A speculative boom takes place when shares of the Bank of the United States are made available. Meanwhile, out west, farmers are not thrilled about the new tax on Whiskey.

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Hello, and welcome to the political history of the United States.

Episode 5.28 Script Omania when we last left off, Hamilton had just managed to secure Washington's signature approving the national bank and delivering a stinging defeat to Jefferson and Madison.

This week we are going to turn back to that issue to begin our episode and see just how the internal offerings of the new bank went.

We are then going to spend the second half of our episode heading out to the frontier where a new crisis is beginning to form over a tax on whiskey.

For really the last two years, everything had been coming up Hamilton.

To this point, we have watched men like Madison and Jefferson attempt to push back on Hamilton to little success.

His economic plan sought to not only create a financial plan for the United States, but but to alter the very nature of the country.

Where Madison, and especially Jefferson, saw the United States as a republic of virtue and dreamt of a population of yeoman farmers, Hamilton saw the world as one of money, business and finance.

And as people choose sides in the forming battle, political parties began to form.

Now, I think it is probably fair to say that no matter how the initial public offering went for the bank of the United States, Jefferson and Madison were going to be aghast, appalled by whatever it is they were seeing.

Hamilton, for his part, would see the result as nothing short of a great success, proving his point that he had been right all along.

Unsurprisingly, this is exactly what happened.

Depending on who it was you were asking, the initial public offering for the bank was either a massive success or an unmitigated disaster.

So the question becomes, what actually happened?

Each share of stock was valued at $400, of which a quarter of it was going to be paid in actual specie, with the remainder being paid in government securities.

Not all of that money was due up front and in fact all a purchaser had to worry about was $25 down.

What that $25 bought was a certificate referred to as scrip, which gave them the ability to purchase the actual shares of over four installments.

Okay, so shares are $400 each, but it costs only $25 to buy the scrip which gave the purchaser the ability to buy those full shares.

This seems straightforward enough, right?

What ended up making all of this so much more complicated is that the scrip was fully transferable.

If you have been following along, of course, this makes sense that the scrip would be transferable because it falls completely in line with absolutely everything we have seen from Hamilton thus far.

Making it non transferable would have been far more out of character for Hamilton.

Pragmatically, what this meant is that pretty much as soon as the shares were made available, there was a mad rush to buy them up as fast as possible.

Something that was accomplished in just about an hour after their release, followed by a wild burst of activity as speculators took to the work of buying and selling scrip.

This frenzy was so intense that it earned itself the nickname and the name of our episode, Scriptomania.

That government scrip itself quickly saw its value rise as a trading frenzy took off for it.

There were a few reasons for this boom.

First, the bank was very quickly seen as a safe investment.

Government securities were accepted at face value for the bank shares, which was a nice hedge against the securities becoming deeply devalued, like we have seen with past American currency.

Second, the bank was always seen as a very safe investment.

This was going to be the sole institution responsible for handling all of the government business for the United States.

With this being such a safe investment, more than a few saw this as the moment to make a quick buck by scooping up shares of the bank and then pulling in profit with a minimal amount of risk.

As those $25 subscriptions were rapidly bought up by everybody wanting to get a foot in the door.

It was the script itself that took on value, as everybody continued to want to get a piece of the action.

This initial public offering sold so quickly that, at least according to Thomas Jefferson, there were some claiming misdeeds by the government, as several were left out in the cold.

Robert Morris was apparently ready to sue the government over all of this.

To what degree a run on the script was anticipated by Hamilton is hard to tell, although he certainly was not disappointed by the result.

That, however, is not to say that he was completely thrilled with it either.

Hamilton was at least concerned enough by the massive overvaluing of the scrip that he himself was wanting people to pump the brakes a little bit.

He worried that the widespread speculative boom was heading towards a potential cliff, as speculative financial boons are known to do, and worried that with his financial plan still in its seeming infancy, such a crash might permanently damage the bank's reputation.

With the prices of the script now going for over $300, everybody became very nervous.

But this was all just a house of cards.

Waiting to tumble down.

Now, this crash largely gets lost in the notes for a couple of reasons.

First, the recovery was pretty quick, and by September, prices seemed to be rebounding.

Clearly, for Alexander Hamilton, aside from that small blip in August, things were going well.

The initial public offering had been successful and had showed the power of the new bank.

As we led with.

However, not everybody was thrilled with how things were going.

If Hamilton viewed this as a success, Madison and Jefferson viewed it with far more trepidation.

Both Madison and Jefferson viewed this phenomenon of script mania as being nothing more than gambling.

Jefferson, writing to Edmund Pendleton at the end of July, calls out this gambling and remarks that as of yet, the delirium of speculation is too strong to admit sober reflection.

This remark by Jefferson came just a few weeks before that securities downturn.

About a month later, on August 25th, Jefferson would go on what I can only describe as a bit of a rant on the subject.

Now I'm going to read directly part of this letter, but be aware that this letter is actually quite a bit longer.

In a letter to Edward Rutledge, Jefferson writes, what do you think of this gripomania?

Ships are lying idle at the wharfs, buildings are stopped, capitals withdrawn from commerce, manufacturers, arts and agriculture to be employed in gambling, and the tide of public prosperity, almost unparalleled in any country, is arrested in its course and suppressed by the rage of getting rich in a day.

No mortal can tell where this will stop, for the spirit of gambling, when once it has seized a subject, is incurable.

The tailor who has made thousands in one day, though he has lost them on the next, can never again be content with the slow, moderate earnings of his needle.

Nothing can exceed the public felicity if our papers are to be believed, because our papers are under the orders of the scrip men.

I imagine.

However, we shall shortly hear that all of the cash has quitted the extremities of the nation and accumulated here.

Jefferson really does keep going on for a while on the subject, but I think this bit gets his feelings across quite nicely.

What Jefferson is describing here perfectly sums up a speculative run and the inherent dangers of it.

He writes of people making fortunes and then practically overnight losing everything.

For somebody like Jefferson, who envisioned that almost bordering on utopian, enlightened, agrarian republic, this Speculative run was the antithesis of what he viewed as the future of the United States.

Madison was not any happier than Jefferson.

He too viewed the entire episode as being an embarrassing cash grab and lamented to Jefferson that everybody around him was abuzz with gambling.

More than that, though, Madison did not necessarily view all of this as an incident of embarrassing gambling on a speculative endeavor, but rather feared that this was going to literally take control over the country.

What Madison worried about more specifically was that the bank would favor those who owned stock in it.

This favor, considering that the bank was going to be so intrinsically tied to the business of the United States, could turn into political favor.

In other words, Madison feared that if this group of wealthy bank owners owned enough of a share of the national bank, they would essentially be in control of it and therefore would be able to directly influence and control the policy of the United States.

Madison had a second concern as well.

It was not lost on him that the majority of the bank's investors were coming from those in Philadelphia.

Now, this makes sense to a degree because of pragmatic considerations.

Consider a speculative rent today on something like cryptocurrency.

If there is a sudden run of Bitcoin, it is not really going to be an event that is terribly geographically limited, at least within the confines of the United States.

People are just going to hop onto the Internet and make a trade with the bank.

We know that the shares were limited and that they were completely gone within a short period of time.

That means that Philadelphia, where the bank was physically located, was always going to have an unfair advantage just because of geography.

This problem became even more pronounced when you zoom out even further and look at the country as a whole.

The speculative run was most predominant in Philadelphia.

However, it was not exclusive to that city.

Jefferson was happy to point out, pretty much to anybody who would listen to him, that the shares were sold almost exclusively to Northern interests.

Of the 23,500 shares of the bank that had been sold, Jefferson identified only 700 of those coming from the South.

Other Northern cities were represented, such as Boston, New York and Baltimore.

However, Southern involvement in the matter was virtually non existent, per Hamilton biographer Ron Chernow.

Hamilton did regret that there was not more Southern investment when it came to investing in the bank, though he seems to have found little interest in a country where geographical factionalism remained a serious problem and Southern distrust of the Northern institutions was growing.

The ordeal over the bank did little to convince Southerners that the bank was anything but a nefarious Northern scheme.

Adding more fuel to the claims of corruption that Jefferson and Madison were only too happy to seize upon was that one of the biggest speculators in all of this was the former Assistant Secretary of the treasury and close friend of Alexander Hamilton, William Doerr.

Dewar, it seems, was personally responsible for a lot of the speculation that came during those days in July.

Dewar was buying so much, in fact, that it was leading to claims that he personally was manipulating the market.

Hamilton, seemingly annoyed at his friend, would write to Dewar, basically telling him to cool it, that the script being priced at $300 is way too high and that if this entire thing implodes, it is going to be bad for everybody.

Hamilton went further to note to doar that 190 is probably the far more sustainable price.

While everybody in Philadelphia was busy with the bank of the United States and all that came with it, out in the West, a different drama was in its earliest days of playing out.

Back when Hamilton's call for a national bank was first introduced, a second bill was also filed that sought to levy taxes on all wines and spirits produced within the United States.

Now, this bill passed with little notice.

Nobody was particularly opposed to it.

In fact, on its face, other than being introduced at the same time as the bank of the United States, there was hardly anything noteworthy about the legislation.

It was seemingly bound to be little more than a historical footnote.

Except somebody did notice.

You see, all along the western frontiers, people were taking notice and they were not happy.

Throughout the western frontiers of the Carolinas and Virginia, there would be in the coming months and years resistance to these new taxes.

In Kentucky, the new legislation was so despised that the citizens just mostly ignored it as the federal government lacked the manpower to meaningfully enforce it.

Now, as a brief aside, since we just brought up Kentucky, this seems like as good a time as any to mention that it is right around this time that the United States gained two new states.

By the end of the year, two new territories were itching for admission as well, Kentucky and Vermont.

Nothing about either of these states joining the Union was terribly controversial.

Neither state found any resistance to officially joining the union, and indeed their admission at the time seems to be something of an afterthought.

Neither state found any resistance to joining the union, and indeed their admissions at times seems to be something of an afterthought.

Very few books on the era that I have read even bother to mention it.

Jefferson and Madison make a passing note of it, but other than that, nobody is really talking all that much about the two new states.

So although Kentucky was approved first, they would join the nation a year later.

So welcome to the club, Vermont and Kentucky.

Okay, now that we have our newest players in the fold, let's head back to the crisis at hand.

As we were discussing, the new taxes on distilled spirits was anything but popular legislation out on the western frontiers.

As unpopular as it was, though, nowhere was it more despised than in western Pennsylvania.

The problem with the whiskey tax, as it would become known, was multifaceted.

The tax was simple enough.

It was a 9 cent tax on every gallon of whiskey that was produced.

Now, figuring out just how much whiskey was produced turned out to be a far more difficult task.

Large scale distributors could easily answer the question and could produce at a steady rate, thus being able to easily anticipate their tax burden well in advance.

For smaller producers though, things were far more irregular, leading to huge amounts of uncertainty.

Hamilton suggested that the solution was to either bill a flat rate per gallon or based on the size of one's stills.

The second option was essentially the government coming in and saying, hey, you have X amount of capacity, therefore this is going to be your tax burden.

The issue with this system is that small producers seldom were able to produce up to the capacity of their stills, whereas the large scale producers could.

Even if they used the per gallon method, that was still impossibly difficult to meaningfully predict.

For the smaller producers, the large scale distributors were completely and totally on board with this new plan.

Of course, they were not fans of paying taxes either, but they knew that they could handle the tax burden without too much trouble.

That was a whole lot more than could be said for the smaller competition.

Thus, while the large distillers shoved on ahead, the small distillers fought to keep their heads above water, often forcing them to fail entirely or sell out to those same large distillers.

For the small distillers, therefore, they found this law to discriminate against them in favor of the large scale operations.

Making matters worse, violations of this law were to be dealt with with a huge at the time fine of $250 to be paid in cash.

That explains what the problem is.

So the next question is why Western Pennsylvania?

As it turns out, western Pennsylvania had become one of the distilling centers of the United States, with right around a quarter of all distilleries being located in and around Pittsburgh.

Although the population remained limited, Pittsburgh was a critical trading spot located at the Forks of the Ohio.

For many of you who have been here the entire time, you fully understand why the Forks of the Ohio were so critical for trade.

If you skipped out on those episodes, just know that the Forks of the Ohio was such a critical spot at the confluence of three major rivers that it would spark a war between the British and the French that would morph into a global conflict.

With so much whiskey being produced in one location, many there couldn't help but feel that not only was this a discriminatory tax against the small distillers, but that it was also specifically tailored to target a single region, which just as a quick reminder, is a region that was no stranger to radicalism in the not too distant past.

We are only 30 years past Pontiac's Rebellion, which was full of often brutal radicalism on both sides of the conflict.

It was at the end of July that the first conference on the subject took place in Brownsville, a small town to the south of Pittsburgh along the Monongahela.

Among those present at the meeting were William Findlay, who we will see again shortly as he's going to end up in Congress in short order.

Also at the meeting, although he would come to later really wish that he wasn't, was Albert Gallatin.

Gallatin would bounce around a bit at first, moving from New England out to western Pennsylvania, where he would settle down and become a farmer.

Now Gallatin is never going to exactly be the ringleader of what is coming.

But he was present during those early days of the crisis and eventually is going to become something of a moderating force in the events that follow.

As we continue throughout this season, Gallatin is going to be sticking around with us for a while and would soon become a prominent ally of both Thomas Jefferson and James Madison.

Following the example from years earlier in the Imperial crisis, it was quickly decided that the events of Brownsville would not be sufficient.

They proposed a second meeting take place in Pittsburgh that September, and that all of the surrounding counties hold a conference to select representatives to attend.

It would then be the meeting in Pittsburgh that would draft the official response.

Before anything could actually happen, though, things took a turn towards violence.

The job of enforcing the tax in the region went to a guy named John Neville, himself a moderately large distiller.

The guy was generally well liked and respected.

Neville himself, as well as his son Presley, were soldiers and had fought in the revolution.

John Neville, being a bit older, can join our large group of men, including Washington, who had been present with Braddock for his infamous march.

The job of being a revenue inspector came with a moderate salary.

However, the real benefit was the 1% bonus that Neville collected from his efforts, thus incentivizing Neville, again, a much larger distiller than his neighbors, to collect the tax.

Now, Neville himself was not exactly bouncing farm to farm personally.

He hired a guy named Robert Johnson to do that for him.

Johnson himself is not exactly an important figure for anything that he would personally do, but what happened to him, well, yeah, that is going to matter.

On September 6, Johnson made his way out into Washington county, located to the southwest of Pittsburgh, to assess the distillers and figure out the tax.

Per historian Brady Kreitzer in his book the Whiskey A Distilled History of an American Crisis, Johnson was well liked.

He was seen as being friendly enough, if not just a bit on the naive side.

He certainly did not see it coming when, as he made his way through Washington county, he was intercepted by a mob dressed up as Ohio Warriors.

Johnson was beaten by the crowd with clubs cut with razor blades and then tarred and feathered.

The good news is that despite this horrific attack, Robert Johnson actually survived.

Knowing that it probably will not surprise any of you to hear that he was pretty upset over his ordeal and wanted to see his attackers punished.

What we know of his attackers is that these were not just some random thugs, but rather were locally important, well respected men.

The ringleader of the attack was a guy named John Hamilton.

He was A Revolutionary War veteran and was well respected as a leader amongst the residents of Washington County.

Unfortunately for Hamilton, Johnson had identified him as being one of the attackers, and along with two other men, warrants were issued for their arrests.

The guy tapped with the job of actually carrying out those arrests was John Fox of Philadelphia.

Fox, though, was not a stupid guy.

He understood that this attack was anything but random and understandably, was not terribly interested in just waltzing into Washington county himself to carry out the arrests.

No worries, though.

He rounded up an elderly man named John Connor.

Conor is a sad story, as it seems that he was intellectually disabled and pretty much everybody was just fine with taking advantage of the guy.

Sure enough, when Fox hired him, Connor gladly accepted the job and marched right into Washington county to deliver the warrants.

Unfortunately, and predictably, the same group was there to meet Connor.

They nearly beat him to death before tarring and feathering him, robbing him, and then tying him to a tree and leaving him for dead.

When Joseph Fox found out, he decided that was good enough for one day and got out of there, back to the safety of Philadelphia as quickly as he could.

At around the same time, another guy, Robert Wilson, would also find himself getting tarred and feathered.

Wilson doesn't actually seem like he had anything to do with the whiskey tax.

Instead, it appears that Wilson was just an unfortunate outsider who asked way too many questions and failed to read the room and shut up.

Either way, his sudden appearance and awkwardly probing questions convinced people that he was a Treasury Department spy, and he too was rather brutally assaulted.

As we discussed before, preparations were being made for a response from the various western Pennsylvania counties.

In September, that meeting took place in Pittsburgh.

After three days of meeting, the delegates had prepared a list of grievances which largely called out the entire Federalist platform.

They complained about the bank, the concentration of wealth in the hands of a few wealthy businessmen, and, of course, the tax on whiskey.

Again, here you have certain men, specifically Hugh Henry Breckenridge, who would later become the leader of the moderate camp, largely because the majority's radicalism had spooked them back from the prevailing actions.

So how did Alexander Hamilton and company take the grievances of the Western farmers?

Upon learning of the events to his west, Hamilton's concern was not finding a way to address the grievances of the people on the frontier, but instead was to Double down.

Just like the British during the Imperial crisis, this was all about making it clear that the United States retained full sovereignty in the region and that it was not about to allow some backcountry farmers to conduct negotiations at the end of a musket.

Sure enough, rather than backing down and trying to reach some kind of a compromise, Hamilton decided that this was the perfect time to amp everything up.

Now, failure to comply and register a distillery would still come with a huge $250 fine, but also it would now include the forfeiture of the distillery itself.

Also, nobody was going to be going to Washington county or any of the western Pennsylvania counties anymore.

Now it was going to be up to the distillers to travel up to the tax offices themselves and make the payment.

Finally, Hamilton set up a new commissary system for the army stationed along the frontier.

While that might not sound related, in the past, these soldiers would frequently buy supplies, including alcohol, from these frontier towns.

Now that key bit of business was unceremoniously stripped away from the small farmers.

William Findlay, now in Congress, would advocate for his neighbors.

But Beyond a small $0.01 reduction in the tax, Hamilton and his Federalist counterparts had dug in their heels.

We are going to leave the western Pennsylvania distillers here for a moment.

However, as you might have guessed, we are going to be hearing from them again in the future.

In the coming months and years, resistance to not just the specific tax, but indeed to the Federalists themselves, would become a poignant force.

Next time, we are going to turn our attention to more of the affairs out in the west, as the United States army would face off against a perceived Indian threat.

Until then, I hope you all have a wonderful two weeks.

I hope that you are staying healthy and that you are staying safe, and I will see you back here next time as we discuss the Battle of Wabash.