the last book I ever read (Alexander Hamilton by Ron Chernow, excerpt ten)

from Alexander Hamilton by Ron Chernow:

As with any speculative bubble, it is hard to pin down the elusive moment when reasonable confidence in bank scrip bloomed into euphoria. As late as July 31, Fisher Ames wrote to Hamilton from Boston, praising the bank subscription: “People here are full of exultation and gratitude.” Then, in early August, prices soared upward in a vertical line. On August 8, Madison expressed shock to Jefferson: “The stock-jobbers will become the praetorian head of the Government, at once its tool and its tyrant, bribed by its largesses and overawing it by clamours and combinations.” Jefferson brooded about the harm to America’s moral fiber: “The spirit of gaming, once it has seized a subject, is incurable. The tailor who has made thousands in one day, tho[ugh] he had lost them the next, can never again be content with the slow and moderate earnings of his needed.” Benjamin Rush reported the same money-mad bustle in Philadelphia. Everybody from merchants to clerks was forsaking everyday duties to wager on scrip: “The city of Philadelphia for several days has exhibited the marks of a great gaming house…. Never did I see so universal a frenzy. Nothing else was spoken of but scrip in all companies, even by those who were not interested in it.” Senator Rufus King later told Hamilton that New York City’s economy had ground to a halt as people rushed off to gamble in bank shares: “The business was going on in a most alarming manner, mechanics deserting their shops, shopkeepers sending their goods to auction, and not a few of our merchants neglecting the regular and profitable commerce of the City.”

Finally, on August 11, 1791, came the first crash in government securities in American history. Bank scrip that had gone on sale for twenty-five dollars just over a month earlier had zoomed to more than three hundred dollars. The bubble was pricked when bankers refused to extend more credit to leading speculators. Then bears began to sell, and shares nose-dived. As the chief financial regulator, this market turbulence thrust Hamilton into a ticklish situation. He had no precedents to guide him. As a rule, he tried not to interfere with markets and thought it improper to register opinions on the value of government securities. But he also believed he had an obligation to protect the financial system, and so he improvised as he went along. On August 15, Rufus King informed Hamilton that speculators attempting to depress bank shares were quoting Hamilton’s opinion that scrip was grossly overvalued: “They go further and mention prices below the present market as the value sanctioned by your authority.”