Duer and the Crash of 1792
once was a man named William Duer. Born in England
in 1743, Duer was the son of a very successful West
Indian planter. Educated at Eton, Duer settled in
America in 1773, became sympathetic with the colonists
grievances against Britain and, at the same time,
he quickly began to hold positions of importance in
New York society. Duer regaled his friends and associates
at dinner at his home on Broadway, not far from Wall
Street, where Trinity Church is still located. At
his wedding to Catherine Alexander ("Lady Kitty"),
the bride was given away by George Washington.
Duer became a member of the Continental Congress,
a New York judge, and a signer of the Articles of
Confederation. He was also secretary to the Board
of the Treasury (appointed by Alexander Hamilton),
a position that made him privy to the inner workings
of American finance in the late 1780s. Hamilton, our
first Treasury Secretary, was honest and never profited
from his government position. Duer, on the other hand,
saw nothing wrong with using information he was privy
to to try and make a fast buck.
The Duer/Hamilton relationship was to have its trying
moments. Duer had been instrumental in helping Hamilton
establish the Bank of New York. Hamilton would attempt
to bail Duer out of some major problems, later.
Duer had made his fortune in land and speculating
on the Revolutionary debt. In 1791, Duer resigned
his Treasury position and entered into a partnership
with Alexander Macomb, one of New York's richest and
most prominent citizens. They agreed to combine Macomb's
money and Duer's speculative talents and insider connections
with the Treasury Department. Duer began speculating
on Bank of New York stock when there were rumors that
it was to be bought by the Bank of the U.S. If true,
the stock was sure to rise. But while long in the
market with Macomb, he was short (betting the stock
would go down) Bank of New York in his own account.
If the merger failed, Duer and Macomb would lose,
but Duer, on his own, would make a fortune. Since
his agreement with Macomb called for using Macomb's
money, not his own, all Duer had to lose by double-crossing
his partner was honor, a sacrifice he seemed perfectly
willing to make.
unaware of Duer's duplicity, but appalled at his speculative
activities wrote on March 2, 1792. "'Tis time, there
must be a line of separation between honest Men &
knaves, between respectable Stockholders and dealers
in the funds, and mere unprincipled Gamblers."
Duer became the center of attention and many were
only too anxious to lend him money in hopes of getting
in on the bandwagon. He began to buy other bank stocks
for future delivery, betting that rising prices would
enable him to pay for them when the time came.
at the same time there were others who had an interest
in seeing that prices fell, namely the Livingston
clan, one of the richest families in the New York
area. To ensure this, they began to withdraw gold
and silver from their bank deposits, contracting the
local money supply and forcing banks to call in loans,
thus instituting a credit squeeze. Interest rates
soared to as much as one percent a day.
This was ruinous for Duer and others who had borrowed
to speculate. Desperate, he tried to borrow more to
cover his obligations (All-Tech and Momentum Securities
weren't around then to help him out), but there was
none to be had.
his fall, panic ensued. Immediately, Duer was thrown
in debtors prison and Macomb ended up there as well.
Alexander Hamilton, however, rode to the rescue and
ensured that the country as a whole didn't suffer.
He ordered the Treasury to purchase several hundred
thousand dollars worth of federal securities to support
the market, and he urged banks not to call in loans.
Soon, calm quickly returned. According to historian
John Steele Gordon, "It would be 195 years, until
the great crash of 1987, before the federal government
once again moved decisively to prevent a panic."
Duer often traded on insider information, he earned
the distinction of being the first to do so. Within
a month of his collapse and the crash that followed,
the auctioneers and dealers resolved to move themselves
in from the street and the coffeehouses and to find
a more permanent location. It became apparent that
the marketplace needed a central location so that
dealings could be better controlled and better records
kept. In May 1792, dealers and auctioneers entered
the Buttonwood Agreement. Meeting under a buttonwood
tree, today the location of 68 Wall Street, the traders
agreed to establish a formal exchange for the buying
and selling of shares and loans (bonds).
what became of Duer? Hamilton tried to intervene on
his behalf but was only able to obtain a short reprieve.
Duer soon ended up back in prison and he died there
"Wall Street: A History," by Charles Geisst
"The Great Crash of 1792," an article in the May/June
issue of American Heritage magazine, written by John