The Birth of Modern Bankruptcy Law

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Stop managing software and start managing your business with one unified system Try for free today at odu d. com slash heartradio. That's odoo d. com slash heartradio Service opens doors and at American Military University it can open doors for the whole family If you have a loved one who served in the military, you may qualify for reduced tuition AMU offers flexible online programs designed to fit your schedule. So you can keep moving forward Whver life takes you. Learn more at AMU dot PUS . u slash military O doors to the future for you and your family with the help of the American Military University Let's get stop You caught it Jacob, as a history podcast, we are contractually required to observe that our country is about to celebrate the two hundred fiftieth anniversary of the signing of the Declaration of Independence You gave me the Latin, Robert What we call this, Jake? got I got the Wikipedia page right here. It's the United States semi quincentennial AK A The bicecquizentennial, AKA, the sester centennial or my personal favorite. Yes Qarter Millennum. The quarter Millennium is the best one. Yeah, why do we need Latin? This is This is America. did a half marathon. Now it's the quuarter Millenne. Quarter Millenn. We're going all the way. way A thousandousand years, baby. So obviously like this summer, we're gonna to be hearing a lot about the classic foundounding fathers. You got your George Washington, your Thomas Jefferson You're Alexander Hamilton. Since this is business history, we are going to tell the story of the financial Founding father Robert Morris. Morris signed the Declaration of Independence. He signed the Constitution. He was a senator. He was a hero of the Revolution in a really important way. He found the money to pay for the guns and soldiers. At one point He was likely the richest man in the early United States And then All of a sudden He was not He had so many debts, he was thrown into jail. I'm ready for the musical Yeah, no musical But we do have a podcast called Business History. I'm Jacob Goldstein. I'm Rober. It's a show about the history of business. Today on the show, a wild side of the American Revolution. Okay, wild for me, not the battles, but the financing of the battles. The money George Washington needed to fight the revolution. It's no exaggeration to say that Robert Morris created Really this new economy of the United States out of thin air And the question that everyone asked as he was being hauled off to prison was Did he finance the war Or did the war finance him Not mutually exclusive, happy quarter Millennium Who will speak for the bankers?? I am going to speak for the bankers. Okay I'm just going to admit right here, Robert Morris is not everyone's favorite founding father. He was controversial at the time. He's controversial now, but I have a real soft spot for him, he reminds me of all the people I went to business school with The MBAs, they're charming They're super smart. they're organized And they just say out loud, I want to make money I'm here to make money They ignore things happening in the world. They're not ideological. And Robert Morrre sort of feels like this, even though he's living through the most dramatic times in world history, he's a guy who's like, Yeah, whatever. let's just like look at the ledger and make some money here He came to America from England, so he's a British citizen in seventeen forty three. He's a teenager And he didn't come for religious freedom or to start a new society. He came because he wanted to be a merchant. He wanted to do international trade It came to make money.. And Philadelphia was the place to be. Like this was a place where ships were coming and going and you thought there was money to be made. He started out as intern, you know, just swooepping the floors, became a shipping clerk There's a story about him that captures his style He's still a teenager and his boss is out of town He's the shipping cler But he hears from a sea captain Kusty old guy with one eire. Price of flour has jumped in Europe Okay. Yeah. and Morris doesn't really have the authority to do anything, but he's like Let's screw it. let's buy up all the flour we can get in Philadelphia. Let's put it on an outbound ship And take advantage of the high prices before anyone figures it out. Arbitrage. It is an arbitrage opportunity. Ifitge is selling for two different prices in two different places and the shipping cost is less than the difference, you should buy all that you can in the cheap place and sell all that you can in the expensive place. And that'll make the prices converge. It's actually a useful function. Yeah. And if Robert Morris were liive today, he'd be working for like hedge fund Janes Street. He would be working for Jam Street trading Fower futures in India versus Pakistan. Yes. Cing closing the scent difference So Morris had the gift and he ended up running this trading company. And it's fair to say that He loved it. He loved being a rich and powerful guy in an English colony, right. He had made it in the New world He was the least likely person to want a revolution because it would mess up all the shipping scheduulle. his profits. Bad for business. So he probably would have stayed out of this whole mess Except for the stampps. There's one thing rich guy hates, it's attaxed. And the step back I am still amazed that Britain thought this up as something to put on the colonists. The stamp act was a fee on anything that involved paper. Anything that had paper, you needed to put a stamp on it and you had to pay for the stamp. I mean, this seems maybe reductant, but when I think about it, it's like, well Who's using a lot of paper? It's not like the poor farmers. It's journalists. Yeah. were and lawyers. Yeah. There were taxes on newspapers, bonds, court documents, playing cards. So well playing cards to the side.. All those other taxes are on the powerful people. In terms of political economy, who do you want on your side? You want the journalists and the lawyers and the bankers. And you're putting tax specifically on them And you know, Robert Morris loved to like do paperwork,. So it was loading the flour under the ships himself. It was really going after the moneyied interests and Robert Morris might have even been able to ignore this except He was a port warden at the time. So he was kind of running things in the port because he was the biggest customer. And the American colonists decided they were going to boycott anything from Britain just to protest the Stamp A. And so there he was. He's like, okay, fine, I will help enforce this boycott. He ends up being elected to the Cinental Congress because you know, he's big guy on campus running the whole thing and He really thought this whole tiff with Britain would be negotiated away. He's like there's just no way that smart people with money on both sides of the Atlantic would never go to war. Here's a quote that he wrote about this. He writes I recommend constantly Steady mananly A decent and peaceable opposition is most likely to ensure success He thought we should just be manly but not shoot anybody. Yeah. Yeah, why is it manly but decent why are those at odds? Robert Morris? He wasn't gonna to get the peaceful part I should say a lot of the stories in this podcast are taken from the book, Robert Morris, financier of the American Revolution. You know that sold a lot of copies there with the word financier in it, right? Robert Morris Fancier of the American Revolution by Charles Rapley And he told the story Co but I love it twenty third, seventeen seventy five Hear the fife drums so glad you' wving tricorn hat. So Robert Morris is at the City Tavern, it's something called the Long Room And he's actually at the annual feast of the Society of St. George. So it's a society celebrating Britain, which is what he is, L J just be clear. He is a British citizen and happy to be one.. They're reveling in it, right? He's sitting up front and a messenger bursts in and announces that the British had fired on American troops at Lexington British loyalists in the bar, according to the story spring up and start running for the exits. They're like,'s on? And the way the story is told later Robert Morris was left at the head table in mid toast with his glass up Camera pans, the room is empty. And he says To the king You know what He doesn't know what to say at this point. And this is uncomfortable for Robert Morris. he is as close as you can get at this point to a global capitalist. Yeah And W is very bad for his business, which is to run ships back and forth to Europe But at this point he is also a member of the Continental Congress, so he wants to do what's best for Pennsylvania And it's hard for him to reconcile So When the colonists are meeting to vote on the Declaration of indndependence Morris actually argues against it, saying, you know, we should be more conservative about this. We shouldn't take any rash measures. And he doesn't vote for the Declaration of independence. He abstains. Classic Weasy move I neither voted for it nor against it. That's going to come in useful in case there's a tribunal later. When it is finally drawn up for a signature though Morris reluctantly signs his name, which you can see to this day. pragmatist and at this point The war had started There was no way back from this. So he's like, I guess I'm in So the first shots fired in the Revolution, Morris dedicates himself to what he does best He is a fancy rich man. He is not going to fight. He is not going to hold a gun But he is going to do trading for the revolution, shipping for the revolution. I mean, the guns aren't gonna buy themselves. George Washington needs gunpowder And Morris was tasked with figuring out how to get it. And this was not easy because England China knew something was up, so for months, they had kept Americans from buying guns and ammunition. They're like, maybe we shouldn't be stalking people who might use these against us The British Navy at this point, of course, controls the seas And it's very difficult to sneak things past the British So Morris starts to essentially act as a smuggler. Yeah, a lot of the revolutionaries, I think were smugglers, quasi smugglers. They're all shippers kind of Dressed up smugglers? No All right. that's right. Okay. So the former clerk starts to forge paperwork Fake sailing orders, fake cargo registers. He's using his agents in the Caribbean and in France to route gunpowder past the British blockades. It's all very exciting, although of course, he's just writing orders at his desk They communicated in secret code and invisible ink. The British didn't yet know you could just put lemon juice on it and read it. Nobody knew. He was a genius. And during this all Morris obviously was obtaining needed supplies for the American Revolutionaries. And at the same time he was making a little money becausecause it was Morris' point of view merchants helping to stock the American army should be able to make a profit His company and other companies provided the ships, and he wrote, I assert boldly Comerce ought to be as free as the air Titors are remarkable for their spirit Their own interest and the public good go hand in hand and they need no other prompter or tutor er veryy self serving. Let me ask you so amazingly, the wealth of nations, you know, the Adam Smith book that started economics came out in seventeen seventy six. incredible of it wins. Yeah Do you know, did he know about Adam Smith? this idea that this is a very Adam Smith idea? Yes. I don't know if you said it before Adam Smith, but he definitely hadad the book had gifted the book to after it happened Yeah. But like Morris is coming up with this, you know, it was in the air this idea. and yeah, self serving absolutely, making money off of a war and tragedies. Terrible. Yeah. But he understood something that I do think is true, which is if you want people to do work for you, Eespecially people, you know in France and the Caribbean and sailors who have no loyalty to the United States of America You need to pay them Well, there's the famous line from Wealth of Nations, right It's something like it's not from the benevolence of the baker and the butcher and the brewer that we expect our dinner, but from their regard to their own self interest Right? Like that's how we get our dinner because those guys are making a profit by baking us bread and getting us meat. And that's how we got our guns and our gunpowder. And eventually, Morris is sourcing tents, sales clothing, even food for the American army. He is Pentagon. he's like seeing where all the troops are and getting them what they need At one point in seventeen seventy seven The British were threatening Philadelphia Continental Congress who are running the colonist efforts at this point. They flee the city Except for Robert Morris and He says he wants he needs to be by the ships. He needs to like follow all the shipping stuff. he needs to stay at his desk and With everyone else left and George Washington in the field, he's basically running the wartime economy for the colonists And he's directing the ships and the logistics and the money side and figuring out how to pay for all of this, He is He's is the president, at least the secretary of the Treasury. And George Washington at this point is depending on him, writing him constantly begging for more, justust saying we need more more, more more and more. When Washington was camped, by the Delaware He's about to cross on the little rowboat standing up. Don't do that to. In winter, it's the famous painting. Yeah. You know what they didn't paint They didn't paint Robert Morris sitting at a desk, figuring out how to get blankets and stockings to keep those men from freezing. It was winter along the Delaware River At one point, Washington's men threatened to desert him because they hadn't been paid. You know, they were also wanting to make some money from sure from being soldiers. And there was no way to find money. And Morris went to all the rich people he knew in Philadelphia to have them dig up their coins to go to their stash, and he somehow managed to get fifty thousand dollars out of them and got it to General Washington to pay the soldiers. But it was getting harder and harder find real money, we should say this time. So we need to talk about the way the monetary system. I've been waiting. got to talk about continentals. I've been waiting to talk about continentals. So The colonies were operating on gold and silver that came from Britain and France and this sort of thing classic money, but they also had paper money. and specifically the Continental Congress had issued these IOUs, we'll say, continontental dollars they were called. and They loved issuing continentals. Yeah. becausecause every time they had to pay for something, they just printed more money and said, yeah, yeah, these will definitely be worth something after the war. Robert Smith, what happens if you keep printing paper money? It's not worth anything. You a lot of inflation. You get inflation. And Morris tried to explain this in his writing. He wrote There is One circumstance more distressing than all the rest because it threatens instant and total ruin to the American cause unless some radical cure is applied, and that's speatle. I mean dereciation of the continental currency. The extravagance that has prevailed in most departments of the public service that have called forth Dig just emissions of paper money. indigous emissions of paper money. Aere they nocturnal? I'll tell you, people always use this word emissions with paper money at the time. I don't know why, but you see it again and again and it sounds disgusting, which is how they mean it to sound. They are disgusted by it I just love that of all the things threatening the revolution Right? Everyone's arguing about the cause of democracy or centralization or federalism. Yeah he's like Robert Morris is the one more distressing than all the rest. it Is it death? Is it freezing? It's inflation. It's inflation in the currency. And you know what? He's absolutely right. Like this is the thing that was threatening George Washington, the army. that like the arrmy was just going to give up. They wouldn't be able to obtain anything. It's funny because this inflation' going on and people reacted to it back then exactly as they react to it today. So some people in Congress blamed the greedy merchants. Greflation. Greed inflation taking advantage of this war to raise prices. Not the fact that we're prting too much money. No, no, no. They're like farmers are trying to gouge us, you know, with their increasing prices for food Pennsylvania put some price controls on things like food. What happens? What happens where do you put price controls on Robert Smith You get a shortage. You get a shortage. If If if you prices rise, then supply will fall. And that is what happened. There's a quote by Robert Morris that actually reminded me of you, Jacob. It's kind of thing you might say The most effectual way to turn a scarcity into plenty is to raise the price for the article wanted If you want more of a thing, pay more for it and more will appear It's the opposite of price controls. So Robert Morris has to tackle this currency problem He doesn't know how to do it. He tries to lecture the Congress about we need to be better about spending, We need to like more by France and hard money But in the end, he decides I'm going to start my own bank and I'm going to print my own for money And let me just say This sounds like bizarre to us. you're starting a bank and printing your own money. At the time it was normal, very popular. becausecause as you alluded to before Paper money was an IOU. L in people's minds, real money was gold or silver coins. and banks would start up People would start banks and they would print paper money and the paper money would actually sayay on it. Like the five dollars bill would say like This is a claim on five dollars in silver at whatever, the Bank of Robert Morris. And then the idea is you could take it and actually get the silver out of the bank, but the paper would trade as money. And I'm always amazed People were very, very, very shrewd and smart about this and they could look at a paper I owe you and look at who issued it and determine how trustworthy is this person and how much is the real value of this paper? Yeah, I mean, in fact, a few decades later peopleople would actually start these sort of like magazines for merchants when there were hundreds of banks or thousands of banks printing their own money that told you for every bank, like take it, don't take it, apply a discount. It's a really interesting market, right? This idea of a free market in money So Rubber Morse thinks All right, everyone's screwing this up I'm just going to take it back to first principles. He starts the Bank of North America. Yes, thinking big. startarts in Philadelphia with a bunch of money, but mainly a shipment of silver from France. Okay Collateral? Yeah, and the bank issues its own paper notes backed by silver and gold. and He is very vigilant there should not be too many of these paper notes. Not too many emissions. Not too many emissions. No emissions And he did all these psychological tricks because it is a psychological game. I mean, a new bank pops up and you're going to trust them Here's how we got people to trust them One thing they did They had the vault in the basement and the loan office was up above And they had pulleies. to lift chests of silver. Okay, right? You know, just total logistics. but he made sure it was out in the open and people could see it. Oh, they've got a chest of silver. And he would have people raise and lower the boxes of silver. So if you came into the bank You would tell me, o, you should have seen it. They had boxes and boxes of silver in there. likeike they have the money to back the notes. The quote was, it would dazzle the public eye by the same piece of coin multiplied by one thousand reflectors I love that. It's like David Copperfield. Silver failed Another wild thing that they would do at the Bank of North America, so I am told was that if someone wanted to pull silver out of the bank, you know, they would arrive there with a note and say, I want the silver instead of this note they would say y to do it, sir Everything's backed by silver and gold here, and they would pay out the silver customer would leave happy from the bank. And then they would send a clerk after that person chase them down in the street and say like, hey, listen, can you give us back the silver? we'll give you some notes. Like really, it's safer keeping it with us. sure you want to be walking out or out here with that silver. he's carefully managing this new currency. and at one point He even issued his own Robert Morris promissory notes, which was which was a bank the guy No, they was just like personally, you know me, I'm a rich guy I walk around Philadelphia. I will personally guarantee this money And they were called because they had different durations to them because his name is Robert, long bobs and short bobs. Oh, that's great. Yeah. Moore said when he issued his own notes, My personal credit, which thank heaven, I have preserved through all the tempests of war, has been substituted for that which the country had lost I'm now striving to transfer that credit to the public Its a very Bcherly way think of the world It's like you're moving credit around A little bit arrogant also. Even at the time, people thought he was arrogant. And remember the United States of America A lot of people thought that this should be a plain and simple nation. Yeah, notot the United States of America yet if I've got the timing right. Yeah. So they thought the colonists or our new civilization here should be plain and simple. You didn't want to have ostentation. People were not talking bankers and economists. Yeah. And one of the things I really do admire about Morris is He was seeing things that no one else could see. Because of course everyone's like, Oh, there's actual gun fights and battlles you know, and we don't know the future of our nation. And he's like, no, no, no, focus on the money Let the money work and everything else becomes easier So all of this subterfuge personally guaranteeing essentially currency used by the government. It would not have worked for long the war ended. So Good news. Morris stayed on for a while as the head of finance of the new country there was just so much drama, political drama at this point about how the states would work together, would there be taxes? Would there not be federal taxes And Morris really argued like, no, if we're going to make this system work He was very Hamiltonian in this that we need a centralized government, centralized debt, centralized currency. And at one point, President Washington, who was when he was president, would ask him to be the Secretary of Treasury, the very first secretary of Treasury You know, before he asked Alexander Hamilton, he probably said, Hey, you could be on the ten dollarars bill. My man. And Morris is like, I already have way too many paper bills out there. my name on it so he declined and Alexander Hamilton the job instead So Morris at this point, he's like, I'm done with government. I want to go back to my first love, the thing I really believe in. making goobbs of money. 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Service opens doors and at American Military University it can open doors for the whole family If you have a loved one who served in the military, you may qualify for reduced tuition AMU offers flexible online programs designed to fit your schedule So you can keep moving forward Whver life takes you Learn more at AMU d PUS . u slash military O doors to the future for you and your family with the help of the American Military University How is TD making banking more human with less bank talk and more real talk? Less, your call is important to us, and more, how can we help? It's getting more of what you want and less of what you don't. That's how TDs make you banking more human We And we are back Let's jump fifteen years after the end of the Revolutionary War Robert Morris is a resident of the Prune Street Dbtors prrison in Philadelphia He is living In a cell, it's a nice cell, but it's still a cell He would walk three miles every day in the yard outside the prison Big circle fifty times around the yard, apparently he would keep pocket f of pebbles and with each circle he make He would drop a pebble just so we could keep count of if I ent around the ledger Yes, exactly And as he's walking around, he must have thought about how much of a fall this was. How big he was. in those fifteen years since the Revolution. At one point, he owned more land in the United States Anyone else? Like you would probably be in the top ten of landowners today Six million acres. Six million, larger than the state of New Jersey. is what he owned. No. I'm double checking that You can check it. How many acrescentage new Jersey It's almost forvermat sized his land. New Jersey has five million acres. Yeah impmressive impmpressive also would lead to his downfall, But at the time, you know, he's in the debtor's prison and the former president of the United States because George Washington has voluntarily decided not to become king Heroically. huge moment in history. Yeah. ye But George Washington is still a celebrity. He came to Philadelphia. He's getting parades. everyveryone's celebrating him. and he takes a break to visit Robert Morris in prison. because He knew that a lot of the success of the Revolution was because of Robert and I don't know, Robin Mooars must have thought if I just hired to the end of the war I might be a hero. There might be parades for me Yeah as one of the people who madeade the revolution successful But he could not retire When he left the government, he started to trade again And he started to use the network that he had developed through smuggling all of that gunpowder and guns, his contacts in France and around the world. And He had these big schemes that he was going to try and pull off this network His first genius plan Got one word for you China Okay, that sounds like a good idea for what I'd know so far. Yeah, everyone else is restarting trade with Europe after the Revolutionary War. Moors bought a ship and sent it in the other direction. It held thirty tons of American ginseng.h. Popular in China. Yeah, two thousand six hundred animal skins, cotton, lead, and a little pepper right and see coming. The ship returned in seventeen eighty five with eight hundred chests of tea and twenty thousand pairs of Nan keen trousers, which I guess were a nice cotton trouser popular in the day I don't actually know what that is It's like hammer pants. Yeah, they' millennials. They were tight tight trousers It doesn't matter what was in the ship. The important thing was he made a twenty five percent profit He's doing great. Still had the touch Next up The French approach him. and they want what the Frenchman always wants Cigarettes, cigarettes, Tbacco. It was actually snuff. I think they were snuff fans. They would later take up the cigarettes U, But the war had, you know, put a crimp in the tobacco supply and prices for tobacco were very high. in Europe So Robert Morris makes a bold deal. He says I will sell you all of the tobacco you want For the next three years, if we lock in this high price I will supply it all and What Morris understands that they don't quite get is that know the industry in America is ramping back up again. The price will fall over the next three years, and he's locked in a high price And He can make huge profits on this. Now I will say Robert Morris As a Philadelphia banker is not the most popular man in the South at this time. so he sets up These sort of shell companies, whatever it is, he's a secret part of it. Okay. They compete against each other, The shell companies. they don't even know They have common ownership. and they end up cornering the tobacco market. Okay? Yeah And so Eventually he's sending thirty ships a year, millions of pounds of tobacco to France Of course, in order to do this scale of operation, he was gonna need a lot of money, so he issues some more of his notes. Now remember, the first time he issues the bobs. First time he issues them He was doing this to save colonist to save the revolutionary Amy. this time, you know just for the self and just for profit He's borrowing money. It's sort of bond like. Yeah And he also has this thing that like, you know Those debts are due, but of course, they're due after the tobacco arrives and there's a long chain of events that happens.'s the finance guys. what finance guys do. So picture this, he's got the ships sailing to China, He's corner the tobacco market, ships in the Atlantic, secret companies, tons of debt As he would later say Give give me a Robert Morris ism I can never do things in the small I must either be a man or a mouse Well, this man is now juggling payments and loans across half the world But he has a solution. what he calls the ultimate object of human avarice. This is it, the big score, the thing that's going to pay off all of his debts. It is land Real estate So this a good way to make money, goingo along real estate? A great way to make money, especially if you believe that you have now created a stable country with a lot of wilderness land. It's very smart. And in fact, a lot of the founding fathers were real estate speculators long before they thought about revolution. They were buying and selling wilderness land on the Western frontier basasically Ohio. Yeah. And in fact, one of the things that Britain did the kind of piss them off was they passed the proclamation of seventeen sixty three colonists were forbidden from settling west of the Appalachian mountains.. So you know, among the many things that we went to war for, one of them was the right to speculate in wilderness land inhabited by Native America Yes, USA So he starts buying wilderness land, Robert Morris does. and like everything else in his life, he goes all in, he starts.'s like first. Big purchases, a million acres of western New York along the Genesesee River A million A million cost him thirty thousand pounds in Massachusetts currency. There is no way to know what that is worth that. presresumably a lot Yeah, a lot, but Not that much. Not as much as it would sell for today. Yes So here's the plan. He wasn't gonna to hold this for two hundred years, which you should have done. He was going to send his agents to Europe And they would find people in small towns around Europe in Germany or something, who wanted to move to the New world. And he would say, I will sell you this many tracks of my vast land. and you can all live together. and it'll be just like Germany O only it'll be in There' a recurring sort of scheme in the newew world. You see it happen again and again And I mean, it did happen. It wasn't just a scheme. People came and moved and created these immigrant communities where they could still speak German and have their beer and pretzels and newspapers in German and whole communities. You'll see this happen a lot in the later eighteen hundreds So this is going to be the big score. And if he could make it work He would never have to issue any Morris notes ever again But first, just a little bit more debt, just a little bit more land, by which I mean millions of acres, and then more land deals. And I think of it as this giant denga set of debt right? And you know, things are paying off. He's paying off the debt, but then he puts it into a new debt. He puts thea Jena stick on top and he keeps pulling it out and pulling it up and pulling it out. and all of a sudden now it's three feet high, the Jena tower filled with debt. And then Something shakes the table Another revolution H French Revolion And really what brought in just years of chaos afterwards, kind of a kind of a nice irony that our revolutionary friend should be toppled by another revolution. After the French Revolution, there's all of these issues. There's a panic of seventeen ninety seven. The Bank of England suspends their hard money payments, businesses go under European countries borrowing more money to build their armies, to defend against France because Napoleon's coming. So a lot of the credit dries up And you know If you're relying on a cycle of debt and the new debt is hard to get. What happens, Jacob? Well, the people you owe money to come and say You're a rich guy, you own an more land than anybody sells some of that land to give me my money Exactly right. His famed Morris notes are becoming more worthless every day. He has this like side deal with someone else who's in the same boat and they start cross endorsing each other's worthless notes to be like, well, if you don't trust me, maybe trust the other guy Anyway, it's all falling apart People are yelling at him in the streets of Philadelphia because he owes money to everyone. So he retreats to his country home, which he calls Castle Defiance little bit arrogant. And even there Predators are showing up Charlie Morris would lock the door and he would only communicate with people in a bucket that he lowered down from the second floor. not the first floor because someone could shoot you. On the second floor lower down a bucket and they would send notes back and forth. And his note would just say no. He was probably filled with more moreoris Can I offer you some long b? I just printed them. So I have some emissions for you here. He is definitely scared at this point Predators would come and camp outside his home on his land and they would burn bonfires all night, and I assume, yell at him all night, waiting for him to come out. Bond offires? Bonfires. Eventually, yeah, they were fueling it with Moris notes. That's for now. We're burning currency Eventually he sends a note to the sheriff He wants to turn himself in and go to deebtor' prison In a note to a friend, he wrote, My money is gone, My furniture is to be sold I am to go to prison and my family to star Debtors's prisons It's been a think for hundreds of years. The idea was You would go and have your freedom taken away and you would work or your family would work figure out how to pay your debts. So it was a way of kind of keepeing away the mobs a little bit, although they could still visit you in the prison and yell at you. and in fact that happened the debtor's prison that he went to they actually calleded a debtor's apartment because they didn't It wasn't full prison, but he was definitely confined there. It was a two story brownstone on Prude Street in Philadelphia. And u Even though it was filled of people had no money who had sold furniture The inbates had to pay for room and board. huh? 't know I just The moral thing, I guess It's not high security Inmates could have visitors But it was right next door to the real jail. and they both like shared a yard and they were separated by a low wall And I guess hardcore criminals would jump over and basically mug the debtors for whatever they can negative money that they have. Robert Morse is like, take more notes take more notes And also Debtor's prison was getting crowded In seventeen ninety eight, the economy was struggling. Robert Morris wasn't the only person who couldn't pay his bills George Washington did visit him, famous person of the United States at this time Thomas Jefferson said I would like to hire Robert Morris to help run my economy if not for the prison and all And Morris himself was despondent. He wrote around this time, I feel myself an intruder every place into which I go I sleep in another person's bed occupy other people's rooms And if I attempt to sit down and write, It is at the interruption and inconvenience of someone who has acquired a prior right to the place Prison diaries from Marvt Morth. So he still has land. he's still trying to work out some things, but apparently when they total it up He had racked up about three million dollars in debts. That a lot. That is a lot And He was probably thinking at this point, he was gonna to spend the rest of his life in the Prune Street prison And then somebody Wanton invented the bankruptcy court I'm looking forward to talking about bankruptcy to debate Did you ever notice how you spend hours shopping online? only to pause right before you hit byy now Tiny hesitation The one where you wonder if it's trustworthy can make or break the saes Now, with AI changing the way we discover and compare things, that split second trust question matters more than ever That's where PayPal comes in For more than twenty five years, PayPal has been a leader in online payments. And now they're at the forefront of agentic commerce, making it work for businesses, letting them maintain control of their brand and their customer relationships So even as the way we shop changes, the moment that matters most still feels familiar and deeply dependable built for payments, Gth and aggentic PayPal open buuilt for all business. 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Formal, legal bankruptcy And there have been forms of this in Europe, but in the early United States, they had a lot to do, so they hadn't yet passed a federal bankruptcy law. Like how would it work? And it's a complicated problem when someone is in tch Especially a financier Right? They have all these debts, but they also have all these assets you get the kind of moral thing of like, oh, let's be mad at them, let's throw them in jail or whatever. I mean, A, it's cruel On a certain level, that's not actually financially a good idea, right? They have assets all these different creditors. and what you fundamentally want is for the creditors for the people that guy owes money to to get as much money back as possible. Yeah, so it's a collective action problem If somebody owes me money And I want that money back.. It is in my best interest to buttonhole them them sell the house, make them sell the furniture and give me back the money first. Like that's just my best interest. But there are hundreds of other people who also want their money. So what they need is everyone to get together and say, wait a minute If we let this person in an orderly way sell their assets, get the most forord or if they're running a business, keep the business running, then we all stand a better chance of being paid something instead of fighting each other. And you have some A neutral party, a bankruptcy judge, eventually, who can assess which creditor should be paid first, right or how you should allocate the assets, the proceeds to the different creditors. A complicated problem. Yeah, and I'll tell you what doesn't help is locking a guy in a room with a bunch of hardened criminals trying to mug you all the time. It's bad for the creditors, right? It's bad for the people who are owed money if that guy is locked Okay, so this is clearly a problem that needs to be solved Morris might have been the most famous man in the debtorss prison but he was joined by many other businessmen of the day. The economy had faltered, currency is unstable There are lots of unhappy constituents who want their money back. And so Congress, when forced gets to work So they have to hit this balance. They do not want it to be a pleasant process Otherwise everyone will rack up debts They want it to be orderly. They want to be able to see all the assets and debt of a person and to make some of the creditors whole And the solution they came up with, it's very interesting, very interesting in the bankruptcy we have today Today, a person or a company declares bankruptcy They stand up and they say, I declare bankruptcy chat out the office. shout out to the office. No. they file for bankruptcy. It's all pre orderly Congress in eighteen hundred decided that bankruptcy should be involuntary.. So if you owe me money, and can't pay it back I can declare you bankrupt. bank It's not up to me. I can't go to court and say I want to file for bankruptcy. No, you would have to arrange with the creditor That's would come to you and say, I declare doesnt make sense in a way. It's sort of leaving it up to the creditor Yeah. you know, it's not the way we do it today This is how they did it. The way they designed it was a panel of three commissioners would get to see all the assets and debts. they would decide what would happen next. And then two thirds of the people who lent the money had to agree, maybe based on how much they lent And then maybe the debt would be discharged. So this was the plan. It was hard to get through Congress passed by one vote. And you might think at this point, Robert Morris would have been thrilled. like this is what he needed It was what he needed, but it wasn't what he wanted He kept saying, I don't want to be declared bankrupt. Like that seems shameful. I'm not bankrupt There's money somewhere. I can make this work. Also cl make guys. It's just a liquidity crunch. Yeah. and much like process today, there is a stigma. It is saying you are bankrupt And he didn't want that stigma. Well and especially I guess, if his whole thing, his whole life is he's the guy who wanted to make money Then being bankrupt is saying he has failed at his main thing. The thing he loved U money, but