THE FOUNDING FATHER WHO SAVED THE AMERICAN REVOLUTION
The Winter of 1781
In January, 1781 the American Revolution was hanging by a thread. Washington faced the most desperate moment of the war. His troops were hungry, hadn’t been paid in months and desertions rising, the Revolution was on the verge of collapse. It was a dire situation and wrote a letter that warned,
“If the army is not supplied immediately, we must inevitably disband.”
The letter wasn’t written to Congress but to a wealthy merchant in Philadelphia. Robert Morris, a member of Congress supported Washington and had the financial means to save the army and country from dissolving. Congress was broke, and the states weren’t paying their requisitions that’s when Washington turned to Morris, a self-made millionaire and entrepreneur, the one man capable of raising the funds Washington needed. With his personal credit Morris provided the money to buy the food, clothing, ammunition and other essentials required to keep the Continental Army alive. Two men, one a general and one a financier formed a partnership that saved the revolution.
It wasn’t only the financial paralysis of Congress that made 1781 such a tough year, but men of the Pennsylvania Line, about 1500 and the New Jersey Line were mutinying. They were demanding food, clothes and months of back pay. The states weren’t paying their requisitions making the situation worse. Nobody wanted to be paid with worthless Continental currency.
This was an ominous moment in Washington’s war with the British and a time when the Continental Army could have dissolved. If that had happened it would have ended the Revolution without a shot being fired. A delegation of Continental Army officers went to Morris’s office of finance in Philadelphia and demanded their back pay before they were to be disbanded. Among the petitioners was Henry Knox along with other officer from five states. Congress was overdrawn on the credit that the French had extended. With the country on the brink of bankruptcy Morris was left with the problem of how to pay the army. He met with Hamilton, Madison and John Rutledge of South Carolina in his office and decided he could put together a month’s pay, $250,000 dollars or, about $7,000,000 dollars today. He did it by using a combination of bills of exchange and notes drawn against his own accounts. He had General MacDougal and his colleagues in a meeting in his office to tell them he’d provide a month’s pay at the rate of one week at a time. The purpose was to prevent giving them a large sum of money at one time to raid the camp commissary. By March 1783 working with a New York contractor and with Washington a plan was made that allowed regimental paymasters to convert Morris’s notes into payment for the troops. The pay came in the form of partial cash with clothing and supplies – no liquor. With the help of Morris, Washington was able to pay his troops what they earned and end the nightmare of a potential general revolt.
Development of a Financier
Morris’s ability to act in this moment came from a lifetime of experience. Born in England he trained in finance at a Philadelphia trading company where he became a partner b the age of twenty-three. At Willing and Morris, one of Philadelphia’s most powerful trading and snipping firms, Morris built a global commercial network. He did business with the French, Dutch, Spanish and in the Caribbean.
In early 1781 Congress discussed Morris as a potential organizer of the country’s finances. As a congressman and merchant, he was in the rare position of having political clout and private financial power.
Morris Chosen Superintendent of Finance
Congress debated and over the objections of John Adams who opposed giving one man centralized control, Morris was appointed Superintendent of Finance in May, 1781. It gave him sole authority to fund the army and to prevent the complete collapse of the Revolution. The position gave Morris unusual powers as the top administrator. After he was appointed, he became responsible for every facet of government except for the army. Initially, he didn’t want the job but accepted only after insisting on sweeping reforms.
With his extraordinary powers, much like a modern president, as Superintendent of Finance with his proven business acumen and personal wealth he was able to stabilize the country’s finances. Prior to his appointment, rather drowning in committee politics he advocated scrapping Congress’s committee system of administration and replaced it with departments of war, marine, treasury and foreign affairs under individual executives.
Morris’s first actions weren’t abstract maneuvers. The situation was desperate and to keep the army from dissolving he took immediate, concrete, life-or-death interventions. He acted quickly by reorganizing the Treasury the moment he took office. He tore the system apart and rebuilt it so money could actively move again. He rearranged the Treasury to speed up the settlement of accounts. He created a streamlined reporting structure so he could see in real time where the money was going and where it was disappearing. He demanded accountability from every officer handling public funds, something Congress never enforced. The government didn’t know where its money was preventing the army from being supplied, paying bills or, the men.
By creating “Continental Receivers,” it forced the states to pay up. Continental Receivers were appointed in each state to collect taxes and requisitions directly. This by passed the endless delays and excuses from state legislatures. For the first time there was a system to actively bring money into the national treasury. This was a bold move that made enemies but was essential. With his organizational acumen, personal wealth and international connections, Morris was the one man capable of stabilizing the economy.
With his personal credit he bought food, clothing, supplies and did the unthinkable – he bought and paid for it all with notes backed by his own reputation. He got loans from local Philadelphia merchants based on his signature alone. They trusted him more than Congress. This is why he’s called the Financier of the Revolution, not because he managed money, but because he became the financial system.
He established a system for subscribers to make deposits with a goal of 300,000 British pounds or, the equivalent of $15,000,000 dollars today. His proposal provided subscribers with interest-bearing notes that would be redeemed in six months based upon their contributions. The infusion of funds from Morris stopped further mutinies, kept the Continental Army intact, allowed enough money for Washington to keep fighting and kept the Revolution from collapsing. By creating a national bank that hadn’t existed before, he combined public finance with private credit making it the financial foundation of the country.
The history of Robert Morris is about institutional genius, and not a biography of a man who financially saved the American Revolution. Alexander Hamilton was one of Morris’s strongest allies who praised him saying,
“Mr. Morris certainly deserves a great deal from this country,” and, “No man in this country but himself could have kept the money machine a going.”
His contributions to the success of the Revolution are less known and barely recognized, yet, as a founding father of the country his finance support to Washington was crucial. Historians focus on the principal founders such as Washington, Franklin, Jefferson, Hamilton, Adams and others. As Superintendent of Finance using his personal credit, he raised the funds to pay the troops when they were mutinying and refusing to fight until they were paid. He bought supplies, took out personal loans and got credit from Philadelphia merchants who trusted him more than Congress. He not only established and organized the country’s financial system; he created the Bank of North America and became the first financial officer and executive in the fledgling country.
Morris established the first reliable contracting system. Before his reforms, procurement was chaotic and corrupt. After reorganization contracts were awarded through sealed bids. And, contractors were held accountable and prices were standardized. As a result, supplies actually arrived where they were supposed to. This was revolutionary. It was the birth of the modern American procurement system. He paid wagoneers, drivers and suppliers. He reopened supply routes, reestablished depots and ensured food and clothing reached the army. When General Nathaniel Greene was appointed Quartermaster, Morris improved procurement, deliveries and pay. While General Greene improved the supply system Morris provided the fuel – the funds to make it work. Greene rescued the army’s supply system from chaos, imposing order where there was none before. Working in conjunction with Morris the funds were provided for the funding Greene needed to rescue the army’s supply system. Robert Morris was the hidden architect of American independence.
In 1781 after he succeeded in rebuilding the supply system Greene left with Washington’s army to the southern theatre to fight the British. By August of that year, the system Greene rebuilt began to collapse again, not from mismanagement but, from bankruptcy. Washington had no officer to turn to and no officer who could acquire food, clothing or pay out of an empty treasury. This is when Robert Morris stepped in to fill that vacuum. With his personal credit he injected the money into Greene’s old system buying the food and supplies that kept the Revolution alive. Robert Morris didn’t just write checks, he built the financial machinery that allowed the Revolution function.
In the months after Greene left the Quartermaster’s post, the supply system began to falter again, not from mismanagement but, from a shortfall of funds. This is when Alexander Hamilton quietly became one of Morris’s most important allies. Hamilton had long argued the Revolution couldn’t survive without a modern financial structure. He immediately recognized Morris’s appointment as Superintendent of Finance was the turning point he’d been waiting for. The two men believed in disciplined credit, centralized control and strict accountability.
Hamilton fed Morris detailed analyses, proposed reforms and helped Washington understand why Morris’s new system of contracts, credit notes and receivers was the only way to keep the army functioning. Their partnership gave Morris the intellectual and political support he needed to overhaul the treasury and revive the supply chain Greene rebuilt, setting the stage for the decisive campaign to come.
To fight the British in Yorktown, Washington needed not only the funds necessary but, he needed the means to deceive the British into thinking he wasn’t sending bis army south. To accomplish this, he had ovens built in is camp to appear as though he wasn’t going anywhere. Bread was the daily staple that fed the troops. By having ovens built they were designed to look like he was staying put. During the night his men left camp quietly and secretly and, headed south to Yorktown. It caught the British by surprise and Washington’s troops were in Yorktown ready to battle. To make the trip south, Washington relied on Morris for the funding to pay for food, wagons, horses, shoes, ammunition and back pay to prevent desertions. Morris provided about $1.4 million dollars in today’s money for that move. Washington wanted another $20,000 for supplies for the army except Morris said he didn’t have it. Washington, instead, turned to his secondary source of funding for a loan, Hyam Salomon. Salomon loaned Washington the $20,000 he needed for weapons and other supplies. That loan essentially saved the American Revolution and contributed to the defeat and surrender of the British.
Conclusion
The Revolution survived because a handful of extraordinary men trusted each other, respected each other and refused to quit even when quitting was a rational choice. His financial wealth wasn’t enough to support the army and the Revolution. It took assistance from others to make the money he provided work.
By Neil Perry Assistant editor