Thursday, February 28, 2013

The Chase Manhattan Bank of Cholera

You probably know that Aaron Burr murdered Alexander Hamilton in a duel. But I recently learned of Burr's surprising and grotesque role in some of New York City's worst plagues — including one we're still suffering through to this day.

My dad recently gave me a fascinating (but not online, unfortunately) medical history of New York City's water supply by Dr. David E. Gerber, from which I learned this:
"In 1799, New York City passed on the responsibility of constructing and maintaining a waterworks to the newly charted Manhattan Company. The company, the brainchild of the improbable team of Alexander Hamilton and Aaron Burr, received from the state legislature a mandate to supply New York City with 'pure and wholesome' water."

Left: Manhattan Company log pipes excavated in 2004 near Coenties Slip. Via New York City Walk (photographer unknown)

But the Manhattan Company was terrible at providing "pure and wholesome water." They employed cheap wooden pipes and instead of procuring fresh Bronx River water, as had been proposed by city officials, they dug wells on the outskirts of the growing city (near today's Greenwich Village) where the water supply quickly became polluted with the city's sewage, or dried up altogether from overuse.

So in spite of a $2 million charter from New York's state government, the growing city continuted to suffer from polluted water. In 1832, the very first year that cholera arrived in New York City (from Asia, via overseas trade), 3,515 New Yorkers died.

There was a reason why the Manhattan Company was so negligently, fatally incompetent at its purpose: it was run by some of the city's earliest investment bankers, including the murderer Aaron Burr.

At Burr's initiative, the Manhattan Company's charter was amended shortly before it took effect to allow the new company to spend its excess capital "in any way not inconsistent with the Constitution and laws of the United States."

The Legislature and Burr's business partner, Alexander Hamilton, seemed to believe that this would allow for additional, future waterworks. But Burr almost immediately exercised this clause to capitalize a new bank, using the money intended for waterworks to give out loans to New York merchants.

The Bowery Boys, the New York history podcasters, have an episode on the Croton Aqueduct that tells some of this same story, and they put it this way:
"There was a banking monopoly where you had the US Federal Bank [i.e., Alexander Hamilton's First Bank of the United States] and the Bank of New York, which was founded by Hamilton, Burr's rival and victim. Burr and his company got a $2 million contract from the state legislature to bring fresh water into New York City.

They decided to spend it thusly: $100,000 on waterworks and bringing fresh water into the city — so 1/20th of the total — and $1.9 million on creating a bank!"

Providing "pure and wholesome water" was just a distracting sideline. In fact, the more the Manhattan Company spent on public waterworks (there were no water meters back then, thus no reliable user-fee system, thus no profit motive), the less they had to spend on high-interest loans to New York City's merchant class.

Hamilton evidently didn't like the competition from a new bank in town: he left the Manhattan Company shortly after Burr capitalized his new bank with 1.9 million New York State taxpayer dollars.

The citizens of New York suffered the Manhattan Company's filthy water until 1842,  when the City of New York finally opened an aqueduct from the Croton River, which provided public drinking water that was genuinely pure and wholesome, and does so to this day.

So New York eventually addressed its sanitation problems and cured its epidemics of cholera and yellow fever.

Unfortunately, Aaron Burr was only an early vector in New York City's raging plague of assholes who collect millions of dollars from the government in order to enrich themselves in the global banking casino.

In 1955, Aaron Burr's Bank of the Manhattan Company merged with the Chase National Bank to become Chase Manhattan. And in 2000, Chase Manhattan bought out the investment firm JP Morgan to become JP Morgan Chase, on whose website you can today download a short history that tells part of this very same story. This document includes some pictures of old wooden pipes and a quaintly threatening engraving (below) of their company's founding chief executive ballistically perforating the Founding Father on our $10 bill.

However, somehow JP Morgan Chase's PR department neglected to mention the part about all the cholera — hopefully they'll appreciate this addendum.