of newly issued currency handed to the borrower, and this flood of new currency quickly had an impact; enough was being used to buy stock that overall stock prices surged in January.
Within a month of the BUS’ s opening, Thomas Jefferson complained that too much of the borrowing was simply fueling stock speculation:“ The rage of gambling in the stocks, of various descriptions is such, and the profits sometimes made, and therefore always hoped in that line are so far beyond any interest which an individual can give, that all their money and credit is centered in their own views.”
Though Willing was not known to be an overly accommodating lender, the giant size of the BUS compared to other banks meant that almost any lending it did had a material impact on the economy. In early 1792, the total loans outstanding among all 12 other banks was likely around $ 5 million. By the end of its very first year, the new BUS had extended $ 5.4 million in additional private-sector loans, as well as another $ 2 million in loans to the federal government. This represented more than a doubling of credit extended to Americans. It flooded markets with new funds that overheated national business activity.
Most of that $ 5.4 million in privatesector lending by the BUS was used to finance bills of exchange for merchant traders— just the type of lending Willing knew best. Nevertheless, some of its lending was in the form of“ accommodation loans,” unsecured loans that borrowers could use to buy government bonds and bank stock. Those accommodation loans only added fuel to the financial frenzy. Speculative activity picked up markedly, and bond and stock prices responded accordingly.
The previous summer’ s near-disaster in bond and scrip trading had somewhat chastened Philadelphians, but the more high-spirited traders in New York City seemed unfazed, shifting speculative activity northeast from Philadelphia to Manhattan, where the scale of the speculation and risk-taking was far grander. Any speculator thought to be successful was besieged by other New Yorkers who offered him fistfuls of money to“ invest” on their behalf.
King of the Alley
A central character in this financial speculation was Assistant Treasury Secretary William Duer. Federal law prohibited Treasury officials from speculating in federal securities, and so Duer, always more interested in the financial intelligence he could glean than in the job itself, had resigned. The reality was that his avarice had long been known, and although“ various forces favored Duer’ s appointment”— including his well-regarded head for business and his“ reputation for efficiency” as a commissioner on the Board of Treasury during the previous three years— it was becoming increasingly clear that Hamilton had exercised poor judgment in hiring him.
At the end of 1791, Duer entered into a partnership with Alexander Macomb, a land speculator and one of New York’ s wealthiest citizens. The idea was to combine Macomb’ s wealth with Duer’ s insider knowledge and speculative talents for one year, then divide the profits. Duer began buying Bank of New York shares when rumors circulated that it would be taken over and converted into a branch of the BUS. If the rumors proved true, he figured, the stock price would skyrocket.
They also bought US bonds, reasoning that their value would go up, since the bonds would be needed for the purchase of the BUS’ s upcoming stock issue. This became known as the“ Six Percent Club” because those bonds paid 6 % interest. To attract more credit and investment, the two also fraudulently inflated their already significant assets.
Duer was a snake; Jefferson derisively called him“ King of the Alley.” Even as he was buying Bank of New York stock with Macomb, he was“ selling it short” in his own account. In other words, he was betting in public that the Bank of New York would be taken over, but betting in private that it would not. If the merger never materialized, Duer and Macomb would suffer losses, but Duer, separately, would see strong profits. Since he was betting with Macomb’ s money, Duer had nothing to lose. Did he have some inside knowledge that the BUS would not buy the Bank of New York and was simply withholding that knowledge from Macomb?
www. MoAF. org | Winter 2026 | FINANCIAL HISTORY 21