The Exchange Artist: A Tale of High-Flying Speculation and America's First Banking Collapse

Brandeis historian Kamensky has written an insightful, engaging, and timely account of America's first financial collapse, a crisis caused by risky speculation in real estate. Although Kamensky's story takes place during the presidency of Thomas Jefferson, it will sound eerily familiar to anyone conversant with today's tottering financial system. Boston entrepeneur Andrew Dexter had big dreams. Tying his ambition to the fledgling American banking system, he constructed the biggest building in Boston, a commercial center he named the Boston Exchange Coffee House. Dexter financed this $500,000 project, completed in 1809, with banknotes printed by a series of rural banks that he controlled. To describe these banks as undercapitalized would be an understatement. Dexter's banknotes were backed by only a few hundred dollars in gold deposits, yet he ordered his clerks to sign and issue hundreds of thousands of dollars' worth of (worthless) banknotes, which were then used to pay his suppliers and workers. Kamensky meticulously details how Dexter took control of these rural banks and manipulated them to finance his activities. Dexter also used the press to promote his building scheme and to maintain public confidence in his worthless banknotes. In the end, Dexter's hyper-leveraged plans collapsed as the public discovered his fraud. Confronted with the forced closure of his banks and a government investigation of his crimes, Dexter fled to Canada. Kamensky does a stellar job explaining the fragility of the early American banking system and showing how Dexter took advantage of this fragility. The echoes with today abound.

April 19: "What you see first, after the starting gun's crack, is a column of bobbing runners, thousands of them, surging downhill..."

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