A Counterfeiter's Paradise

by Ben Tarnoff

  While passersby huddled for warmth, Lewis was hauled to the prison on Walnut Street at the center of town. Its facade stood two stories tall, built of rough-cut stone and capped with a copper weather vane shaped like a key, which spun wildly in the blustery weather. Compared to most American jails, the Philadelphia prison was striking for its size. The main entrance led through iron-grated doors to a long corridor linking two addi-tional wings. Farther on was a courtyard that joined the compound’s other structures, including workshops where inmates toiled at various trades, separate rooms for delinquent debtors, and a solitary-confinement block.

  These buildings were the legacy of a vocal band of reformers who, decades earlier, had determined to make the Walnut Street Jail a prototype for a new kind of penitentiary. Colonial justice had emphasized corporal punishment and public humiliation; the new approach called for rehabilitating criminals by putting them to work, segregating debtors from serious offenders, and improving living standards. It also required regulating the conduct of wardens, who in earlier days had let alcohol and prostitutes flow freely through their jails. Although the reformers prevailed on the authorities to adopt the majority of these changes, they had less success with their most revolutionary demand: keeping prisoners in solitary confinement, letting them out only to work. Rather than shaming the convict in public—at the pillory or the whipping post at the center of town—the reformers wanted to sequester him, so he could reflect on his evil past and begin the lonely process of personal transformation. The plan simply wasn’t practical. The state legislature eventually had sixteen such cells built, not nearly enough to hold its more than three hundred inmates. The jailers ended up using the cells to quarantine particularly tough convicts or to punish recalcitrant prisoners.

  The Walnut Street Jail housed convicts from all over Pennsylvania. Small towns like Bedford—whose authorities couldn’t afford to keep prisoners for long periods of time and whose jails were too weak to hold them anyway—dispatched their most troublesome criminals to Philadelphia. This eventually led to severe overcrowding that made conditions at the prison steadily worse. When Lewis arrived in the summer of 1816, the Walnut Street Jail had become almost precisely the opposite of what it was supposed to be. Instead of rehabilitating criminals, it hardened them; instead of segregating Pennsylvania’s worst lawbreakers, it brought them together to conspire and enlist new recruits. People serving time for minor offenses rubbed shoulders with the state’s most desperate felons, with the result that the prison undoubtedly produced more criminals than it reformed. Prisoners fought one another, provoked riots, assaulted jailers, and attempted increasingly brazen escapes. One convict sawed the irons off his leg, slipped through the bars on his window, and used a rope made from tied blankets to lower himself into the courtyard before vaulting over the wall.

  The prison’s criminal culture was familiar to Lewis. Twenty-eight years old, he already had years of experience as a lawbreaker, both in Canada and in the United States, and had seen his name in newspapers throughout Pennsylvania after his widely publicized trial. Even so, the Walnut Street Jail transformed him. It left his charisma and his poise intact but toughened his resolve and deepened his daring. He had always been a gambler. Prison made him eager to take greater risks; he emerged ready to commit bigger, more spectacular crimes.

  The Walnut Street Jail’s lawlessness not only emboldened Lewis, it also gave him a way to earn his freedom. As the prison descended into chaos, the jailers began relying on informers to help them keep order. Using informers had a double advantage: they supplied information that thwarted attacks and jailbreaks and, since they were usually pardoned, helped relieve congestion in the prison. Freeing inmates who squealed also saved lives, since other prisoners often tried to kill them. Determined not to serve his full six-year sentence, Lewis ingratiated himself with his keepers by informing on his fellow prisoners. In 1819, it finally paid off: after tipping off the jailers about a plan among inmates to escape, Lewis was recommended to the governor for amnesty.

  When Lewis’s pardon reached Governor William Findlay’s desk in Harrisburg, he probably didn’t think twice before signing it. He regularly freed inmates at the Walnut Street Jail who had been nominated for clemency; if he didn’t, the overpopulation problem would have become even worse, and Findlay already had enough to worry about. He faced reelection the following year, and if the last contest was any indication, it wouldn’t be easy. An early disciple of Thomas Jefferson and a loyal member of the Democratic-Republican Party, Findlay had narrowly won in 1817 after an especially bitter contest against a coalition of dissident Democrats, Federalists, and independents. The partisan rancor didn’t subside when he took office, as the legislature immediately launched an inquiry into whether the new governor had embezzled public funds during his ten years as state treasurer. In the midst of managing this political whirlwind, granting another pardon would be a relief by comparison, a routine gesture. He couldn’t have known that signing it would soon come back to haunt him.

  ON SEPTEMBER 9, 1819, after three years and three months in the Walnut Street Jail, Lewis walked out a free man. A lot had happened while he was behind bars. He entered prison while America suffered the coldest summer on record; he left to find the nation in the grip of a depression. In Philadelphia, employment had fallen 78 percent across thirty different trades since 1816, affecting industries as varied as cotton manufacturing, pottery, and book printing. Thousands of out-of-work laborers roamed the streets desperate for food. As winter approached, fears grew that the newly destitute masses wouldn’t be able to survive the season.

  Lewis was witnessing what came to be called the Panic of 1819, the catastrophic conclusion to a period of prosperity that had lasted since the end of the War of 1812. The boom had been fueled by a surge in foreign trade, westward expansion, and a steady stream of currency and credit supplied by the nation’s banks. Banks had stopped redeeming their notes for coin in 1814 during the financial uproar surrounding the British invasion of the nation’s capital. When the war ended, the banks still hadn’t resumed payment, which meant they could print more and more paper without bothering about whether they had enough silver and gold to back it. Flush with cheap money, Americans invested in a rapidly diversifying domestic economy, speculating in everything from real estate to road building to textile manufacturing.

  In a sign of the times, the New York Stock & Exchange Board opened on Wall Street in 1817. The conservative business ethic of Alexander Hamilton’s era, already under siege for decades, was in danger of being swept away by a horde of schemers and speculators. These men leveraged paper fortunes on stepladders of debt, prospering in an economy where actual cash was seldom exchanged. The engine ran on confidence: so long as people didn’t try to redeem one another’s promises to pay, banks could balance ever-greater piles of debt on a slim base of precious metals. America’s growing financial sophistication, instead of producing real riches, had created a hallucination that everyone conspired to sustain.

  This period of false prosperity also saw the federal government incor-porate the Second Bank of the United States in the spring of 1816. Politicians like James Madison, who had loudly clamored for the first Bank’s demise in 1811, now supported chartering a new one: the dire state of federal finances during the war and the deluge of irredeemable banknotes that followed it had changed their minds. The Second Bank opened its main branch a couple of blocks east of the Walnut Street Jail, in Carpenters’ Hall, a colonial-era Georgian building planned by the same architect who designed the prison. Its redbrick walls and white cupola evoked the receding memory of the Revolution: the delegates of the Continental Congress had first met there in 1774. The same resolve that had won the nation its independence would now be needed to rein in its financial disarray. The Bank scored an early victory in February 1817, when, along with the Treasury Department, it persuaded most state banks to resume the redemption of notes for coin, bringing a much-needed degree of sanity to the economy. At least nominally,
America had returned to a specie basis for its currency.

  Despite a strong start, the Bank soon became an enthusiastic parti-cipant in the mania it was supposed to regulate. Instead of taming the nation’s wildcat financiers, it helped buoy the bubble with fresh infusions of money and credit. The Bank’s directors, who came from the same aggressively entrepreneurial stock as the men who staffed the state banks, printed reams of notes and freely handed out loans. Regional branches sprang up throughout the country, lending to local borrowers with virtually no oversight from headquarters in Philadelphia; by the end of 1817, there were eighteen of them, in locations ranging from New Orleans to Cincinnati to Providence. The Bank filled its coffers with bills from state banks but, crucially, didn’t try to exchange them for coin—the resumption of specie payment in February meant that the Bank considered these notes equivalent to silver and gold.

  The problem, of course, was that they weren’t. The exchangeability of bills for precious metals had grown increasingly theoretical: even banks that had nominally resumed payment did everything they could to prevent people from redeeming their notes. The Bank couldn’t continue overextending itself for long, and by the summer of 1818, it was forced to take measures to stay solvent. It reduced the number of notes in circulation and, most important, called on the state banks to honor their bills.

  This simple request triggered the calamitous chain of events that led to the Panic of 1819. As banks throughout the country scrambled to meet their obligations, many went bankrupt; those that remained afloat depleted their coin reserves, forcing them to limit note issues and curb lending. The violent contraction of currency and credit gave the economy a severe shock. Cash became scarce, interest rates rose, and prices fell sharply across the board. People who had gone deeply into debt expecting future profits now found themselves unable to repay their loans as their income dwindled. Merchants who traded in foreign goods saw the value of their products plummet; real estate speculators now held land worth a fraction of its former cost. Farmers who had borrowed to finance improvement projects suffered from a steep decline in agricultural prices. As money became harder to obtain, investment in manufacturing, construction, and transportation dried up. Laborers watched their wages plunge: an unskilled turnpike worker made seventy-five cents a day in 1818; a year later he earned only twelve cents a day. In many parts of Ohio and Indiana, the Panic essentially wiped out the money supply, as local banks failed and currency drained eastward to the cities. The situation became so severe that some communities resorted to the barter system, swapping goods the way America’s first colonists had done centuries earlier, before the introduction of paper money.

  Although the Panic affected Americans in very tangible ways, the trauma was also psychological. In a boom, everyone becomes a cheerleader; the abundance of easy money persuades people that the good times will continue forever. The bust abruptly shattered this illusion, and the emotions it provoked were as powerful as its economic impact. In the years after the War of 1812, American farmers overcame their traditional distrust of banks and took out large loans to develop their land. When the Panic struck, saddling them with intolerable debt, they erupted in anger, blaming everyone but themselves. While there had undoubtedly been unscrupulous characters who had exploited unsuspecting victims, the tide of righteous rage that tore through the country masked something deeper. The surge of inflated wealth couldn’t have happened without the complicity of ordinary Americans; the fury they felt afterward was partly a way to vent their humiliation over being so easily fooled.

  Perversely, the easiest target was the party least responsible: the Second Bank of the United States. By demanding that the state banks settle their outstanding balances, the Bank was simply doing its job. But, like sleepers rudely woken from a lovely dream, Americans lashed out at the Bank, denouncing it as a federal conspiracy to oppress the states and enrich eastern investors at the expense of hardworking citizens. The bankers in Philadelphia and politicians in Washington were too far away to bear the full brunt of people’s bitterness, so a lesser cast of villains emerged: local landlords, tax collectors, financiers—anyone who stood to profit from someone else’s labor without producing anything of his own.

  The rising populist current couldn’t have come at a better time for Lewis. As unemployment, bankruptcy, and foreclosures ravaged the country, crime acquired an aura of prestige. Not only was it a way for the dispossessed to make a living, but compared with the perfectly legal frauds perpetrated by the nation’s banks, lawbreaking seemed honest. In difficult times, the outlaw often becomes a hero to the hopeless. He transcends the tedium of poverty: while the poor stand in soup lines or wander the streets looking for work, the outlaw takes what he wants instead of wait-ing for society to give it to him. It wasn’t just his charisma or his daring that made Lewis a folk hero. What elevated him to the status of a legend was his metamorphosis into precisely the kind of populist icon that central Pennsylvania needed in 1819: a Robin Hood who protected the weak from the strong, who punished the avaricious and rewarded the needy. Lewis so skillfully cultivated the character of the righteous outlaw that people lionized him even as he robbed and swindled them. His success came at their expense, but at a time when communities across America were struggling, they could take pride in knowing that a native son of the Alleghenies was pocketing tremendous amounts of money—not as cowardly bankers and businessmen did but as a criminal, with bluster and bravado.

  Lewis wasn’t the Panic’s only unlikely hero. John Adams, who turned eighty-four in 1819, proposed someone even more improbable: Thomas Hutchinson, the colonial leader who had tried to purge paper money from Massachusetts when Owen Sullivan was starting to forge bills and Adams was just a boy. Now, as the elderly Founding Father watched the country he helped create slide into a depression provoked by the fickleness of paper wealth, Hutchinson’s judgment seemed prescient. A decade before the crash, Adams spelled out his thinking in a letter to a friend. “If I was the witch of Endor,” he wrote, referring to a woman in the Old Testament who summons the spirit of a dead prophet, “I would wake the ghost of Hutchinson, and give him absolute power over the currency of the United States and every part of it.” Despite hating Hutchinson’s Loyalist politics, Adams admitted that the haughty merchant “understood the subject of coin and commerce better than any man I ever knew in this country.” In the seven decades since Hutchinson proposed banning bills of credit in 1749, paper money had woven itself even more deeply into the fabric of American life. Adams feared for the stability of a nation that swung from boom to bust, and for the future of a citizenry so readily seduced by fraudulent fantasies of the good life.

  ON A SUNDAY MORNING in October 1819, John McClelland bobbed gently in his saddle as he guided his horse down a mountain road east of Bedford. A Pittsburgh merchant, McClelland was carrying $1,500 in banknotes and gold to Philadelphia, where he planned to deposit the hefty sum in a bank. Transporting that kind of money across almost the whole length of Pennsylvania would be extremely dangerous, but unfortunately, there wasn’t an easier way to transfer the funds. He still had two hundred miles to go before reaching Philadelphia, and the rugged Allegheny terrain, with its dense forests and secluded hollows, offered countless places for highwaymen to lurk—a thought that undoubtedly crossed McClelland’s mind as he trotted along the turnpike.

  At around nine o’clock, McClelland saw a man walking ahead on the path. A lone traveler on foot didn’t seem like much of a threat, so the merchant kept his pace. Just as he got close enough to pass ahead, the man whirled around, pistol drawn. It was Lewis. He had blackened his face, presumably with ash or coal dust; a pair of blinking blue eyes and a streak of blond hair stood out against the dark skin. A careless moment could cost McClelland his life. As he dismounted at gunpoint, two accomplices also disguised in blackface darted out from the side of the road. One jumped on the horse and galloped away, while the other, sighting people coming up the path, helped Lewis force McClelland into the woods. They pushe
d the merchant to the ground and, thrusting their gun barrels against his chest, ordered him to remain absolutely silent. When the passersby had gone, the thieves stood McClelland on his feet and marched him to a camp about half a mile north of the road.

  Just like the backcountry bivouac where Noble and Lewis had holed up four years earlier, the site had all the amenities of wilderness living: a fire, a pot, and a hut. The robbers hurled McClelland into the hovel, where he sat and watched them rifle through his saddlebags. The ringleader was clearly Lewis; the others were a pair of thuggish Irishmen named John Connelly and James Hanson. Connelly was tall and broad, with dark brown hair and a long, thin jaw that drew his face downward and gave it a sullen cast. Hanson was the shortest of the gang and apparently the most bloodthirsty; once back at the campsite, he proposed killing McClelland but was promptly vetoed by Lewis and Connelly.

  During the several hours that they kept the merchant prisoner, the thieves took his money, his watch, and some of his clothing. Finally, at three o’clock in the afternoon, they departed, but not before instructing McClelland to stay in the hut until sunset. A short time later, Lewis returned alone. Handing the merchant his watch and $30, the robber said he planned to stick up a nearby stagecoach; if the heist succeeded, he promised to give McClelland back the rest of the money. Then Lewis left. The merchant didn’t wait for the sun to set; he dashed to the nearest tavern and raised the alarm.