Book Review: The Exchange Artist

The Exchange Artist is Jane Kamensky's story of Andrew Dexter, the building of the Exchange Coffee House in Boston at the beginning of the 19th century and America's first banking collapse.

As an historical narrative of the workings of America's banking industry during the period from about 1790 when Andrew Dexter begins his scheme until about 1837 when Dexter's last attempt to engineer a fortune collapsed, The Exchange Artist makes for interesting, but not compelling, reading.

During that era, banks were established by charter from the local legislature and, crucially, issued their own money. With unlimited ability to create money simply by running the printing presses, the operation of banks was largely an exercise in confidence. As long as merchants, workers and others had confidence that the notes issued by a bank would be honoured on presentation at the bank (i.e. redeemed in specie) and accepted by others, the bank could issue as much money as it wished.

In his efforts to finance the construction of the Exchange Coffee House (at the time the largest building in Boston by a huge margin), Dexter took the ability of banks to create money by printing notes to extreme levels. By buying control of a handful of distant banks and establishing a central clearing facility for the exchange of notes issued by different banks, he was able to make the notes issued by less familiar and more remote banks acceptable and also to delay and frustrate the process of presenting notes for conversion into specie. Crucially, the resulting delay enabled those more distant banks to run the printing presses and put huge numbers of notes into circulation to pay for the construction costs. With nothing to back the notes in issue, eventually the scheme collapsed and Dexter was forced to flee to Canada to escape his creditors. The Exchange Coffee House itself would burn down in 1818, less than a decade after it was completed.

As mentioned above, I found The Exchange Artist interesting but not compelling from an historical perspective on the American banking industry. The personal story of Andrew Dexter and the telling of the building and burning of the Exchange Coffee House was rather bland.