[Albany, January 31, 1799]
The opening paragraph of the letter printed below contains the first reference in Hamilton’s extant correspondence to a series of events that led to the chartering of the Manhattan Company.1 This company, which eventually was to supply New York City with an inadequate water system and a major bank, owed its creation primarily to the ingenuity of Aaron Burr, who at the time the charter was granted was a member of the New York Assembly.2 Although it is—and was—generally believed that Burr wished to create a bank that would be responsive and favorable to the Republican interests in the city, it is highly unlikely that he would have succeeded in obtaining a charter for the company without the support of Hamilton. Nor was this all, for Burr was assisted by other prominent Federalists, and one of the company’s original directors was John B. Church, Hamilton’s close friend and associate and his wife’s brother-in-law.3
In 1799 politicians assumed that banks, like most other institutions, were dominated by one or the other of the major parties, and New York’s Republicans charged that the city’s two banks—the Bank of New York and the local branch of the Bank of the United States—discriminated against Republicans and used their influence to secure the election of Federalist candidates.4 At the same time it was generally recognized that steps should be taken to improve the city’s water supply. It remained for Burr to perceive a connection between these two apparently unrelated situations by developing a plan to establish a bank with a charter that created a company ostensibly for furnishing the city with water.
In February, 1796, the New York City Common Council appointed a special committee “on the subject of supplying this City with fresh Water.”5 Although the committee received numerous proposals from various individuals during the next three years,6 it took no effective action until the yellow fever epidemic of 1798 convinced New Yorkers that the spread of the disease could be attributed in part to the impurity of the city’s drinking water.7 Among those presenting plans to the Common Council for an improved water supply was Dr. Joseph Browne, Burr’s brother-in-law. In December, 1796, and again in July, 1798, Browne proposed to the Council that it should urge the state legislature to charter a private company to supply the city with water from the Bronx River.8 On December 17, 1798, the Council approved the “Plan suggested by Doctor Joseph Brown for conveying the Waters of … [the Bronx] River … with some few variations.…”9 At the same time it rejected Browne’s plan for a private company, for it ordered that a bill be prepared and submitted to the legislature authorizing the city to establish and operate a municipal system.10
Any bill providing for a public water system posed an obvious threat to Burr’s plan to use a law chartering a private water company as a device for the establishment of a new bank. But Burr proved more than equal to the situation. After February 16, 1799, when the Assembly “Ordered, That Mr. Burr have leave of absence for ten days,”11 he left Albany for New York, where he formed a committee of six, of which both he and Hamilton were members and which consisted of three Federalists and three Republicans. According to the minutes of the Common Council for February 25, 1799, “The Mayor12 informed the Board That on Friday last Mr Burr one of the Members from this City in the Assembly of the State together with John Murray Esqr as the President of the Chamber of Commerce, Gulian Verplanck Esqr as the President of the Office of Discount and Deposit of the Bank of the United States in this City,13 Peter H. Wendover as the President of the Mechanic Society together with Major General Hamilton and John Broome Esqr,14 according to an Appointment by Mr Burr, called on him and stated to him in the Presence of the Recorder,15 who was also requested to attend for the purpose, that great difficulties had arisen in the minds of the Members of the Legislature touching the Powers requested to be vested in this Board, by the Bill for supplying this City with Water and the Bill for investing this Board with adequate Powers in relation to certain objects of importance to the Health of the City: that it was Problematical whether those Bills would pass in the form Proposed and He therefore submitted the Propriety of this Board requesting the Legislature that if those Bills respectively should not be deemed Proper in the form proposed by the Board, the Legislature should make such Provisions on the several Subjects thereof as to them should appear most eligible.
“That after some Conversation with Mr Burr and the other Gentlemen accompanying him the Recorder and himself requested that their Propositions might be stated in Writing to be communicated to the Board as on this day. And Mr Recorder now laid before the Board a Paper without Signature which he stated to the Board he had received from Major General Hamilton16 as the Propositions for their consideration this day, which being read
“Resolved, That before the Board proceed upon the said Propositions they ought to be sanctioned by the Signature of the parties recommending the same; And that the Nature and Circumstances of the Difficulties which have attended the several applications made on the behalf of this Board to the Legislature should also be stated.
“Resolved further that the above Resolution be communicated to Mr Burr and Major General Hamilton without delay; And as the objects above alluded to are of great importance to the welfare of the City, the Mayor be requested to call a special Meeting of this Board as soon as he shall receive the Proper communications in consequence of the above Resolution.”17
In compliance with the request for a signed statement from the committee, Hamilton wrote to Mayor Richard Varick on February 26 and enclosed a memorandum containing the arguments for a private company. On February 28 the Council resolved that “… they will be perfectly satisfied if the objects in View are pursued in any Way that the Legislature may think proper by which their fellow Citizens may be benefitted in the most easy, safe and effectual method, and the Charter rights of the City remain inviolate.”18 But Hamilton was still not finished, for he then prepared a “memorial” to the legislature calling for a “Company … with a Capital not exceeding one Million of Dollars to be formed by voluntary subscriptions of fifty dollars to a share.…”19
“An act for supplying the city of New-York with pure and wholesome water,” which was passed by the Assembly on March 28, 1799,20 and by the Senate on March 30,21 became law on April 2.22 The provision which enabled the Manhattan Company to establish a bank was inserted toward the end of the measure and reads in its entirety: “And be it further enacted, That it shall and may be lawful for the said company to employ all such surplus capital as may belong or accrue to the said company in the purchase of public or other stock, or in any other monied transactions or operations not inconsistent with the constitution and laws of this state or of the United States, for the sole benefit of the said company.” In 1799 the Manhattan Company established both a water system and a bank. The water system was inadequate from the outset and stopped operations in 1840. The bank survived, prospered, and exists today as the Chase Manhattan Bank.
Hamilton lived to regret the part that he had played in the chartering of the Manhattan Company. In the course of a letter to James A. Bayard on January 16, 1801, stating his opposition to Burr as President, Hamilton wrote: “I have been present when he has contended against Banking Systems with earnestness …” and then added: “Yet he has lately by a trick established a Bank, a perfect monster in its principle; but a very convenient instrument of profit & influence.”