Stephen Girard was born poor in France and sought to make his fortune as a trader at sea. When a British warship chased his French vessel into Philadelphia in May 1776, the Americans confiscated it for use in the Revolution.
Realizing that the War of Independence would mean a short supply of goods, he opened a store and made his first American profit.
“His life would be one part soap opera, two parts melodrama and three parts epic,” wrote George Wilson in “Stephen Girard: The Life and Times of America’s First Tycoon.” “He was an extraordinary person in an extraordinary era.”
By the time Girard (1750-1831) died, he had built an estate of around $7 million, worth $191 million now.
When his fortune is measured as a percentage of gross domestic product, he ranks No. 4 in American history, just behind John D. Rockefeller, Cornelius Vanderbilt and John Astor, according to “The Wealthy 100” by Michael Klepper and Robert Gunther. During the War of 1812, the American government would turn to him to keep it from financial collapse.
Girard was born in the French port of Bordeaux, blind in his right eye. It looked grotesque, and he was ridiculed by other kids, but the ridicule ultimately made him tougher.
His father was a sea captain and rarely home. Life got especially tough for Stephen at age 11; his mother died, leaving him in charge of seven siblings.
In 1764, Girard began working on one of his father’s ships and took his first nine-month trip to the West Indies. Nine years later, he captained his first vessel, but when he left Bordeaux, he didn’t realize he would never return home.
The part of the cargo that he had purchased turned out to be in oversupply in the Caribbean, and he sold it at a loss. Then he invested everything in coffee and sugar, and sailed to New York to turn a profit.
He was soon running ships on the round trip to New Orleans.
In the spring of 1775, the Revolution exploded. As a Frenchman who regarded Britain as the enemy, he was sympathetic to the Colonial cause.
Then came his 1776 showdown. As he brought goods from Haiti to try to run the British blockade of New York City, he hid out in Philadelphia. It became his home the rest of his life, and he became a privateer for his new country, capturing British merchant ships.
Meanwhile, Girard at 26 married Mary Lum. It was a happy match until, several years later, she showed signs of insanity and he institutionalized her.
After the war ended in 1783, his trading empire flourished. “Many young boys who served valuable apprenticeships in his counting house … praised him,” wrote Robert Wright and David Cowen in “Financial Founding Fathers.” “A successful stint with Girard was the 18th century equivalent of an MBA. … He found just the right mix of fixed salary and bonus incentive to keep employees productive.”
Girard was careful about whom he trusted, learned from mistakes, didn’t get involved in get-rich-quick schemes and was a top deal maker.
“His sailors were among the healthiest and happiest in the world, allowing him to keep his ships at sea a larger percentage of the time than other merchants,” wrote Wright and Cowen. “It wasn’t unusual for his ships to leave Philadelphia laden with $75,000 worth of produce and to return a year and a half later bearing goods that would sell for $150,000 or more. He purchased sugar from specific hills that he knew to yield only the sweetest canes, and as a connoisseur of coffee and tobacco he was unequaled.”
To The Rescue
As a philanthropist, Girard’s finest hour came in 1793, when yellow fever hit Philadelphia, the U.S. capital, with 45,000 residents.
All the leaders fled, along with 20,000 citizens who could afford to. Everyone assumed that the disease was contagious, although it is transmitted not by people but by mosquito bites.
Girard was ahead of the masses. He had survived yellow fever in the Caribbean and didn’t believe it contagious. He also figured that the standard treatments — bleeding patients of their “bad blood” or having them ingest toxic mercury to supposedly kill the disease — were counterproductive.
He set up a hospital on the outskirts of Philadelphia, kept it clean and instituted milder therapies.
By the time the epidemic was over two months later, 5,000 had died, but he had provided them with comfort and consolation while saving thousands of others.
“Fearlessly, audaciously and defiantly, unselfishly serving others, he had looked death in the eye,” wrote Wilson.
Girard would take the lead again when the fever returned in 1797-98. With a keen understanding of currency exchange rates, he made money by buying and selling international promissory notes called bills of exchange.
He generously supported Thomas Jefferson’s Democratic-Republicans, who favored France, vs. the pro-British Federalists.
Yet Girard’s financial investments made him realize that the Republicans’ opposition to the national bank was wrongheaded. So in 1811, he teamed up with Albert Gallatin — Treasury secretary under Presidents Jefferson and Madison — trying in vain to keep the Philadelphia-based First Bank of the United States open.
Even though it closed, Girard turned up on the right side. He had bought 14% of its voting stock to control how the bank’s assets were liquidated, then made his big move in May 1812. He bought not only the bank’s cash and invested assets but also its buildings at a bargain price. He kept on key employees and reopened as the sole proprietor of a private bank, which meant that he wasn’t beholden to state laws or a corporate board.
“It was a simple but brilliant plan,” Greg Reid, author of “Think and Grow Rich: Stickability, the Power of Perseverance,” told IBD. “Using his own money and some of the best people in the banking business, he instituted conservative lending policies that allowed him to have less gold and silver on hand than other banks while making more loans to small businesses that were neglected by competitors. In today’s parlance, he had a AAA credit rating.”
When the War of 1812 broke out, Girard and Gallatin spoke out against Jefferson’s embargo on trade with the British, to no avail.
Girard then repatriated his overseas investments into American corporate equities and U.S. federal bonds to avoid seizure of goods.
By March 1813, with rising war expenses and no national bank from which to borrow, the U.S. government ran out of money.
Gallatin’s attempts to raise $16 million in loans from the public in increments as small as $12.50 brought in only $4 million (worth $60 million now).
Most large investors were loath to fork over money toward what appeared to be the losing side in the war, but European financier David Parish agreed to underwrite $2 million. Gallatin asked Girard to save the nation’s economy by stepping in. Girard formed a syndicate with Parish and Astor to sell $10 million in bonds. They resuscitated the financial system.
When Gallatin sailed for Europe to negotiate peace in 1813, Girard took over the buying and selling of Treasury notes to brokers in exchange for his bank being allowed to receive federal deposits, performing some of the functions of a central bank. After the financial chaos, Girard persuaded Republicans that they needed a national bank. The private-public Second Bank of the United States was authorized in 1816.
“Girard was a financial innovator, introducing convertible mortgage bonds for the first time on a large scale, giving him a hedge when he bought a company,” wrote Wright and Cowen. “If it failed, he would own assets; if it plodded along, he could earn interest on the bonds; if it thrived, he would convert bonds to stock and make a larger profit.”
The money kept piling up. When he died at 81, he bequeathed most of his fortune to charitable and municipal institutions in Philadelphia, especially Girard College.
He had founded it to provide free education for orphans. Its trust fund is estimated today to have nearly $400 million, and thousands of students have benefited.
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