America’s First Swiss Banker

Few Americans realize Swiss-born Albert Gallatin’s impact on U.S. foreign and fiscal policy. He was born in 1761 to wealthy parents – Jean and Sophie Gallatin in Geneva, in the Republic of Geneva (now part of Switzerland), orphaned at 14 and sent to live with the Pictets (the family that later started the Swiss Bank Pictet et Cie in 1805).

While at the Academy of Geneva (now the University of Geneva), Gallatin became enamored with the teachings of Jean Jacques Rousseau, John Locke, and other Age of Enlightenment philosophers. At 29, Gallatin was fascinated with the political experiment known as the United States of America and emigrated.

Gallatin was noticed by leaders of the Democratic-Republican Party when he vehemently opposed some of Alexander Hamilton’s fiscal policies. He won election to the Senate in 1793 but could not take his seat since he had been a citizen for the required nine years. Undeterred, he successfully ran for a Pennsylvania seat in the House of Representatives on a platform that opposed the Whiskey Tax, the ensuing rebellion, and Washington’s military response.

Jefferson wanted Gallatin to be his Secretary of the Treasury. When he gave Gallatin a recess appointment on May 14th, 1801, Jefferson is reputed to have said, “He is the only man in the United States who understands, through all the labyrinths Hamilton involved it, the precise state of the Treasury.”

Immediately, Gallatin began to dismantle the financial structure that Alexander Hamilton had created. Gallatin’s primary goal was to reduce the national debt that had ballooned to $83M. By 1812, he had cut it to $45.2M. Much of the savings came from cutting programs to support Revolutionary War veterans, reducing the spending on the Army and Navy, and increasing duties on imported goods.

Another one of his accomplishments was that when he supported Jefferson’s desire to acquire the land around the mouth of the Mississippi River, he urged Jefferson to accept the French offer to sell the U.S. all their land in North America. The purchase created two problems for Jefferson – one, how to pay for it without raising taxes, and two, how to get it approved.

Gallatin played a major role in that he helped the U.S. team led by Robert Livingston and James Monroe negotiate a deal with British banker Francis Barings (see August 4th, 2021 post Financing the Louisiana Purchase ). Monroe was Jefferson’s Secretary of State and was sent by Jefferson to France to help speed up the purchase before the French changed their mind.

The other problem the purchase created was that Jefferson believed that the purchase would require an amendment to the Constitution. Gallatin and John Jay, now Chief Justice of the Supreme Court, convinced Jefferson to get the treaty ratified by the Senate. (See August 21, 2022, Jefferson’s Constitutional Gamble ).

Once Jefferson was out of office, Gallatin changed positions on some issues. One of which was the need for a central bank. In 1811, there was strong opposition by the Democratic-Republicans in both the House and Senate to renewing the Bank of the United States’ charter. Gallatin wanted to create a fund of $20 million that the bank could loan to businesses to help jumpstart the Industrial Revolution in the U.S. The Democratic-Republicans, over the vociferous objections of Gallatin, Madison, and the Federalists in the Congress, refused.

Fast forward, Madison’s June 1812 declaration of war on Great Britain sent Gallatin scrambling to raise money for an army and a navy. Without a central bank to guarantee loans, Gallatin tried to get state banks to lend money to the Federal government, but they refused.

Gallatin then turned to wealthy individuals who, given the experience of the American Revolution in which families loaned money to support the war and either didn’t get repaid or was paid in worthless Continental dollars, Gallatin was forced to accept high-interest rates for these securities and make guarantees that the Federal Government would pay the lenders (primarily John Astor, Stephen Girard, and David Parish) back.

During the War of 1812, the national debt jumped from ~$45M to $127M in 1816. Gallatin’s public service didn’t end when he resigned as the Secretary of the Treasury in 1814. After the war, he helped create the Second Bank of the United States in 1816. Gallatin served as the Ambassador to France and later to Great Britain before he died in 1849.

David Monack 2006 photo of Albert Gallatin’s statue in front of the Department of the Treasury building in Washington, D.C.

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