Why Baltimore?

Chapter Three

"President Washington first took office in New York City, but, when reelected in 1792, the capital had already moved to Philadelphia where it would remain for a decade. Fittingly, Jefferson was the first president to be inaugurated in the new and lasting capital of Washington, D.C. in March 1801."

See website of Independence Hall Association.

Baltimore was the closest city to the new capital of the United States, carved out of the states of Maryland and Virginia, according to Andrew Ellicott's survey. Washington, D.C., as it was called, was then only a "swampy location" north of the Potomac River and east of the historic city of George Town in Maryland. While about 5,000 transients had taken residence in the new seat of government by 1800, the population of Baltimore had doubled in the last decade of the 18th century to more than 26,000 people. Thanks largely to the efforts of merchant-turned-banker Alexander Brown, by 1850 Baltimore had become the leading foreign exchange center for trade in the United States.[1]

Alexander Brown, having spent many years as an auctioneer in a Belfast linen market, in 1800 followed brothers Patrick and Stewart to America. Importing Irish linens from his Irish trading center, he soon expanded into a variety of other commodities that passed through the harbor in Baltimore. 

He loaned out a portion of his profits from linen sales, clearing drafts and bills of lading for other merchants whose goods sat in the harbor awaiting payment, and before long his importing business had become a private bank. With surplus funds on hand for investment, he sought ought other wealthy men in the area to join with him to put their capital into the most promising technology of that day. These aspiring venture capitalists in Baltimore are worth mentioning below.

Charles Carroll, "the Signer" 

Charles Carroll setting the stone for B&O

In 1800, the year Alexander Brown arrived in Baltimore, the city’s wealthiest, and most eminent, citizen was Charles Carroll, the only Catholic signer of the Declaration of Independence, who had retired from politics the year Brown arrived. Until his death in 1832, Carroll focused on business affairs, becoming:

one of the founders of the Chesapeake and Ohio Canal Company and [he] invested in the Bank of Maryland, the Bank of Baltimore and the First and Second Bank of the United States. He held many shares in canal, turnpike, bridge and water companies in the Washington-Baltimore regional area. He purchased $40,000 of state-backed securities to build the Baltimore and Ohio Railroad, serving on its first board of directors.

Charles Carroll, a major shareholder in the Bank of the United States founded in Philadelphia, likely requested Alexander's assistance with his banking business in Philadelphia. As a result, Alexander stationed his two youngest sons there to assist Baltimore clients as well as handle business at the Philadelphia port. There they organized a new private bank, Brown Brothers & Co., in 1818.

A year earlier construction of a man-made canal which would stretch from the easternmost point of Lake Erie across to New York City's port, had begun and by 1825 would link the "western" states bordering both the canal and Lake Erie to the port at New York city. The headquarters of Brown Brothers & Co. was soon relocated by James Brown in New York to take advantage of the ever-increasing shipping trade there. Back in Baltimore, the original bank took bold steps in recognizing another technology which Alexander and George Brown hoped would allow more trade to be carried by land rather than by ships--the first rail road in America.

The Baltimore & Ohio Rail Road Company, in which Charles Carroll invested heavily, was organized in 1827 in the home of Alexander’s second son, George Brown, who served as its first treasurer. It was Carroll who laid the railroad’s foundation stone in 1828.[1]  The railroad was a bold attempt by Alexander and George, who remained in Baltimore, to capture some of the western trade for their city's port. According to research cited by photographer John Gensor:

Meanwhile, at the busiest harbor in the country, Baltimore, its wealthy shipping merchants are alarmed at the canal craze that was taking place. Not only was Washington building a canal to get the western trade to the ports of Georgetown and Alexandria,  but Philadelphia was also building one, linking itself to Pittsburgh to get the western trade for its port. Also, the Erie Canal construction begun in 1817 would also siphon off the western trade to New York City. If they did nothing, all trade from the west would start going to other harbors and none to theirs. The only river running into Baltimore was the Patapsco River and the water flow of this river was not enough to sustain a canal operation. Its source was a spring on top of Parrs ridge at Mt Airy, Maryland, just 36  miles away. The freight hauled by a Conestoga wagon over the Maryland road systems would be mediocre to what one canal boat could haul. But what could they do to save Baltimore’s port? Make a wagonway using a tracked road for the wagons instead of them using the dirt gravel roads?

It was the experiments with a "road of rails," to compete with the canal system that led to the incorporation of the Baltimore and Ohio Railroad in George Brown's home in 1827 where Philip E. Thomas shared his vision to other investors, many of whom like he and Brown, were either officers or directors of the Mechanic's Bank. It seems much of the ideas had come from England, where they had been previously explored by Alexander Brown's eldest son, William, in 1824 who wished to connect Liverpool to Manchester. The B&O would use the concept to connect the Potomac to the Ohio River.

The Carroll and Caton Family

Charles Carroll's daughter, Mary (born 1770), had been leaning toward marrying her cousin Henry Carroll of Duddington, son of her father's cousin Daniel Carroll--like Charles a member of Maryland's Senate to the House of Delegates. However, in 1787 she chose instead Richard Caton, an Englishman from Lancashire, and they would raise four daughters who would, as they say, marry well. Those marriages were described in Sisters of Fortune: America's Caton Sisters at Home and Abroad, a book by Jehanne Wake.

The Catons' daughter Maryanne in 1806 married Robert Patterson, whose sister, Betsy Patterson, was married to Napoleon's younger brother, Jerome Bonaparte, until, that is, his emperor brother had the marriage annulled. William Patterson is said to have been the second wealthiest man in Baltimore at the time.

William Patterson

In 1816 William Patterson, chairman of the newly chartered Baltimore Exchange Company, was another important associate of Alexander Brown. The Exchange Building housed the U.S. Custom House as well as Baltimore's branch of the Bank of the United States, established there in 1792, shortly after the war against Britain had ended. Patterson had been "a vital supplier of General Washington’s impoverished army during the early days of the war for independence," according to Jack White, a blockade runner for the patriot cause, having arrived in Philadelphia from Ireland in 1766:

When the British set out to prevent arms and powder from reaching the colonies at the beginning of the revolution, Patterson invested everything he owned and took off with his ships for France in hopes of arming the rebellion at a time when Washington claimed he hadn’t enough powder to fire a salute. First he supplied Washington’s forces from the Dutch island of Saint-Eustache and then from the French possession of Martinique. He returned to America in 1778 with over a hundred thousand dollars, married 17-year-old Dorcas Spear, settled in Baltimore, bought property, and built ships. He became one of the wealthiest men in Maryland, second only to Charles Carroll of Carrollton, Carroll County namesake and the only Catholic to sign the Declaration of Independence. (Patterson’s son Robert would one day marry Charles Carroll’s granddaughter, Mary Caton.)

When the British set out to prevent arms and powder from reaching the colonies at the beginning of the revolution, Patterson invested everything he owned and took off with his ships for France in hopes of arming the rebellion at a time when Washington claimed he hadn’t enough powder to fire a salute.
First he supplied Washington’s forces from the Dutch island of Saint-Eustache and then from the French possession of Martinique. He returned to America in 1778 with over a hundred thousand dollars, married 17-year-old Dorcas Spear, settled in Baltimore, bought property, and built ships. He became one of the wealthiest men in Maryland, second only to Charles Carroll of Carrollton, Carroll County namesake and the only Catholic to sign the Declaration of Independence. (Patterson’s son Robert would one day marry Charles Carroll’s granddaughter, Mary Caton.)
- See more at: http://www.sykesvilleonline.com/history/182-the-blighted-hopes-of-george-and-prudence-patterson#sthash.C0ZDRB7X.dpuf

a vital supplier of General Washington’s impoverished army during the early days of the war for independence. - See more at: http://www.sykesvilleonline.com/history/182-the-blighted-hopes-of-george-and-prudence-patterson#sthash.C0ZDRB7X.dpufThe Baltimore Exchange began business in 1820, with Alex. Brown & Sons being one of the approved traders in a long list of merchants. It too was an unsuccessful operation which dissolved within ten years.

Until the Bank of the U.S. met its demise in 1813, Brown's close business associates, Carroll and Patterson, were also shareholders of the central bank set up by Alexander Hamilton. Rechartered again in 1816, the Second Bank of the U.S. saw a number of Baltimore's businessmen indicted for fraudulent activity, especially in connection with Dennis A. Smith and the Mechanic's Bank in that city. Alexander Brown, who first became a director of the bank in 1807, was called as a witness against Smith, who had been central to a scheme with

stock taken in such a way 'that a Baltimore clique, taking advantage of a rule about voting, got votes enough to control the organization. By subscribing as attorneys, they got 22,187 votes out of 80,000, and they subscribed only $4,000,000 out of $28,000,000.'[2]

Thus this "clique" (which included Alex. Brown, his son George, and, later, his grandson, George S. Brown), received almost 36% of the branch's votes, while only putting up about 14% of the capital. The goal was obviously to keep those who supported federalist policies from having control of the Baltimore branch of the Second Bank of the U.S.

John Thomas Scharf, author of History of Baltimore City and County, from the earliest period to the present day (1881), indicated that one of the most active purchasers of the bills issued by the Baltimore branch of the Bank of the U.S. was an institution called the Bank of Maryland, which became insolvent in 1834 upon the revocation of the charter of the Bank of the U.S., and that Alexander Brown was among its creditors appointed as a committee of receivers, with William Patterson chairman. 

This same Baltimore branch of the Second Bank was integral to the 1819 landmark Supreme Court case, McCulloch v. Maryland, in which the Court interpreted the Constitution's "necessary and proper" clause to expand the listed powers of Congress under the Constitution in favor of federalism: i.e., the federal government had the implied authority to pass legislation not expressly provided for if deemed necessary in executing the powers that were so authorized.

The information below indicates stockholder information regarding the Second Bank, widely disseminated at the time, indicating the shareholder percentages by state, as well as by foreign country, in January 1832. The U.S. government owned 70,000 shares, while 470 foreigners owned just over 84,000. There were 3,602 "domestic" stockholders who controlled about 195,600 shares in the bank that year. Charles Carroll was the second largest with 2,633, falling significantly short of Stephen Girard's 6,331 shares in the bank.

The Brown banks and clients Carroll and Patterson owned significant stock in Bank of U.S. (click to enlarge).

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[1] Gary L. Browne, "Business Innovation and Social Change: the Career of Alexander Brown after the War of 1812," Maryland Historical Magazine 1974 69(3): 243-255.
[2] Theodore Dwight Woolsey, The First Century of the Republic: A Review of American Progress (Harper & Brothers:1876), 244.