Saturday, January 19, 2019

Not Gogol's IG, but close

BOBCHINSKY. It's he, it's he, it's he—why, he's so alert, he scrutinized everything. He saw that Dobchinsky and I were eating salmon—chiefly on account of Dobchinsky's stomach—and he looked at our plates so hard that I was frightened to death.

The Inspector General has visited the past and re-written history. This is not Gogol's Inspector General with whom we are dealing, not a Khlestakov faking authority in a Russian village. We must admit that Khlestakov who was created in 1836 or even a real Russian Inspector General did not know the US Constitution (but as an officer to the Czar he knew an emolument when he saw one.) What we have is the Inspector General's office in the General Service Administration in Washington, D.C. scowling at Trump International Hotel on Pennsylvania Avenue. He examined "over 10,000 GSA documents" and several written from 1791 through 1793.

Much in the now occupies this inspector's time at that venue, so what accounts for his interest in the past? Maryland and the District of Columbia are suing President Trump for violating the emolument clauses of the Constitution. The Constitution says a president cannot be enriched by foreign governments. The accusers say foreign governments are booking rooms in his hotel. The Constitution also says that other than his salary a president can't receive "any other Emolument from the United States, or any of them." The accusers say Trump is profiting from doing personal business with the government. The Trump International Hotel is a property that he leases from the US government.

Lawyers looking askance at the accusations note that President Washington did business with the government by purchasing lots owned by the government in the City of Washington. Although I don't think the IG or lawyers on either side have noted it, in 1796 there was a "Caution" in a Washington newspaper placed by George Walker who bought heavily on the east side of the city and who thought the federal Commissioners were dividing lots and squares in ways that favored the west side of the city. Walker cautioned  that the Commissioners who were restricted to selling public lots were also conveying property they had no title to for private purposes "thereby producing an immense waste of the funds for the public buildings and great emolument to those concerned." (Greenleaf and Law in the Federal City, p. 159.)

So pay attention: when President Washington hazarded his money on city lots in 1793 there were people alert to anyone making illicit gains thanks to special treatment.

The IG investigated the historical documents pertaining to the land Washington bought in Washington and found that he bought private property. It is true that he bought the lots from federal Commissioners he appointed but the IG found that when selling lots the Commissioners were acting under authority of private trustees.

An appendix to EVALUATION REPORT-GSA's Management Administration of the Old Post Office Lease Redacted  explains:
If Washington purchased lots owned by the United States, that might be some evidence of an early historic practice that a President’s gain from private business activities with the United States does not violate the Presidential Emoluments Clause. Our review considered any evidence that the United States owned the lots that Washington purchased during his presidency. We also considered any evidence that, even if the United States did not own the lots Washington purchased, the Commissioners’ participation in the sales provided a benefit from the United States that might be viewed as an emolument. The evidence that we found suggests that Washington purchased privately owned property during his presidency. The evidence similarly suggests that the Commissioners’ participation in the sales did not provide a benefit from the United States.
In reality, that is to says in the opinion of contemporaries as reflected by their correspondence and actions, the lots Washington bought were government property. As for the Commissioners they had been appointed by the President in accordance with Resident Act through which Congress initiated a process to fulfill the article in the Constitution mandating the creation of  the Seat of Government of the United States. The Residence Act authorized the Commissioners to purchase or accept gifts of land. The lots they sold to the President were carved out of gifts of land that they accepted.

The history of Washington, that I explore in my 701 page book Through a Fiery Trail: Building Washington 1790-1800. Madison Books, 1991, clashes with the legal history explored in the IG's report. It would be unfortunate if the prominence given to the legal battles engulfing the current President distorts the motives and action of the first President and those who founded the nation's capital.

The Inspector General takes a narrow view of the historical evidence. Sixteen private land owners, then and now known as the proprietors, who owned virtually all the land within the boundaries Washington described for the new city, executed deeds that conveyed that land to two trustees, Thomas Beall and John Mackall Gantt. In his report the IG summarizes the deeds. They authorized Beall and Gantt to:
• Hold all or a part of the land for a federal city, laid out in streets, squares, and lots, as the President approves for the new city;
• Convey to the Commissioners all the streets and those squares, parcels and lots as the President shall deem proper “for the use of the United States forever;”
• Make a fair and equal division of the remaining lots, returning one share to the proprietor and one share donated for sale on terms and conditions set by the President;
• Convey the complete, fee simple, ownership in the land to the purchasers of the lots sold;
• Use the proceeds from the lot sales to pay the proprietors at the rate of £ 25 per acre for the squares and lots conveyed to the United States;
• Transfer the remaining monies or securities from the sales to the President in order to achieve the purposes of the Residence Act by funding the construction of public buildings to house the government....
In history blogs like this it is customary to place a portrait or a statue to the important historical figures under discussion. As busy and powerful as the IG makes the two trustees out to be there are no portraits or statues (just a charming miniature of Beall.) At the time Beall was the mayor of Georgetown, then a separate city in the future District of Columbia neighboring the future City of Washington, and Gantt was Georgetown's "recorder." Beall and Gantt did relatively little to build the nation's capital. Gantt soon became the commissioners' clerk keeping track of who bought public lots in the city which means that by the IG's reading the evidence, the Commissioners acted under the authority of their clerk.

Beginning an analysis by boldly stating that the proprietors "executed deeds" with Beall and Gantt, the IG's report congers a picture of the 16 proprietors or the leaders among them huddled with Beall and Gantt and negotiating an agreement. Wrong picture. The land deal was negotiated, or it might be better to say, dictated by the President to the landholders meeting in Georgetown on March 30, 1791. The proprietors signed an agreement with Washington in which they agreed to "bind ourselves... to convey in trust to the President of United States, or Commissioners or such a person or persons he shall appoint..."

As we know by an April 3, 1791 letter from the President to the three Commissioners he appointed just before signing the agreement, one of them, Thomas Johnson who was also soon to be sworn in as an associate justice of the Supreme Court, was charged with drawing up the deeds "that would answer all of the purposes of both the public and the Grantees." In his diary for June 28, 1791, the president wrote, "whilst the Commissioners were engaged in preparing the deeds to be signed by the Subscribers this afternoon, I went out with Maj. L'Enfant [his city planner] and Mr. Ellicott [his surveyor] to take a more perfect view of the ground...." No matter what the deeds said, the President acted much like a man who just gained control of a extensive domain, about 5000 acres.

The IG's report doesn't define what the word "public" means in the phrase “purposes of both the public and the Grantees.” I take it to mean the government. In the March 30 agreement the word "public" is used eleven times: "public improvements (twice)," "public uses," "trustees on behalf of the public," "public and individuals," "public buildings," "to be paid by the public" (twice), "public arrangements," "paying to the public," and "paid the reasonable value thereof by the public." Is there any doubt that in the context of the development of the city the word pubic meant the federal government? Judging from an April 23, 1791, letter written by Commissioner Daniel Carroll to James Madison, then the President's informal leader in Congress, there was no doubt that the government owned the property. He wrote “produce from the sale of the public property will certainly be very productive...."

The word "public" is not used in the deeds giving the land to the trustees. In its place the words used are "United States" as in "for the use of the United States." President Washington did not sign the deeds drawn up by the commissioners but the IG report suggests that Washington understood that because of the signed deeds, the "public" lots had become the trustees' lots and thus still private property. As we'll see there is ample evidence that he still thought of the lots as pubic property. Everyone else did too. Because no contemporary began distinguishing between private lots and lots privately held in a trust, or to put it more simply, the trustees' lots, we have to assume that everyone recognized that the deeds were a legal framework to effect a relatively complicated transfer of property. No one suggested that the use of Beall and Gantt as trustees represented a step back from the March 30 agreement.

There is no discussion in the Washington, Jefferson or Madison Papers or the Commissioners' Records about the use of Beall and Gantt as trustees. However, there is a theme in those papers that might explain why they were appointed. When it mandates a district for the residence of the government, the Constitution also gives Congress the power to exercise exclusive legislation over it. But there were good reasons to put off Congress's assuming jurisdiction as long as possible. The siting of the capital was the fruit of a long congressional debate spanning all its first sessions that ended in a controversial compromise roughly between Northern and Southern states. Pennsylvania was building a "President's house" in Philadelphia banking on the Potomac capital failing before the relocation of Congress in 1800.

In late August 1790 the President asked his advisors how he should implement the Residence Act. In his August 29 memorandum advising the president James Madison wrote:

The completion of the work will depend on a supply of the means. These must consist either of future grants of money by Congress which it would not be prudent to count upon—of State Grants—of private grants—or the conversion into money of lands ceded for public use which it is conceived the latitude of the term “Use” the spirit & scope of the act will justify. (https://founders.archives.gov/documents/Washington/05-06-02-0177)

By the way, Congress did not give a previous grant of money to the project. With petitions in hand from several sites offering land and from states offering money, Congress passed the Residence Act  expecting not to have to appropriate any money for building the public buildings.

Article 4 section 3 of the Constitution also forced the Commissioners to give legal cover for their operations to keep Congress from taking control prematurely. That section says: "The Congress shall have Power to dispose of and make all needful Rules and Regulations respecting the Territory or other Property belonging to the United States." Officialdom was mindful of Article 4 Section 3. In a January 7, 1799, letter found in the Commissioners' Records Attorney General Charles Lee advised against President Adams and the Commissioners deeding part of a square conveyed by the trustees to the federal government to the Queen of Portugal. Only Congress could "dispose of" that property.

After the deeds of trust were signed, the Commissioners went to the State of Maryland to more or less reiterate the authority that the Commissioners got from the deeds and got authority of their own to appoint “a clerk for recording divisions and certificates of sales and payment.” They soon appointed Gantt.

The IG's report suggests that the Maryland laws reflected a desire to further protect the rights of the proprietors. It was more likely another move to keep Congress at bay by showing that while the Commissioners under the control of another legislature until Congress finally moved to the District of Columbia and took control. They certainly were not under the control of Beall and their clerk Gantt. Neither the deeds nor Maryland legislation gave the two trustees any check on the Commissioners. They were in fact holding the land for the government and everyone knew it. The final clause in the deeds seems to let the cat out of the bag. It requires both parties to a deed, the proprietor and the trustees, to "if required by the President of the United States for the time being, join in and execute any further deed or deeds for carrying into effect the trusts, purposes, and true intent of the present deed." (I'm no lawyer but it appears the IG has an exalted view of trusts established by our Founders and a dim view indeed of trusts set up by our current president who billionaire though he purports to be the IG fears he will reciprocate with any foreign government official today who buys an extra side of salmon at his hotel that he will profit from when he leaves office.)

True intent: as Justice William Johnson put it in the opinion of the Supreme Court in Pratt v. Law (1815) "it is well known at the founding of this city, the proprietors of the soil gratuitously relinquished a proportion of the property to commissioners appointed to receive it." In Pratt v. Carroll (1814) Chief Justice Marshall put it this way: "This part [of Carroll's land] was conveyed to trustees, one moiety for the use of the public, and the other moiety for the use of the said Carroll."

By the way, Pratt was one of seven Philadelphia businessmen who served as Trustees of the Aggregate Fund which was a group of creditors trying to recoup money owed to them by by bankrupt speculators in Washington lots. Pratt and his fellow trustees were active not only in pressing their claims but they also managed and developed property they gained through suits. So in the 1790s there were trustees who had a true interest in property and there were Beall and Gantt who were powerless dummies periodically ordered by the commissioners to sign conveyances. As convenient as it maybe for various legal purposes to say they owned lots or owned the title to lots at the time that distinction of was meaningless.

No one thought the deeds or legislation made the lots on the “lands ceded for public use” private property and the previous owners of the land had none of the rights associated with owning property save that they could farm it until the government needed it. After the first public auction of lots in October 1791, the Commissioners explained to the President that their agents won bids for four lots just to keep the price of lots up and thus those lots "fall again to the public." On the bright side they thought it possible to make some private sales, i.e. sell public lots but not at auction, "that we believe will not injure the public." By “injure” they meant sell at a price lower than the price for a lot establish by the public auction. There was no thought of a lower price injuring the previous owner of the land. (https://founders.archives.gov/documents/Washington/05-09-02-0056)

Congress had no quarrel with the arrangements. After the first auction of lots in October 1791, the President informed Congress that "there is a prospect, favored by the rate of sales which have already taken place, of ample funds for carrying on the necessary public buildings..." Among those invested in the city, there was much excitement after the auction. In Manuscript Division of the Library of Congress there is a letterbook copy of letter written by Proprietor Samuel Davidson who donated much of the land north of the future White House. He calculated that the lots to be returned to him by the government as per the deed were worth over £ 100,000. In an October 23, 1791, letter now in the collection of the Washington Historical Society, William Houston, the nephew of proprietor William Prout, explained to his parents in England the reason for the excitement. His uncle bought 400 to 500 acres but "gives half away half to the United States for them to sell in lots...." Since many public buildings would be built on those acres including the "Royal Exchange, Town House and Guild Hall, the National Bank..." his uncle's lots would be worth £ 100,000. (It is likely since they were writing to people in Britain that Davidson and Houston meant British Pounds Sterling. In the 1790s £ 1 was worth $5. In Maryland's £ 1 or one Maryland Pound was worth $2.66.)

The sale was rather modest, 31 lots roughly 40 by 100 feet fetching about 97 Maryland pounds on average. The only real upshot of the auction of a handful of lots around the future White House was to establish a price for lots from which one could calculate the future wealth not of the proprietors but the US government. The French minister attended the auction with the President. On October 24 he wrote to his government: “Les ventes subsequentes seront vraisemblablement plus avantageuses; mais en les supposant de meme valeur que le premiere, on estime qu'elles rendront au tresor federal, pres de trente millions tournois.” Thirty million tournois in the federal treasury sounds like a lot of money to me. Minister Ternant also reported the expectation that the lots would be used as collateral for a loan to finance work on the public buildings in the coming spring.

No one at the time seemed at all concerned with a mechanism described by the both the March 30 agreement and the deeds of trust that the IG report highlights in bullets 5 and 6 of its summary:
• Use the proceeds from the lot sales to pay the proprietors at the rate of £ 25 per acre for the squares and lots conveyed to the United States;
• Transfer the remaining monies or securities from the sales to the President in order to achieve the purposes of the Residence Act by funding the construction of public buildings to house the government....
Here's how the deeds put it:
And that the said Thomas Beall, of George, and John M. Gantt, or the survivor of them, or the heirs of such survivor, will, on the order or direction of the President, convey all the said lots so sold and ordered to be conveyed to the respective purchasers, in fee simple, according to the terms and conditions of such purchases; and the produce of the sales of the said lots, when sold as aforesaid, shall, in the first place (my emphasis), be applied to the payment in money to the said [Proprietor], his executors, administrators, or assigns, for all the part of the land, hereby bargained and sold, which shall have been laid off in lots, squares, or parcels, and appropriated as aforesaid to the use of the United States, at the rate of twenty-five pounds per acre,...
The phrase “in the first place” congers up the image of someone calculating how much of the huge squares which the city plan earmarked for government buildings and parks could be conveyed to the government based on the proceeds from the 31 lots sold at the first auction. The attracted a crowd including the President and Secretary of State, who the President designated as his officer overseeing executing the Resident's Act, as well as city planner Pierre L'Enfant, the surveyor Andrew Ellicott, and gentlemen bidders,and no one asked what portion of the proceeds was to be used to pay proprietors at a rate of 25 Pounds an acre for land appropriated by the government for public buildings. Finally months later on April 3, 1792, in a letter to the Commissioners proprietor David Burnes who had owned the land from which the public lots were surveyed complained but primarily about the damage to his land.
That spring the Commissioners' workers began operating on the ground like they owned everything. As workers began preparing the site for the White House and hauling building materials to it, Burnes not only didn't get £ 25 pounds an acre “in the first place.” He saw his fences knocked down and the remainder of his land made unfit for farming which by the agreement he was entitle to do until the Commissioners began using the land. He wrote: 
To me it appears evident from the contract that I am entitled to the use of my land until I am paid for it. If you have a right to withhold my property for one year you have one hundred years. I must insist therefore in the undisturbed use of my land or payment for each part you appropriated to public use and I shall certainly take measures to retain the former until I receive the latter.

But what measures could he take? There was no mechanism in the deed of trust to address any grievances save appealing to the President who then might simply write a new deed. Burnes wasn't so naive as to see a direct connection of lots carved out of land he once owned and his getting payment for the portion of his land to be used for the White House. He didn't fume over the meager sums raised at the October auction. What inspired Burnes' letter was news that the Commissioners were mortgaging 500 lots, none necessarily on his land, to raise a loan. Burnes continued:

I presume that even upon your own principles I am entitled to my money. I believe in law that a mortgage is considered as a sale subject to redemption and I am told the number of lots mortgaged upon any scale of division would entitle me to a dividend at least equal to what I have demanded.

Burnes got the proverbial runaround. Almost a year later, February 12, 1793, Burnes wrote to the President. This time he tried to tie payment to the first appearance of the commissioners' workers on his land and the sale of nearby public lots at the auction:

You informed my Son [that] the Commissioners would do every thing that was right; if they had done right in my opinion they would have paid me for the Presidents Square Octr 1st 1791 when they began Occupying the above mentioned Square and I deprived of the use of the Ground. The Sales have taken place pretty generally on my Ground, I therefore expect payment Immediately, for all the appropriated ground, otherwise I must bring Suit against the Commissioners in order to make them do Justice—Mine is a peculiar case and requires Immediate redress—I possess no other Lands than those in the Center of the City All cut up and rendered useless for farming—I hope to be redressed through your interference and Procure from the Commissioners of the Federal City such assistance as the nature of the Original agreement and my exigencies render absolutely requisite.

The President's secretary Tobias Lear replied on February 14:

The President of the U.S. directs me to acknowledge the receipt of your letter to him of the 12t[h] inst.—and to inform you, that, altho’ he is exceedingly sorry to learn that any misunderstanding has taken place between the Commissioners & yourself, relative to your land in the federal City; yet, as the Commissioners were appointed, according to law, for the special purpose of managing all matters within the District & city respecting the ground & public buildings, and thereby relieving the President from the details of that business (which the duties of his Office would have made it impossible for him to have ent[er]ed into) he declines any interference on the subject of your letter—and adds, that, from his knowledge of the Characters of the Gentlemen acting as Commissioners, he does not believe there can be any intention, on their part, to avoid a strict compliance with the terms of the Contract made with the proprietors, or to withhold what is justly due to any individual concerned therein. But, that, if you conceive yourself injured by any conduct of theirs, the door is open for an appeal to that tribunal where every Citizen has a right to seek for justice. (see letter and reply here )
 
Lear did condescend to refer to “your land in the federal City.” But as the deed Burnes signed puts it, at issue was “all the part of the land, hereby bargained and sold” to the government. There was no doubt that the government owned the land which explains why the proprietors were not paid “in the first place.” The only private property in the city were the lots or, in not a few cases, whole squares returned to the proprietors which equaled the number of lots and squares kept by the government after the surveys and divisions. Lear certainly acted like he represented the party in the dispute who had all the rights of possession. He invited Burnes to sue. 

The Commissioners' did pay Burnes and others for damage done by the Commissioners' workers but they didn't fulfill the “in the first place” clause. Burnes wanted them to pay him 1500 pounds and then if they didn't take that much land he would pay them back. The Commissioners paid what was due for their taking Burnes' land (in an October 18, 1794, letter they referred to his "ground" as if they were careful not call it his property) at their own pace pleading the complexity of the surveying which did indeed progress very slowly.
 
Meanwhile most of the other proprietors were completely out of luck. Merely having their land pocked with government buildings and parks on the plan of the city meant little. In September 1791 Secretary of State Jefferson and Rep. James Madison met with the Commissioners to raise and have them decide issues concerning development of the city. At that meeting with coaching from the Washington administration and not from the two trustees in Georgetown, the Commissioners decided to only convey the sites of the President's house and Capitol to the government and wait on all the other sites on the plan designated for the government's use until those sites were developed. (That these other proprietors were not obsessed with rapid payment did not keep them from complaining usually over the boundaries of the public appropriations wanting them contracted or expanded depending on the market for private lots. In a March 8, 1792, letter to James Madison, Commissioner Carroll reported that the stance of proprietor Daniel Carroll of Duddington, the Commissioner's nephew, would be worrying “if there was not so much [of his former property] in the hands of the public....”https://founders.archives.gov/documents/Madison/01-14-02-0222 )

Clearly the President, Secretary of State, a congressional leader and the Commissioners considered the public lots public property. Even the IG's report dispenses with putting the payment of the proprietors “in the first place” by whittling that provision down to a parenthetical “and return a share of the proceeds to the proprietors.”
The six public lots that Washington purchased during his presidency appear to be among the lots that the proprietors donated for sale, in order to raise funds for the President’s House (White House), the Capitol, and other government buildings (and return a share of the proceeds to the proprietors). We found evidence that Washington understood that the public lots he purchased were held privately by the trustees, not by the government. Broadsides for the Commissioners’ 1793 sale announced that the sales would be made “according to the deeds in trust of the lands within the city.” Under those deeds, Beall and Gantt, not the United States, “conveyed to the respective purchasers fee simple.”
Washington bought his lots at a public auction in September 1793 in conjunction with his joining in the laying of the cornerstone of the Capitol. By that time the White House had a foundation and one story of three stories completed. As designed the Capitol was to have two wings housing the House and Senate respectively joined by a grandiose center under a modest dome. Each of the three parts of the Capitol were larger than the White House and more difficult to build. (Only the north wing was built by 1800.) The Commissioners had to at least double their workforce to approximately 200 men and redouble the efforts of contractors to quarry more stone, make bricks and amass lumber.
Evidence suggests that the President's understanding of the public lots had evolved, public auctions would not do. He recognized the absolute primacy of raising money for the public buildings. No matter how Burnes' and the IG's interpreted the deeds, the President and Commissioners were dancing to another tune. Rather then merely sell lots, they had to be used as a collateral for a loans and lenders might be less inclined to loan with Beall and Gantt lurking in the back ground for no obvious reason.
To disassociate Washington's purchase of six lots with any analogy to Trump's lease with the GSA for his hotel, the IG suggests that the Commissioners he bought the lots from weren't technically working for the government despite their being appointed by the President:
The Residence Act did not include land sales among the authorities Congress granted the Commissioners in their capacity as United States officers. In these circumstances, the evidence we considered suggests that the Commissioners’ participation in the lot sales gave Washington a benefit from the proprietors’ private trust agreements with Beall and Gantt, rather than from the United States.
The Residence Act is not prolix in listing the authorities of the Commissioners but there was enough there to get the job done. The Commissioners job according to the act was "to provide suitable buildings for the accommodation of Congress, and of the President, and for the public Offices of the government of the United States." In lieu of congressional appropriation the Act decreed "That for defraying the expence of such purchases [of land] and buildings, the President of the United States be authorized and requested to accept grants of money." I don't think the President thought that when he bought public lots that he was actually buying private lots. I do think he was aware that when he bought public lots, or when anyone else did, they were involved in a mutually rewarding process of granting money toward the construction of the public buildings.

The essence of the Commissioners' job was to turn the donated land into money and as soon as it became apparent that there was absolutely no way to raise enough money by selling lots at public auctions, the Commissioners, with approval of the President, monetized much of the donated land with scant regard for the proprietors. They were guided, or misguided, by two young currency speculators who returned to America from Europe after making a killing on trading in on Hamilton's scheme for the federal government's assumption of the States' Revolutionary War debts. In March 1792 Samuel Blodget, who retains a measure of fame as the founder of the Insurance Company of North America, tried to raise a loan for the commissioners using 500 public lots as collateral.
On March 6, 1792 Blodget dictated the particulars of a loan to raise $500,000 which began:

A Declaration to be made by the President
That the sales of lots of public property in the town of Washington shall never be extended so far but that there shall remain and be reserved so many of the said lots unsold as shall at the rate of 100. Doll. per lot be sufficient to secure the proportion of this loan not yet reimbursed, of which lots two fifths shall be South of an East and West line drawn through the President’s house, and three fifths North of that line, which said reserved lots shall be a security for the said principal not yet reimbursed and all arrears of interest

Secretary of State Jefferson witnessed Blodget's signed statement. The President sent it to the Commissioners the same day. They endorsed the idea in a March 14 letter to Jefferson. However thanks to a failure among “paper traders” in New York and Boston, Blodget withdrew the loan.

A little over a year later the Commissioners would negotiate a much bigger loan. Just before they began negotiations that would last three months in which they sold 6000 public lots to two men, Washington bought his lots in the city. The four he bought at the public auction were handled routinely by the Commissioners. He bought two public lots in Square 21 the day after the auction from Blodget who had been hired by the Commissioners as Superintendent of the project. Washington was aware of the huge sale of public lots in the making and in general how the buyers would rely on Dutch banks. How quaint and unbelievable seems the IG report when it suggests that when Washington bought his public lots that he knew that "lots he purchased were held privately by the trustees." When packaging the Blodget scheme for a loan his advisors had prompted to him make a declaration about "lots of public property in the town."

In the early fall of 1793 Washington met James Greenleaf. The young native of Massachusetts who the administration had already appointed US Consul in Amsterdam offered to use his connections with Dutch bankers (he married the daughter of one of the most prominent) to invest heavily in the City of Washington. The President sent him to Washington with a glowing letter of introduction to the Commissioners. After the September auction Greenleaf opened negotiations with the Commissioners for the sale of 3000 public lots. They closed a deal and then Robert Morris, the Financier of the Revolution, formed a partnership with Greenleaf. With Morris's resources available the partners prevailed on the Commissioners to sell them a total of 6000 private lots. Soon John Nicholson a Pennsylvania speculator and promoter joined the partnership.

While Morris was public spirited, his business strategy was always to try to form a monopoly whether it be in flour or land. Greenleaf and Nicholson had an almost holy belief in development. To convince the wealthy British nabob Thomas Law, who made his fortune in India, Greenleaf painted the City of Washington as the "New Jerusalem." With their coming any shine the proprietors had for donating land to the government completely lost it luster. None of them had fostered any development on the private lots they retained. The three partners pledged to build seven three story brick houses a year and pay the Commissioners $10,000 a year. In addition, they would also negotiate a loan with Dutch bankers for the Commissioners.

In their zeal to gobble up lots, the partners tried short circuiting the laborious process outlined by the March agreement and trustees' deeds. No survey, no division of lots, just give us all the land. They wrote to the Commissioners: “Mr. Morris and Mr. Greenleaf wish to be possessed of a deed for the portions now belonging to the Public of those parts of City of Washington which was formerly the property of Notley Young computed to contain one thousand Lots which lies adjoining the River Potowmack...” At the same time they bought all of Young's lots save for his house and garden lots. As for the other 5000 lots they bought, they “shall be selected by them from the public property,”

In reply, in a 5 December 1794 the Commissioners alerted Greenleaf that they had no authority vis-a-vis private lots and nothing in their contract conveying lots to Greenleaf could touch on the private lots: “We think we are disposed not only to be just, but generous, and such we think we ought to be as a public body in our dealings with individuals. But … Your purchases made in the City of original proprietors is a subject totally distinct from your purchases of the public,....”

The crucial issue in the Commissioners' sale of 6000 lots was when and how to convey the deeds to the purchasers who since they planned to raise loans by mortgaging the lots needed to convince Dutch bankers that they owned the lots. The quick solution was to go the Maryland legislature get a law giving the Commissioners power to convey lots through certificates with condition that they could be reclaimed and put up for sale by the Commissioners if the purchaser does fulfill conditions stipulated in the certificate. Ergo no deeds nor formal conveyance needed. Their clerk Gantt need not put on his trustee's cap and sign 6000 conveyances. The President was somewhat leery of the certificates and it was changed to a certificate of a deed. Even the author of the deeds in trust was on board. Thomas Johnson wrote in a July 29, 1794, letter to his fellow Commissioners: “There is no doubt but a purchaser without notice of the Trust would hold the lots at Law and in Equity having given a valuable consideration....”

To make a long story short, the partners could not get loans from Dutch banks neither for themselves nor the Commissioners. However they did make payments to the Commissioners and until late 1796 did build houses.  Because of their payments the Commissioners deeded lots to them but the partners were desperate for more in order to support their obligations not only for 6000 Washington lots but 6 million acres of back lands stretching from New York to Georgia which they also put on the market.

Let one letter that the Commissioners' wrote to Greenleaf on October 18, 1794 encapsulate the general predicament. Note the Commissioners' claim to be “public trustees” and their zeal to protect “public property.”

We have passed a Deed to you for 857 lots and 3353 square feet, and shall lodge your notes in the Bank of Columbia. At the same time that we have much pleasure in complying with your request we cannot forbear saying that deviating from the common mode respecting landed property and more especially as we are acting as public Trustees, we have been induced among other considerations by a reliance that you will make additional advances to the 12000 dollars and that you will before your departure [to Holland to try to save the day] put the payments on a footing which may be depended on for the punctual payment thereof, and likewise of the L1000 per month commencing the 1st January next if the loan does not take place. We cannot at present go further on the subject than we already have, and wish you to request Dr. Appleton [Greenleaf's clerk] to make no application for additional conveyance of lots until the first of May next as it would be painful to use to refuse either him or you which we think ourselves bound to do unless paid for as Certificates issue.

We have narrowed our loan and the fund for mortgage one half, thinking it might too much cramp our Sales to tie up so vast a body of public property....

After the failures of Greenleaf, Morris and Nicholson the Commissioners' attitude toward the public lots suffered a sea change. They decided that they were best not sold to speculators but should kept and sold when the city would be more attractive to buyers after Congress moved to the city. To get their job done the Commissioners decided to negotiate a loan “not exceeding half a Million of Dollars” to carry on the public building, and to secure the loan “pledge any number of public lots in the City northeast of Massachusetts Avenue not exceeding four thousand standard lots."

In their first attempt to get a loan in 1795 the Commissioners relied on the good offices of Secretary of the Treasury Wolcott hoping he could land a foreign loan like the ones that helped America win its Independence. By the way, they proclaimed their authority “in Virtue of the powers vested in us by Law....” No mention of Beall and Gantt.  No luck. In 1796, they began lobbying congress. They needed a grant, loan or loan guarantee. They got the latter. One of commissioners spent five months in Philadelphia. On December 21, 1795, Commissioner Alexander White, a former congressman from Virginia, wrote back to his fellow commissioners summarizing the problems they faced:
I have given a general summary of past transactions and stated the property on hand as well worth more than a million dollars, valuing the Lots at the average price which Lots singly on in small numbers have sold, and have observed that with this property and the debts due from sales heretofore made we can certainly bring the Buildings to such a state as to secure Congress - But if this property can be retained until Congress removes or even till the Buildings are well advanced and we can procure money to carry them on with celerity, the cloud which hangs over the minds of many will be dissipated. The City will be so improved as to afford eligible accommodations for Congress and all their followers and much property remain for the use of the U States - whereas if we are obliged to bring this property to Market at this time, it will fall a pray to speculators as too much of the City has already done. (http://bobarnebeck.com/white.html)
Thanks to congressional scrutiny the Commissioners itemized their expenses and income. They calculated that they had expended $384,783. Their income, in which they still included the sale to Greenleaf, Morris and Nicholson, was $779,185. Their lots sales to others totaled $96,652. In their expenses they included how much they had paid to the original proprietors “for squares appropriated” and it came to $12,000. We can give the deeds in trust credit for at least such a nice rounded figure.
While President Washington bought public lots from the public commissioners no one looked askance at it except maybe Washington himself. As the IG's report notes, The price for the lots [in Square 667] was $ 1066.66, with interest. Washington later commented that he “paid pretty smartly” for these lots.” Despite that 1796 newspaper Caution about emolument arising for purchasing lots, Washington made nothing off the lots.

George Walker who bought much of the land east of Capitol Hill in 1791 had made the Caution and constantly complained about the Commissioners' behavior, which is a long story. In one complaint he alluded to the original deeds and his imagery highlights the true importance of the deeds in the eyes of landowners. He insisted that the Commissioners are "public servants chained up by the DEED of TRUST" and thus should serve "humbly, faithfully and impartially." What mattered were the chains the surveyors' used to lay out all the lots so that they could be divided between the public and the land owners. It was their acting in a public capacity that chained them to acting fairly. Letting the Commissioners duck behind the deeds and claim that their sales were under the authority of the trustees Beall and Gantt would have destroyed the "true intent" of the deed.

What Walker objected to was the Commissioners giving what he thought was a valuable square along Rock Creek, navigable waters back then, that was originally designated as public to a private party. Walker also registered his complaints to the President but he never complained that in the President in his dealings with Commissioners reaped any advantage others didn't. The President wasn't accused of taking any emolument in the form of Washington lots from the Commissioners even though he did business with them.
But it would be a mistake to think that Washington who had speculated in lands his whole life went to the grave without trying to sum up that part of his life's work. The City of Washington featured tangentially in his pursuit of a payoff. While and after negotiating the purchase of city lots from the Commissioners, Greenleaf and Morris expressed an interest in buying Washington's Western land holdings which Washington valued at $133,000.
When pressing his interest in Square 21 to the Commissioners as a lot he might soon build on, we can speculate that he hoped to build his retirement mansion in the city from those proceeds of a sale to the speculators. Greenleaf and Morris never even made an offer, luckily for Washington or he would have been in their long list of creditor. In retirement in 1798 Washington did build a double house near the Capitol, aided by the Commissioners throughout the process. He planned for it to house congressmen. It served as a private residence for public figures until 1814. Then an invading British army showed that there can be a sinister negative side to foreign intervention in domestic affairs. They burned the house down.
Bob Arnebeck

No comments: