Brandeis historian Jane Kamensky's The Exchange Artist: A Tale of High-Flying Speculation and America's First Banking Collapse (Viking, 2008) examines the financial history of the Early Republic through a fascinating and bizarre case study: the rise(s) and fall(s) of Boston's Exchange Coffee House and the man most responsible for making it a flawed reality, Andrew Dexter, Jr.
Dexter planned the Exchange - which at seven stories would tower above Boston - as a grand financial edifice, but his building's foundations "rose upon a pyramid of bank notes," financed by a trail of paper obfuscation stretching from Boston to the nascent Detroit, the wilds of Maine, and rural Rhode Island. It was a complex process, but basically Dexter bought up banks and used paper money issued in their names to fund his projects - his modus operandi was to scatter the money widely enough so as to make it difficult for its holders to exchange for specie (thus 'preserving' its face value even though it was backed by absolutely nothing).
It is difficult, in hindsight, to figure out how Dexter managed to convince so many people, for as long as he did, that his house of cards was a worthwhile venture. And yet it took several years before the complications of his scheme caught up with him and a coterie of Boston merchants and creditors began a campaign to rein in the ubiquitous paper money. A newspaper war - largely anonymous - and the merchants' efforts brought Dexter down and he was forced to flee to Halifax, leaving behind in Boston a huge building with great potential but little allure.
A string of new owners struggled to make a go of the Exchange, and within several years it was a (comparatively) promising venture again (although not primarily as a venue for financial transactions, its original intent). As a hotel/reading room/meeting place it was holding its own - that is, until 3 November 1818, when it was destroyed by a great and long-remembered fire.
Kamensky pulls together the various threads of this story (Dexter's financial shenanigans, an architectural examination of the building, a riveting account of the fire and its aftermath, as well as Dexter's post-Boston life as a founder of Montgomery, AL and erstwhile but unsuccessful pursuer of fortune in the southwest), creating a readable and accessible narrative. While she struggles somewhat with perspectives and tenses, alternating between voices in ways which can be hard to follow, Kamensky manages not to let the style get in the way of the story.
There are some fascinating cameos here, including the portraitist Gilbert Stuart (who painted portraits of Dexter and his wife in their pre-debacle days), and Henry Clay (a patron of the Exchange on the night of the fire who, it was said in the press, assisted in the bucket brigade). Making an appearance as Dexter's father-in-law is Perez Morton, who had in earlier years created a great scandal by seducing Fanny Apthorp, the young sister of his wife. This case, which resulted in Apthorp's suicide, was the inspiration for William Hill Brown's The Power of Sympathy, one of the first American novels (and Apthorp's poignant suicide note is in our collections at MHS).
Kamensky's reconstruction of the Exchange Coffee House scheme is skillful and backed by significant and well-documented research (the footnotes are quite nice). It is both a fine example of narrative history and an instructive cautionary tale.
