Editor's Note: Every American school child learns that Aaron Burr killed his rival Alexander Hamilton in a duel. But even among those well-read in history, few are aware that the hatred between the two men had its beginning in an act of deception that Burr used to break the grip of Hamilton and his cronies on the supply of investment capital in New York. This installment in our occasional series of articles on the history of real estate and finance takes a look at this spurious act and the real estate deals it engendered that allowed Burr to defeat Hamilton's Federalist party in the elections of 1800.

In a clearing above the Hudson River on a bright early morning in July 1804, Aaron Burr, vice president of the United States and a leader of the Democratic-Republican Party, stood aside as his friends cleared the field of branches and debris deposited there by a previous storm. As the task was being completed, Alexander Hamilton, former Cabinet member and leader of the Federalist Party, arrived with a group of his supporters. The two men had come to settle, with pistols, a dispute over an alleged insult to Burr's personal honor. The insult, made by Hamilton, had been published in April of the same year by the Albany Register.

Burr and Hamilton were longtime antagonists, with many political conflicts between them. But there was one important event, one key deception, in which Burr used Hamilton's own reputation against him, which was to turn rivalry into hatred. This deception brought Burr his greatest victories—helping him to, in one stroke, found the bank that was to become Chase Manhattan; use the bank to finance special real estate deals to defeat his political rivals in 1800; and nearly gain the presidency of the United States. But it also earned him a burning enmity from Hamilton that would, eventually, lead them both to this fateful engagement.

The Rivals

Hamilton and Burr were ambitious men who gravitated toward opposite poles in the political world of post-revolutionary America. Both men settled in New York after their service in the Continental Army and became leaders of the fledgling political parties that were just taking shape. Hamilton aligned himself with the Federalist Party, which favored men of wealth and privilege. Although the party believed in "self-government" it did not want to allow the uneducated masses to have the opportunity to intrude in the proper running of the new country. Federalists favored a strong central government and believed that laws restricting voting rights to men of property were desirable because they believed that these men had a greater stake in society and were better able to see the wisest course for the country.

Burr supported the Democratic-Republican Party (known at that time as Republicans). The Republicans wanted a less centralized government and professed a desire for a more radical, broader democratic system.

During the 1790s the Federalists had a run of success. Although George Washington was not officially a member of either party, his policies, influenced strongly by Hamilton, tended to reflect those of the Federalists. And when Washington stepped down, John Adams, a Federalist, defeated the Republican candidate, Thomas Jefferson, for the presidency in 1796. The Federalists also enjoyed the same sort of control in the New York City and New York State governments, and they had few qualms about using their positions in the government to make opposition to their policies difficult.

Control the Capital and You
Control the Capitol

Among the most powerful tools at the disposal of the Federalists on both the national and state levels was their control of the banking system. Hamilton, as Secretary of the Treasury, had set up a strong central bank, the Bank of the United States, which was modeled on the British financial system. He had also been instrumental in the creation of the Bank of New York, which served a similar role on the state level. Hamilton served, along with a select group of other Federalists, on the board of directors of this state-chartered institution.

Control of the Bank of New York by the Federalists allowed them to have a strong say in who could or could not receive loans in the state, and especially in the rapidly growing economic dynamo of New York City.

As Republican pamphleteer James Cheetham noted, "The benefit of those institutions was chiefly confined to the adherents of one political sect. . .it became at length impossible for men engaged in trade to advocate Republican sentiments, without sustaining material injury." Indeed Cheetham maintained that as the partisanship increased in New York, the bank "[d]irectors became more rigorous in enforcing their system of exclusion."

The control of banking capital had a direct impact on their ability to maintain control of the state government, because capital, then as now, was vital to anyone trying to start or grow a business or, critically, invest in real estate. The laws of New York, like those in other states at this time, restricted voting in the elections to those free white men who owned enough property to be considered acceptable voters. By restricting access to capital, the Federalists were effectively able to shut out of the vote much of New York City's growing merchant and artisan population, a large part of which supported the Republicans.

But in 1799 all that was to change, and with the change—engineered by Aaron Burr—the balance of power in the state and in the nation shifted dramatically.

Yellow Fever and Clean
Drinking Water

Aaron Burr was well aware of the disadvantage that he and his fellow Republicans suffered financially in comparison to their rivals. He himself was chronically short of money and he knew that any loans he might obtain from Hamilton's Bank of New York would cost him dearly. But he knew also that according to the laws of the state, banks that could issue stock could only be created by a charter issued by the state legislature. Private banks could be created, but without the stock equity to raise capital, such an entity could never compete with the two chartered institutions already in place. Although there were several Republican members of the state legislature, Burr among them, they were a decided minority, and no Federalist would allow a bill creating a new bank, controlled by Republicans, to be passed.

But in 1798 New York City was hit by a devastating epidemic of yellow fever. In response to this public health crisis, a local physician, Dr. Joseph Browne, who happened to be Aaron Burr's brother-in-law, made a proposal to the Federalist-dominated Common Council for the City of New York that a chartered company, owned privately, should be formed to provide clean drinking water to the rapidly growing population of the city. This measure, he believed, would go a long way toward preventing the kind of epidemic that had just caused so much loss of life. Burr thought this was a wonderful idea, and he encouraged his brother-in-law to move the proposal forward. In the meantime, he began organizing a potential board of directors for the company, made up primarily of his Republican friends, but including a few prominent Federalists.

A committee of the Council read the proposal by Dr. Browne with interest, but in a close vote they decided to recommend a public company, owned and operated by the city, instead. They sent their plan to the committee of the state legislature that dealt with New York City. Burr was a member of this committee and he quickly took an active role in getting passage of a charter that would set up a new company to handle the development and operation of the water system for Manhattan. But Burr's motives for taking this legislation forward were not due entirely to his agreement with the need for a more sanitary water supply in the city.

Burr had a plan that he hoped would break the Federalists' grip on the banking system, and this proposal to charter a water company was just the tool he needed to set his plan in motion.

Burr's Trojan Horse

To make his plan work Burr needed two things—the first he set out to get immediately, the second would come only when the time was right.

First he wanted to have the original concept of a private company, rather than a public one, restored to the bill. The legislative committee was, however, reluctant to agree to this because the Common Council had recommended municipal ownership. Burr got them to agree to give him a few days to gather testimony from prominent members of the Manhattan community indicating that they favored the private company plan, and to secure the agreement of the Common Council to this concept.

He then made a whirlwind trip to Manhattan and in a few short days managed to round up a committee of six prominent men, three Federalists and three Republicans, all of whom were willing to testify to the good sense of having a private company handle this major financial undertaking, rather than making the city create a large new governmental structure that might prove taxing, both literally and figuratively.

The makeup of the six-man committee showed Burr's obvious talents for selling an idea. Included on the committee were Hamilton, the former Secretary of the Treasury, and two other Federalists, Gulian Verplanck, the president of the Bank of New York, and John Murray, the president of the Chamber of Commerce. The Republicans on the committee were Burr himself, John Boone, an eminent merchant and war hero, and Peter Wendover, president of the Mechanics Society and soon to be Sachem of the Society of St. Tammany.

Burr induced Hamilton, the man with the most prominent name in the group, to take the lead in dealing with the Common Council, which Hamilton did, writing a memorandum to the Council that argued against depending on the state to assist the city in funding a public utility.

He wrote: "The Amount of the revenues to result from the supply of the Water must be for some time uncertain and. . . extensive loans on this basis ought not to be counted upon. To raise what might be wanted by taxes to carry on the enterprise with vigour might be found so burthensome (sic) on the Citizens as to occasion the operation to languish."

This reasoning, with the weight of Hamilton's testimony as a highly respected and very Federalist member of the community, helped to sway the Council. They backed off their original recommendation and accepted Burr's private company plan.

Burr returned to the legislature with the full support of the Common Council and the backing of Hamilton and the other Federalists. Once in Albany, he made the key move that was to earn him the wrath of all the Federalists and especially Hamilton, who had used his own good name and reputation to help get the plan accepted. Shortly before the bill was to go to the final vote, he made alterations to the legislation that turned it into a Trojan Horse.

First, he doubled the amount of money that the bill would allow the company to raise through the sale of stock from the $1 million that Hamilton had been told to $2 million. Then, he added a clause, buried at the end of the charter, that permitted the company to use any "surplus capital" in the "purchase of public or other stock, or in any other moneyed transactions not inconsistent with the constitution and laws of this state, or of the United States, for the sole benefit of the said company."

A clause of this kind, granting virtually unlimited powers to a stock company, was unheard of in the late eighteenth century. The legislature, however, due to some careful work and negotiating on Burr's part, never took proper notice of this added wording, and the bill passed, creating the charter of the Manhattan Company.

Republicans Win

The deceptively simple clause was to prove the undoing of the Federalists both in New York and, eventually, in the nation. Because the clause was so vague, it allowed the new company extremely wide latitude to decide what it wanted to do with the funds it raised. It could, for example, purchase and sell real estate, or create a trading company or an insurance firm. Or it could found a bank.

This, of course, had been Burr's intent from the beginning.

Although the Manhattan Company did do the work that the charter had originally intended, i.e., developing a water system for the city, the system the Republican directors of the company (Burr being among them) chose was far less ambitious than the generous funding they had at their disposal would have warranted. Instead, they quickly took the "surplus capital" and went into the banking business.

The charter for the Manhattan Company (since renamed Chase Manhattan) was far broader than the one that had previously been granted to the Bank of New York. This helped to make it instantly successful. Even many of the Federalists who shouted foul the loudest became customers and stockholders in the company because they could see that this entity could not help but make money.

Nonetheless, the Federalists, with Hamilton in the fore, marshaled their forces and targeted Burr for defeat in the next election, successfully unseating him from the legislature as a payback for the way he had played them for fools.

The Bank + Real Estate = Voting Rights

But Burr was not done yet. He ran in the 1800 presidential election as the number two man on the Republican ticket behind Thomas Jefferson. Everyone in both parties was aware that New York's electoral votes would likely decide the election, and in New York at that time the electors were selected by the state legislature, still firmly in the hands of the Federalists.

So Burr organized the first big-city political machine in the history of the United States. Relying on the help of friends like Peter Wendover, he used the Society of St. Tammany to organize a well-orchestrated campaign to elect members to the state legislature.

In order to add numbers to the ranks of the Republicans who could vote in the city, Burr and the Tammany Society created "tontines" (similar to a housing cooperative association) using money loaned to them through the friendly offices of the new Manhattan Company. Each man had a share of ownership in one piece of property that was large enough to allow him the vote. By pooling resources of groups of men, none of whom had enough land individually, the tontines circumvented the land ownership restrictions on voting.

This artful, specialized real estate arrangement helped the Republicans to register numerous new voters for the state legislature elections. Burr's tireless campaign work and the added numbers in the ranks of the party delivered a majority in the state legislature to the Republicans, and with that, the Federalists lost both the state and the presidency.

Eventually, the courts would disallow this method of getting around the voting restriction law, but by then, the damage was done.

Too Clever By Half

In the election of 1800, Burr achieved one of the greatest victories in American political history, but he managed to simultaneously plant the seeds of his own political demise. When all the electoral votes were counted, the chief Federalist candidates, John Adams and Charles Pinkney, were soundly defeated, receiving 65 and 64 electoral votes respectively. Jefferson had received 73, but so had Burr. This was not supposed to happen—one of the electors who voted for Burr was supposed to vote for Jefferson—but through a mistake, or as some came to suspect, a trick on Burr's part, they both ended with equal vote counts.

This meant that the U.S. House of Representatives was called upon to break the tie and decide the new president. Jefferson was infuriated when Burr refused to campaign in his favor in the House, even though it had clearly been the Republican plan to have Jefferson as president and Burr as vice president. Burr did not actively attempt to gain the office, but he clearly hoped that he might get it anyway.

Interestingly, however, the House was still controlled by the Federalists, so they would be in a position to decide which of their two Republican enemies would become president. Here Hamilton thwarted Burr. Despite his loathing of Jefferson, whom he considered a dangerous radical, Hamilton used all of his resources in the Federalist Party to keep Burr from the presidency. He wrote several letters urging members of his party to vote for Jefferson over Burr, saying in one letter, "Mr. Burr loves nothing but himself—thinks of nothing but his own aggrandizement—and will be content with nothing short of permanent power in his own hands. . .By no means, my dear sir, let the Federalists be responsible for his elevation,—in a choice of evils, let them take the least—Jefferson is in my view less dangerous than Burr."

In the end, Jefferson was given the presidency and Burr the vice presidency. But Burr had lost Jefferson's trust, and he was effectively frozen out of any useful role in the administration.

At length, Burr decided to run for the governorship in New York, since his role in the Federal government was nil. But again he was thwarted, partly due to Hamilton's tireless attempts to attack his fitness for the office. These attacks were certainly a great annoyance to Burr, but he bore up under them without attempting to fight back during the election.

"My Friend Hamilton —Whom I Shot"

After he had lost the election, Burr was made aware of the published accounts of Hamilton's casting aspersions on his personal character during the election. This, finally, was too much for Burr. Although he had been attacked by Hamilton in public for his political views many times, Burr had never felt that this was anything more than the cost of playing the political game. He had always maintained a relatively cordial relationship with Hamilton and even dined with him on occasion during some of their most heated political battles. But he, like Hamilton, was a man of great personal pride. Learning that someone had assailed his personal character required a gentleman of the eighteenth century to insist on a retraction, or satisfaction. Hamilton refused to retract, or even to admit that he had made the personal insult. Burr felt obliged to challenge his old nemesis. Hamilton could see no other course but to accept or be seen as a coward.

So the two met on the field in Weehawken, NJ. Hamilton brought the guns—his right as the one challenged. Both brought their intimate friends as seconds and witnesses. Burr's party included two of the leaders of the Society of St. Tammany, Matthew Davis and William Van Ness.

Once each combatant had a pistol in hand, Hamilton made a rather deliberate show of adjusting his spectacles and carefully sighting along the barrel of his weapon before stepping to his place. When the combatants were set at 10 paces, the call of "present!" was made by one of the seconds, and two shots were fired in quick succession.

Hamilton's shot went high.
Burr's shot was true.
Both men were destroyed by the encounter. Hamilton died soon after from his wound, and Burr's political ambitions were doomed.

Legacies

The long public battle between Hamilton and Burr nevertheless resulted in legacies that had lasting effects on the political and economic landscape. The election of 1800 was the first step in the demise of the Federalist Party and the ascendancy of the Democratic-Republican Party, which eventually changed its name to become today's Democratic Party. The Society of St. Tammany learned the lessons that Burr had taught them about political organization and, as Tammany Hall, the society became the best-known big-city political machine in the nation for more than a century. And the Manhattan Company—Chase Manhattan—with the advantage of its broad charter, became one of the great financial powers in New York, the nation and, later, the world.