Financial History Issue 121 (Spring 2017) | Page 13

STEPHEN GIRARD
Early American Entrepreneur,
Financier, Banker and Businessman
By Clyde A. Haulman
In the early phases of the War of 1812,
prospects for the new nation were not
good. Despite several exceptional Ameri-
can naval victories, the British were strik-
ing at will in the Old Northwest and tight-
ening their naval blockade on the East
Coast. Napoleon’s disastrous march into
Russia meant that additional British mili-
tary assets were likely to be available for
the American war. After a decade of fiscal
frugality with little expenditure on the
military and defense, the US government
succeeded in getting a $10 million loan in
March of 1812 — just as war loomed with
Britain. But it was clear that with no new
domestic taxes and, in spite of increased
duties, no significant revenue stream from
customs as the blockade closed down
trade, the war effort was in trouble.
In March 1813, Secretary of the Treasury
Albert Gallatin, who had presented Con-
gress with information about the state of
the nation’s finances earlier in December,
requested an additional loan of $16 mil-
lion. Given the risks lenders perceived,
when the books closed subscriptions fell
well short of the total. With the federal
government facing a fiscal crisis, Gallatin
turned to a small group of leading busi-
nessmen — what economic historian Don-
ald R. Adams, Jr. called “undoubtedly the
first real underwriters’ syndicate for the
purpose of marketing government stock.”
Meeting in Philadelphia on April 5 in
response to the request for proposals to
cover any remaining portion of the loan,
Stephen Girard, the Philadelphia merchant
and banker; John Jacob Astor, a wealthy
New Yorker; and David Parish, son of
a Hamburg banker who previously had
acted as an agent for Girard, indicated they
would divide the unsubscribed $10 mil-
lion among themselves. Girard and Parish
together took $8 million and Astor took
$2 million. The terms of their offer were
slightly more advantageous to the govern-
ment than those of the initial proposal,
and once their offer became known, more
than 100 investors agreed to take parts of
the Girard-Parish commitment. When it
all shook out, Girard had loaned the gov-
ernment some $2.5 million, including his
coverage of most of Parish’s portion.
Three circumstances combined to
enable Girard to play such a significant
role in saving the Treasury loan of 1813
and, thereby, securing the war effort and
federal government operations. First was
his successful business enterprises that
had placed him among the wealthiest
of American entrepreneurs in the first
decade of the 19th century. Second was
the closing of the Bank of the United
States. Third was a loophole in Pennsylva-
nia banking legislation regarding private
banks. Perceptively seeing opportunities
and new directions for his business enter-
prises, Girard acted decisively to enhance
his own position and wealth, as well as aid
his adopted nation.
Arriving in Philadelphia in June 1776,
Girard, having achieved success in coastal
trading, quickly began the mercantile
operations that would grow dramati-
cally over the next 30 years. Capitaliz-
ing on the opportunities provided by the
French entry into the Revolution and
his own industry and frugality, Girard
prospered and spread his networks more
broadly. Aided by his expanding fleet of
vessels, particularly the famous philoso-
pher ships — the Helvetius, Montesquieu,
Rousseau and Voltaire — Girard extended
his trading empire to China and India,
South America and the Caribbean, Russia
and, most profitably, Western Europe.
By the middle of the first decade of
the 19th century, Girard grew increas-
ingly concerned about the viability of the
American neutrality that enabled him and
other merchants to make enormous profits
in the European carrying trade. With the
imposition of the Embargo Act at the end
of 1807, Girard began taking steps to secure
his European assets then spread among a
number of trading centers across the con-
tinent. Consolidating his wealth in London
using his British correspondent Baring
Brothers and taking advantage of favorable
exchange rates, over the next four years
Girard succeeded in securing his capital
and returning it to the United States.
In 1807, Girard sent a trusted employee
to begin consolidating his European
assets. In 1810, he authorized David Par-
ish as his agent and soon sent two other
Philadelphians to assist. Moving assets to
London, while at times difficult and not
without risk, proceeded throughout the
period 1808–1812. However, having sub-
stantial balances in London, even with a
firm that Girard trusted as much as Baring
Brothers, faced significant uncertainties as
the continental war ebbed and flowed and
economic and political relations between
the United States and Great Britain con-
tinued to deteriorate. Thus, Girard sought
to move his wealth to the United States by
purchasing goods for import to the United
States, as well as by financial transfers in
the form of purchases of US government
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