Stephen Girard: The Banker Who Saved America

By John Steele Gordon

It’s a Chinese saying that “wars are fought with silver bullets.” And in the spring of 1813, in a war with Great Britain, we didn’t have any. The Treasury was empty, the country’s ability to borrow was small. The territorial integrity, perhaps the very independence, of the United States was in deep jeopardy.

In 1811 Congress had refused to renew the charter of the Bank of the United States, which had been the prime means by which the federal government borrowed money. The following year, Congress declared war on the only country on the planet capable of attacking the United States, offered generous pay and enlistment bonuses for men joining the army and then adjourned without making any provision to pay for the war.

By March of 1813 the federal government was broke. A series of military reverses had made the country’s prospects for winning the war dubious. That made the public reluctant to buy government bonds, fearing that the government, defeated in war, would default. Treasury Secretary Albert Gallatin had offered a $16 million bond issue. He had structured it to make it easy for small investors to participate. But too few had. If the whole issue was not subscribed, then no bonds would be sold and the war effort would collapse.

With the deadline for the bond offering looming, Gallatin went to Philadelphia on April 5 and called on Stephen Girard.

Born in France, the son of a sea captain, Girard had been born with a deformed right eye, sightless from birth or soon afterwards. It bulged from the socket like a fish eye. Shy as a result, he never allowed his portrait to be painted in his lifetime. After a short career as a sea captain, venturing as far as California, he settled in Philadelphia in 1776.

A shrewd and aggressive trader, Girard by middle age had created the greatest fortune in the United States. When the Bank of the United States lost its charter in 1811, Girard bought its assets, including its Philadelphia headquarters, and established a private bank. It was there that Gallatin met him and asked him to take the unsubscribed portion of the bond offering. He was, quite literally, the country’s only hope.

But even for Girard, that was asking a lot. Of the $16 million total, only $5.8 million had been sold to the public. John Jacob Astor and some of his friends had subscribed to $2 million, but only provided that Girard take the rest of the issue, more than $8 million. In the early 19th century a fortune of $50,000 was enough for a man to be considered very well off. There were probably fewer than a dozen men with assets over $1 million.

Girard could have driven the hardest of bargains or simply refused. He did not. He agreed to buy the bonds provided only that the funds be deposited in his bank until withdrawn as needed by the government and that he receive a small commission on the bonds he was able to resell to other investors.

Eight million dollars was more than Girard’s net worth, so he was taking an enormous gamble. Were the war to continue to go badly, he might well have been bankrupted. Fortunately it did not go badly and, despite the burning of Washington in the summer of 1814, the United States was able to get a draw out of a war it should never have started and to pay its debts.

Girard did not risk his life for his country, but he did risk his fortune. It was a brave act indeed.