But the blow to Alexander’s reputation fell hard. What Alexander did not know yet but would discover soon enough was that, to persuade wary buyers that this was a guaranteed safe investment and to keep driving up the resale prices, William Duer bragged that he had the inside track directly from the man who managed the country’s finances.
The chorus of voices—in Congress, in the city, in the papers—saying Alexander Hamilton was trading insider information to benefit his wife’s family was growing stronger and louder.
Eliza was beside herself. She pressed Alexander to resign.
By November 1791, even Alexander was persuaded that his position in the Treasury came at too high a cost to his family. Eliza was a nervous wreck and foresaw terrible things coming. She exercised a powerful influence over the situation. Alexander’s first obligation was to his family, whose own finances were far from stable, and, if Alexander would walk away from the Treasury, Eliza was prepared to be very flexible about the new situation. She now threw her weight behind a plan for all of them to move to Britain, preferably in a diplomatic position. “Betsey has lately given me stronger proof than she ever did before of her attachment to you,” Alexander wrote to Angelica on the first of the month. “Things are tending fast to a point, which will enable me honorably to retreat from a situation in which I make the greatest possible sacrifices to a little empty praise, or if you like the turn better, to a disposition to make others happy. But this disposition must have its limits. Will you be glad to see us in Europe? For you will never come to America.”
Their nine-year-old son Philip returned home from boarding school in New Jersey in late December, and Eliza busied herself with hunting down Latin textbooks and some fancy embroidery. As far away as London, Angelica heard reports that “our dear Hamilton writes too much and takes no exercise and grows too fat,” she teased her sister.
A solution seemed so near now. Eliza felt confident that the hard part was almost over.
The last few weeks of 1791 were far too brief a reprieve before the annus horribilis of 1792. And Eliza’s hopes were a delusion.
In January 1792, the next financial scandal broke. People were just realizing that a small group of investors, led by two real estate developers named Alexander Macomb and William Constable, along with William Duer, had pulled off a massive land grab at discounted prices. The primary beneficiaries were members of Eliza’s extended family and Alexander’s political party. Congressmen in the opposition fumed. The secretary of Treasury had his hand on the scale and was enriching his relatives, they protested furiously. Alexander would have done well to have taken his own advice, offered to a friend in 1789, that “suspicion is ever eagle-eyed. And the most innocent things may be misinterpreted.”
William Duer “will speculate on you,” William Constable realized by spring, “and after leading you into all the risque He will reap the profit.” But it was too late for the ringleaders. They were overextended. To save their skins, they came up with a plan to run up the shares in the manufacturing group to make ends meet on their other obligations. William Constable strategically shorted the stock, but the stock went wild with the pumping, setting off a second mania of credulous investors eager to jump in on the bubble. For Alexander, who had thrown his weight behind the society, the political appearances were devastating.
There was a vicious game afoot, and Alexander’s enemies among the Livingston clan saw blood in the water. Seeing the run-up as profiteering and relishing the idea of punishing the investors, they exercised their considerable financial clout; started pulling cash out of the banks, setting off a credit crunch; and did their level best to tank the stock. Down it tumbled.
The Panic of 1792 exploded on Alexander in March and ended with riots in the streets. William Duer was short nearly $300,000—something upwards of $7 million today—to meet demands and begged Alexander to intervene to save him.
This time Alexander refused.
When Duer failed, he took down with him not only Alexander Macomb, who was upside down to the tune of a half a million, but also Walter Livingston, the husband of Eliza’s cousin Cornelia Schuyler, the daughter of Aunt Gertrude. Within weeks, all three men were locked away in debtors’ prison. Eliza remembered the conditions there with horror. This time was worse for the prisoners. Mobs of furious investors stormed the jail and threatened to burn it down, with William Duer and Alexander Macomb in it. They were spared immolation, but Duer would die in debtors’ prison seven years later. Gone were Catherine Duer’s days of flaunting an aristocratic lifestyle. Eliza’s heart went out to her.
But mostly, she worried about Alexander and money. Eliza was the family bookkeeper. Their old friend Mac wrote to Alexander affectionately in 1791, “I have learned from a friend of yours that [Eliza] has as far as the comparison will hold as much merit as your treasurer as you have as treasurer of the wealth of the United States.” She knew what happened to every penny. And the budget at home was tighter than usual. Where were hundreds of dollars disappearing to? If she suspected, Eliza said nothing. But she already knew that she would do anything to prevent someone she loved from ending up bankrupt and in prison.
What kind of losses Philip Schuyler, John Church, the patroon’s brother Philip Van Rensselaer, and perhaps even Alexander suffered in the rout is unclear. But land values plummeted by two-thirds, and the four cannot have fared well on those investments. Many of the letters among these men from this period did not survive. That was probably not an accident.
The fallout and recrimination went on for months. Alexander’s archrival, Thomas Jefferson, did little to hide his disdain. Colonel Hamilton, Jefferson fumed to the president in the late summer of 1792, was “a man whose history, from the moment at which history can stoop to notice him, is a tissue of machinations against the liberty of the country,” a man who had been “dealing out of Treasury-secrets among his friends in what time and measure he pleases.”
That was the first act. The second act in this tawdry drama didn’t unfold until late autumn, and Eliza had every reason to curse William Duer all over again. And perhaps, also, Alexander.
Alexander was working in the Treasury on a plan to cash out at face value some long-delayed notes offered to veterans of the Revolutionary War, as part of the process of tidying up loose ends in the new republic. Many veterans and their families continued to dump the notes on a secondary investment market for deep discounts, and if the deal went ahead, anyone who bought notes at less than face value before the news broke stood to make a tidy fortune. It was a classic setup for insider trading.
Before his stock market bubble had gone bust and he’d ended up in debtors’ prison, William Duer, using insider knowledge, had leaked word to a small group of investors. Among those who raked in the profits were John Church’s business partner, Jeremiah Wadsworth; a number of the men in Eliza’s extended family; and some shady characters named Jacob Clingman and James Reynolds. Alexander looked the other direction.
All the evidence suggests that sometime in the spring of 1791—when the familiar story says the affair started—Alexander also asked James Reynolds to buy some of the notes, a couple of hundred dollars at a time and off the record, for his personal portfolio. Around him, the men in the extended Schuyler family were getting rich and could sleep easy at night knowing they had financial security for their families. Alexander alone was barred from taking advantage of the greatest wealth-building opportunity of the century. It was a mighty temptation.
The scandal broke a year after the fact, in the autumn of 1792, just as Alexander and Eliza were celebrating the arrival at the end of August of a fifth child, a boy named John Church Hamilton, after Angelica’s husband.
The pieces started tumbling down when James Reynolds was arrested on charges of defrauding war veterans with this pension-buyback scheme. His business partner, Jacob Clingman, got hauled in next, and from his prison cell offered a deal: his freedom in exchange for proof that Alexander Hamilton was engaged in illegal financial specu
lation.
Word of this extraordinary claim—so long bandied about in the press and in Congress but never proven—made its way up the ranks in Congress until it reached the Speaker of the House of Representatives, Frederick Muhlenberg, who owned the firm where Jacob Clingman worked. Speaker Muhlenberg, on the other side of the aisle from Alexander and the Federalists, found this very interesting. He quickly pulled in three colleagues—Congressman James Monroe, Congressman Abraham Venable, and Senator Aaron Burr—and suddenly Alexander Hamilton was under de facto investigation by some of his fiercest opponents, who planned to turn evidence over to President Washington.
The trail that they hoped would at last indict Alexander Hamilton led them straight to James Reynolds.
Jacob Clingman’s claims, if true, were stunning. Sometime in early 1791, he claimed that he had been surprised to encounter Alexander Hamilton at the home of his business associate, James Reynolds. He was even more surprised when this event was repeated in coming weeks. On one occasion, he said in a sworn statement, he witnessed packets being exchanged and delivered.
Curious, Jacob Clingman suspected game was afoot. He asked James Reynolds and his pretty young wife, Maria, what was the nature of the business. Maria confided that Alexander Hamilton and her husband had been doing business for several months already
and that so far Alexander had recently given James more than a thousand dollars. She believed they were speculating.
James Reynolds was more confiding yet. He told Jacob Clingman, “in confidence, that if [William] Duer had held up three days longer [in the financial panic], he should have made fifteen hundred pounds, by the assistance of Col. Hamilton: that Col. Hamilton had informed him that he was connected with Duer. Mr. Reynolds also said, that Col. Hamilton had made thirty thousand dollars by speculation; that Col. Hamilton had supplied him with money to speculate.” Most damaging of all for Alexander, “Mr. Reynolds has once or twice mentioned,” Jacob Clingman reported to the assembled congressmen, “that he had it in his power to hang Col. Hamilton.”
That got the congressmen moving.
They set off to interview James Reynolds at once. Finding the twenty-two-year-old Maria Reynolds alone in her parlor and her husband out, they pumped the young woman for information. Maria revealed that Alexander Hamilton and Jeremiah Wadsworth—James Reynolds’s wartime employer, John Church’s wartime business partner—had come to visit earlier that day. Alexander, Maria fretfully reported, had urged James to leave the house quickly. At Alexander’s request, she also confessed that she had “burned a considerable number of letters from him to her husband . . . touching business between them, to prevent their being made public.” But she had not burned quite everything. Maria, frightened and pressured, offered the investigators now several letters, in a disguised handwriting, which she claimed were from Alexander to her husband and proved that Alexander was giving James money.
It did not escape anyone’s notice, either, that Alexander Hamilton didn’t just have a family “connection” to William Duer, as James Reynolds had boasted. Alexander also had a family connection to Mrs. Reynolds. Maria Reynolds, the sister-in-law of Gilbert Livingston, was Eliza’s third cousin. The proximate relations of all involved lent a certain credibility to the story.
Armed with this testimony—and more—the congressmen laid out the charges and demanded a meeting with Alexander Hamilton in hopes of obtaining an explanation.
On the morning of December 15, 1792, at dawn, Alexander was at home and frantic. Eliza could hear the incessant creak of the floorboards as he paced up and down the parlor. When James Reynolds arrived on a stealth morning visit near the seven o’clock hour, Alexander was striking his head with his fists in anguish. The visit was short, and what happened in the course of it was something the congressmen later very much thought needed a better explanation, because by afternoon, James Reynolds had completely vanished. Eliza also spent the day anxiously wondering.
When Alexander strode out of the house that Saturday morning less than an hour later, he was calm and confident again. When his inquisitors arrived at Alexander’s professional office at 8 a.m., he was relaxed and jocular. Accusations were leveled. Alexander’s indignant denial followed. There was no financial speculation, he informed his inquisitors. He was simply having an affair with Mrs. Reynolds and her husband was a vile blackmailer. The story seemed remarkably convenient, but Alexander insisted he had proof in the form of love letters and demands for payment. He invited the skeptical congressmen and senator to meet again at the Hamilton home that evening, if they wanted, and Alexander would show them the evidence.
What happened in the next twelve hours that followed is the mystery at the heart of Eliza Hamilton’s extraordinary story.
By the time dusk fell, Alexander was ready to meet his opponents. Eliza did not stay for the conversation. Whether he took her into his confidence now or whether that happened later, Eliza never said, and she went to lengths later to disappear from this story. But, all things considered, the probability is that Alexander told Eliza some substantial part of his troubles. A man who intends to keep a secret from his wife doesn’t invite his accusers to meet in his family living room on a Saturday evening.
What is certain is that Alexander went alone into the parlor with his interrogators and political enemies and laid out in front of them some handwritten letters and receipts said to be from Maria and James Reynolds. The letters were probably forged. The troublesome receipts were undoubtedly authentic. It would have made no sense to fabricate them, since their existence was the largest part of Alexander’s dilemma. The legislators blushed and rose, professed themselves content as gentlemen, and departed.
And that, Alexander thought, was surely the end of that problem. He went away cheerful.
James Monroe, however, was convinced that Alexander was lying. The next day, James Monroe recorded a memorandum of the conversation, writing:
Last night we waited on Colo. H. when he informed us of a particular connection with Mrs. R.—the period of its commencement and circumstances attending it . . . the frequent supplies of money to her and her husband and on that account. . . . To support this, he shewed a great number of letters from Reynolds and herself, commencing early in 1791.—He acknowledged all the letters . . . in our possession, to be his. We left him under an impression our suspicions were removed.
But they were not removed. Quite the contrary. The worst was still ahead for Alexander and, especially, Eliza.
Within days, the gossip was all over the capital. Thomas Jefferson’s journal entry that Monday makes clear that he and another half-dozen congressmen had heard the story of Alexander Hamilton’s confessed infidelity.
Jacob Clingman broke the news to Maria. The horrified young lady steadfastly denied having any affair with Alexander Hamilton and burst into tears at hearing the story. Jacob reported this new conversation to James Monroe, also, who added a new note to the bottom of his minutes. “Mrs. Reynolds,” the note recorded,
appeared much shocked at it and wept immoderately—That she denied the imputation and declared that it had been a fabrication of colonel Hamilton and that her husband had joined in it, who had told her so, and that he had given him receipts for money and written letters, so as to give the countenance to the pretence.
Maria Reynolds claimed she was the victim of a tawdry cover story—one set up by the two men to save their hides but that would ruin forever her reputation.
Who was telling the truth, Alexander Hamilton or Maria Reynolds? At least three congressmen in 1792—and James Monroe especially—did not believe Alexander.
It is not difficult to see why they were suspicious. On the face of it, the tale seemed ripped from an eighteenth-century epistolary novel, with an even flimsier premise.
The story that Alexander told that Saturday night at home was tawdry and salacious. He claimed that Maria Reynolds had turned up on his family doorstep in the spring of 1791, a “Beauty in Distress,” and announced her family connec
tion to Eliza. Alexander expected them to believe that, with his wife and children at home at the time, he came to the instant conclusion that this young lady was offering herself as a prostitute and rushed her off the property, money in his pocket, to see if he could turn her distress to sexual advantage.
And Alexander did all of this knowing that the young woman had a Livingston connection, despite being in a political struggle to the death with Chancellor Robert Livingston, and having been warned of what everyone in Congress took as a given: “The Chancellor hates, & would destroy you.”
If the story were true, there was no conclusion except that Alexander Hamilton was the most debased of men, a creature of his sexual appetites, unthinking, unstrategic, and hopelessly foolish. James Monroe was perfectly prepared to accept the first two conclusions. But Alexander Hamilton was not unthinking, unstrategic, or foolish.
James Monroe also thought there was something that did not add up about the letters Alexander had shown them. Was it not possible that someone else—Alexander himself—had written them? Something didn’t strike the right note. They were sentimental, lovestruck, hysterical, melodramatic. They bore more than a passing resemblance to the kind of letters one read in something like Samuel Richardson’s best-selling epistolary novel from the 1740s, Pamela.
Eliza Hamilton Page 17
