Business History Review


Alexander Hamilton, Central Banker: Crisis Management during the U.S. Financial Panic of 1792

Richard Sylla, Robert E Wright and David J Cowen

Most scholars know little about the panic of 1792, America's first financial market crash, during which securities prices dropped nearly 25 percent in two weeks. Treasury Secretary Alexander Hamilton adroitly intervened to stem the crisis, minimizing its effect on the nascent nation's fragile economic and political systems. U.S. policymakers soon forgot the crisis-management techniques Hamilton invented but failed to codify. Many of them were later rediscovered and became theoretical and practical standards of modern central-bank crisis management. Hamilton, for example, formulated and implemented “Bagehot's rules” for central-bank crisis management eight decades before Walter Bagehot wrote about them in Lombard Street.

RICHARD SYLLA is Henry Kaufman Professor of the History of Financial Institutions and Markets, and professor of economics, at the Stern School of Business, New York University.

ROBERT E. WRIGHT teaches business, economic, and financial history at New York University's Stern School of Business.

DAVID J. COWEN is managing partner of Quasar Capital Partners, LLC, a macro hedge fund.

The authors wish to thank the participants of a seminar held at Northwestern University in May 2006; the National Bureau of Economic Research/Development of the American Economy Summer Institute in July 2006; the Fourteenth International Economic History Congress, session 20, "Capital Market Anomalies in Economic History," in Helsinki, August 2006; seminars at Utrecht University and the Bank of Italy, December 2006, as well as Ann Carlos of the University of Colorado; Benjamin Friedman of Harvard University; William Silber of New York University; Gianni Toniolo of Duke University; and two anonymous referees for helpful comments on earlier drafts.