The Antibubble: Thomas Willing and Early American Financial Stability

The Antibubble: Thomas Willing and Early American Financial Stability

The AntibubbleThomas Willing and Early American Financial Stability By Robert E. Wright Thomas Willing (December 19, to spectacular bubbles followed by then clerked in his father’s Phila- 1731 – January 19, 1821) was per- gut wrenching and economy wrecking delphia counting house for several haps the most important of Ameri- busts. His business practices were so years before rising to partner in 1751 ca’s lesser-known financial founding staid, in fact, that some dubbed him thanks to the business acumen he fathers, the dozen or so men who “Old Square Toes.” displayed during his father’s extended helped the new nation to win its Any genetic predisposition to cau- absence in the Mother Country and a independence and forge a remarkably tion that Willing may have possessed timely and sizeable inheritance from a innovative yet relatively stable finan- was magnified by some early for- great aunt. Like other so-called “dry cial system. During his 60-plus year mative events. The first born son goods” firms, Charles Willing andS on career, Willing furthered the develop- of Charles Willing, an aspiring mer- wholesaled imported manufactured ment of marine insurance, the mort- chant of British birth who married goods but, atypically for the period, gage market, commercial banking and into Pennsylvania’s elite Shippen clan, preferred to sell its wares for “ready life insurance without stimulating the young Thomas attended school in money, or short-credit” rather than frothy excesses that have so often led England from 1740 until 1749. He on long-term credit. Already show- Financial History ~ Winter 2011 20 www.moaf.org ing signs of square toeism, Thomas ground rents were more gilt than sub- a Philadelphia common councilman was particularly wary of sending the prime. Loan-to-value was closer to 50 (1755–59), alderman (1759–68) and company’s property “out amongst the percent than the 95 percent plus typical mayor (1763–64). He also served two country retailers.” A family tragedy of the 21st century variety. Recourse, terms in Pennsylvania’s unicameral soon cemented the young man’s con- the ability of Willing (and other ground legislature (1764, 1765) and was a servative financial instincts. lords) to seize the borrower’s real and Pennsylvania Supreme Court justice Charles became mayor of Phila- personal property to pay the interest from 1767 until 1776. delphia in May 1754, but in late or principal of the loan, was substan- Most of his assignments in city November perished from a contagious tial. As an added protection, Willing government and the colonial legis- disease contracted while fulfilling the denominated many of the mortgages lature, where he was astonishingly duties of the office.T hree weeks shy of in specific full-bodied coins, like gold active, dealt with business and eco- his 23rd birthday, Thomas suddenly pistoles or silver dollars, rather than nomic matters such as ferry regula- found himself financially responsi- in Pennsylvania pounds. Denominat- tion, market stall repairs, extension ble for his mother, his nine surviv- ing the contracts in that local unit of of the public wharf and the General ing younger siblings and the heirs account would have been more conve- Loan Office, Pennsylvania’s hoary of Thomas Lloyd, whose estate his nient but would have exposed Willing government-owned mortgage bank. father had been in the middle of set- and his heirs to potential depreciation Along with Benjamin Franklin and tling when he died. Charles’s estate of bills of credit and to devaluation others, Willing was part of a delega- was quite large, so Willing’s role was of the Pennsylvania pound. All in all, tion that convinced the Paxton Boys as faithful steward of other people’s Willing’s technique was one of the saf- to “return peaceably to their Homes” wealth rather than as an adventurous est methods of financing urban devel- rather than to continue their murder- risk taker. (Willing later reprised that opment yet devised. ous riots on Amerindians living under role as a vestryman in Christ Church, Given his disdain for excessive risk, the colony’s protection. As a justice an Anglican church in Philadelphia in Willing was naturally attracted to the of the peace and judge, Willing also which he was active.) marine insurance business and did helped to uphold the rule of law so With his own share of the inheri- not like what he saw — a slow, expen- important to commercial dealings and tance, some £6,000 sterling, Willing sive system where shippers procured overall economic prosperity. took on somewhat greater risks but insurance, sometimes with the help of Likely because of the economic and always weighed them carefully against brokers, from ad hoc groups of local policy fiasco that he witnessed unfold likely returns. He continued selling dry or London-based individuals called in the aftermath of the French and goods only for cash or short credit but underwriters. In the early stages of Indian War [See “Boom, Bust and Cri- over time began to deal much more the French and Indian War, Willing sis” in Financial History, Issue 98, Fall heavily in riskier “wet goods” (includ- declared that he would rather be his 2010], Willing became an active mem- ing beer, liquor and wine), military “own Insurer Rather than pay such ber of the Revolutionary movement. stores, servants and slaves. Likewise, Exorbitant Premiums” and joined with He opposed the Currency and Stamp he sent ships to sea when war threat- five other “Gentlemen of Fortune” to Acts and other restrictive trade regula- ened but warned his captains to “Be form “Thomas Willing and Com- tions by joining, and sometimes chair- carefull [sic] at Sea & Speak with no pany,” the purpose of which was to ing, public meetings and non-importa- Vessell [sic].” Perhaps most tellingly of insure “Ships Vessells [sic] Goods and tion agreements. As the imperial crisis all, in 1757 Willing admitted his flam- Merchandize on reasonable Terms.” deepened, he served as a member of boyantly reckless clerk Robert Morris That company, and ones like it he the Committee of Correspondence and into partnership, but monitored him formed in subsequent years, reduced a delegate to the Provincial Convention closely and eventually parted ways the risks associated with obtaining in 1774, a member of the Committee when Morris embarked on high-risk insurance in distant London and in of Safety in 1775 and as a delegate speculations, the very gambles that dealing with individual underwriters to the second Continental Congress eventually led to Morris’s bankruptcy who might die, go bankrupt or simply (1775–76). Although he ardently sup- and imprisonment for debt. refuse to pay a claim. ported the Patriot cause, Willing’s Willing was also cautiously innova- Willing also entered public life in vote against independence — prompted tive in his real estate dealings, selling order to reduce the risks his busi- undoubtedly by his close ties to the numerous city lots to artisans by means nesses faced by gaining some influence Mother Country and the cautiousness of a perpetual interest-only mortgage over public policies. He served as a by then seemingly ingrained in his very called a ground rent. Unlike recent Philadelphia County justice of the soul as well as his toes — effectively interest-only mortgages, Willing’s peace from 1761 until 1767 and was ended his political career. Closure of www.moaf.org 21 Financial History ~ Winter 2011 Museum of American Finance that avenue, however, channeled Will- what the US economy needed was a Despite the successful establishment ing into the greatest role of his life as form of money more copious than the of a small but effective banking sys- America’s first commercial and first paltry sum of precious metals in circu- tem, America’s governments remained central banker. lation but still linked to gold and silver essentially bankrupt and its economy The newly independent nation found and, most importantly of all, bereft of moribund. That changed, however, financing its rebellion against Britain, direct political control. after ratification of the US Constitu- then the world’s leading superpower, To meet those pressing needs, tion and implementation of Hamilton’s extremely challenging. With two of Morris, young upstart Alexander financial program, a set of policies that every three Americans still actively Hamilton, and others suggested the established the credit of the national loyal to the Mother Country or sitting formation of a commercial bank. A and state governments and encouraged astride the proverbial fence paralyzed desperate Congress and several state an efflorescence of entrepreneurship. A by fear, large-scale taxation was out governments concurred and autho- key component of the new system was of the question. Borrowing large sums rized the nation’s first commercial the Bank of the United States (1791– of money domestically or abroad was bank, the Philadelphia-based Bank of 1811), a central and commercial bank also impossible for a runaway republic North America, which made loans to headquartered in Philadelphia and with a weak central government, no governments and businesses funded owned by the national government and track record and anemic tax receipts. by the issuance of bank notes and private investors. The obvious choice So the new governments printed deposits convertible into gold and sil- to run the crucial new institution, their own money to pay salaries and ver coins at predetermined rates. which among other things provided the buy munitions and provisions. And Less concerned than the average federal government with a safe place to then more money. And then some voter about Willing’s stand on inde- stash its cash and, when its deposits fell more. And then the British poured a pendence and his continued residence short of its obligations, with loans, was large number of counterfeits into cir- in Philadelphia during the British America’s most experienced banker, culation as well.

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