Financial History Issue 133 (Spring 2020) | Page 23

purer water to the city. Sponsored by
Aaron Burr, its real purpose was banking.
Burr inserted a clause into the charter that
allowed any surplus capital the company
had to be “employed in the purchase of
public and private stocks, or in any other
moneyed transactions or operations” that
were legal. The Manhattan Company was
supposed to supply a lot of water and do
a little banking. Instead, it supplied little
water and did a lot of banking.
Securities prices rose during the epidemic
and by December were significantly higher:
Bank of New York from 132% to 134% of
par; BUS from $464 to $500; US Deferreds
from $63.75 to $67.50; US Sixes from $73.75
to $80; US Threes from $45 to $50.
Independence National
the fever a regular occurrence. Between
August 1 and November 9, the fever killed
more than 5,000 Philadelphians—about
10% of a population of 50,000 before
the outbreak induced some 20,000 resi-
dents to flee. Among them was President
George Washington, who went home to
Mount Vernon in early September.
One person who did not flee in time
to avoid the infection was Treasury Sec-
retary Alexander Hamilton, who caught
the fever in early September. His wife was
also stricken. Both were quickly cured by a
cold-bath treatment recommended by Dr.
Edward Stevens, an old friend. But when
the Hamilton family went to Albany, New
York, to recuperate at Mrs. Hamilton’s
father’s home, they were almost denied
entry to the city because of unwarranted
fears that they would bring the malady
with them.
Philadelphia’s most eminent physician,
Benjamin Rush, used a harsher treatment
than Stevens’ method, blood-letting and
mercury purges, and lost many patients.
The two doctors became involved in a
public debate over whose treatment was
best. In 2020, we have witnessed efforts to
keep possibly infected outsiders away as
well as debates over treatments. They are
nothing new.
Merchant-financier Stephen Girard
stayed on in Philadelphia, using some
of his fortune and managerial skills to
tend to the sick. He espoused the Ste-
vens treatment and became a hero to
Philadelphians.
During the epidemic, the prices of the
young nation’s two most important secu-
rities, US 6% bonds (Sixes) and shares in
the Bank of the United States (BUS), both
dipped slightly in early August before
rebounding and even increasing until
quotations for the Philadelphia market
ceased in early September. Specifically,
Sixes dropped from $90 (per $100 bond)
to $88.75 before hitting $91.67, while BUS
shares went from $420 to $412 to $428,
suggesting a “flight to quality” scenario as
some wealthy Philadelphians on the hoof
sold real estate and specie for more liquid
and transportable safe assets. Unlike 2020,
the securities market did not crash. It sim-
ply shut down during the epidemic.
The reaction in the New York market,
where both securities also traded, was sim-
ilar. When quotations began again in Phil-
adelphia on January 1, 1794, BUS shares
were at $440 in Philadelphia and $444 in
Portrait of Benjamin Rush, Philadelphia’s
most eminent physician during the
yellow fever epidemic of 1793,
by Charles Willson Peale, circa 1818.
New York, and Sixes were at exactly $90
in both markets, suggesting that the tem-
porary cessation of trading in Philadelphia
did not damage market integration. In fact,
Philadelphians eager to buy or sell those
securities probably just did business via
New York during the hiatus.
Yellow Fever Epidemic
(New York City, 1798)
Outbreaks of yellow fever were an almost
annual occurrence in the decade 1795–1804
and reached epidemic proportions in New
York similar to Philadelphia’s outbreak
five years earlier from July to October 1798.
Some 2,100 of the city’s population of about
35,000 died of the fever that year. The toll
included prominent citizens such as Anti-
Federalist Melancton Smith and printer
Thomas Greenleaf. Street vendors hawked
“Coffins—coffins of all sizes.” Many of the
dead were buried in mass graves on what is
now the site of Washington Square Park,
which then was on the outskirts of the city.
In 1799, the city’s two chartered banks,
the Bank of New York and the branch of
the Bank of the United States, relocated
from Wall Street to Greenwich Village,
also on the outskirts, during the expected
fever months. The sites of the banks
became the West Village’s Bank Street.
That same year, the state chartered the
Manhattan Company, which proposed
to alleviate fever outbreaks by supplying
Cholera Epidemic
(New York City, 1832)
When cholera broke out in 1832, New
York City’s population had increased to
250,000, many of them recent immigrants
living below 14th Street. The epidemic
killed some 3,500, a mortality rate equiva-
lent to more than 100,000 when applied
to the city’s current population. When it
peaked in Manhattan in July, President
Andrew Jackson was in the process of
vetoing Congress’s bill to re-charter the
second Bank of the United States and
completely repaying the US national debt.
The most liquid US government bond
paid 5% interest per year. While the cholera
epidemic raged, leading to a mass exodus
from the city, the Fives not only continued
to trade, they traded above par, in a tight
range from $103.75 to $104.125 (per $100
principal) throughout the summer. Most
cholera victims were poor and not inves-
tors, but the disruption of the city’s usual
business was palpable. Most trades, though,
were over-the-counter and through bro-
kers, who, like many modern knowledge
workers, could conduct business even
when out of the office or out of town.
Unsurprisingly, then, the stocks of pri-
vate commercial banks, like the Bank
of America, Butchers and Drovers, and
Chemical, also remained range-bound all
summer, as did the shares of New York,
Neptune, Merchants Fire and other insur-
ers. New York Gas Light also traded in a
range between $145 and $155 throughout
the summer.
Railroads exhibited a more complex
pattern. Harlem dipped slightly at first,
from $105 to $95.50 per share, in late July
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