In 1807, Andrew Dexter began building the tallest building in America, a temple of finance that soared an unheard-of seven stories — and caused the young republic’s first major bank collapse.
The skyscraper was the Exchange Coffee House, a product of the commercial ambitions that seized the country. It also resulted from the unregulated banking system that allowed swindlers like Andrew Dexter to flourish and fail.
The Exchange Coffee House went up in smoke nine years after it opened. People could see the fire as far away as New Hampshire and Maine. But even before the flames started, the Exchange Coffee House had caused plenty of damage. It destroyed banks as far away as the Michigan Territory.
Dexter’s failure ‘was one of the most direful events in the economic history of New England,’ wrote historian Horace White in 1911.
Andrew Dexter, Jr.
Born on March 28, 1779, in Brookfield, Mass., Andrew Dexter was named after his father, a prosperous textile merchant. He grew up in Providence, graduated from Brown and moved to Boston to take up the law. Dexter then studied with his uncle, Samuel Dexter, later named the third U.S. Secretary of the Treasury.
In 1808, he married Charlotte Morton, the daughter of Perez Morton and niece of Fanny Apthorp, who committed suicide after giving birth to Perez Morton’s illegitimate child.
Coffee, a luxury beverage at the time, marked the people who drank it as cosmopolitan, as elite. As Dexter began to amass wealth, an ambition seized him. He wanted to build an enormous exchange that would serve as Boston’s financial nerve center – and serve coffee.
Gospel of Ascent
Jane Kamensky, author of The Exchange Artist: A Tale of High-Flying Speculation and America’s First Banking Collapse, explained the expansionary zeitgeist that influenced Andrew Dexter
“The gospel of ascent seeped into every sphere of life in the early republic, from farm house to schoolhouse to courthouse to countinghouse to meetinghouse,” she wrote. “And wherever it touched, aspiration took shape. In the slaveholding south and the rural north and the ever-expanding backcountry, aspiration pushed relentlessly at the horizontal: a hunger for more acres, farther shores.
In Boston, aspiration was vertical, wrote Kamensky.
Speculators and Swindlers
Back in the early days of the Republic, banks issued notes that customers could exchange for gold or silver. People conducted business by exchanging the notes at a discount, which depended on the bank’s reputation and its distance from the people doing business. A bank note that could be exchanged in Boston, for example, was more valuable to Boston businessmen than a note that had to be exchanged in Providence.
Some banks were established far from commercial centers because of the difficulty in exchanging notes for specie. Speculators and swindlers bought or established banks in far-away places so they could issue notes that would take a long time, if ever, to redeem.
The discount rate was set by traders doing business in the street. Dexter intended the Exchange Coffee House to be a place where they could trade bank notes indoors. It would also have a coffee room, reading rooms, conference rooms, a hotel, dining rooms and business offices.
The Exchange Coffee House took two years to build. As it rose from Salter’s Court, so did Dexter’s ambition. In the end he built a vast exchange floor, a 40-by-60-foot atrium framed by pillars on each floor that grew more ornate as they rose to the ceiling. A sumptuous Coffee Room was furnished with imported mahogany furniture, velvet draperies, china from Canton and silver from the Andes. Even the privy was a marvel: It was four stories high with windows on every floor.
People came long distances to see the fantastic building. The Rev. William Bentley recorded in his diary on Nov. 14, 1808:
For the first time saw the Exchange but the naked front, without anything but its own surface on the line of the street, is not capable of affording a view but of a very large building.
Exposure and Flight
There were more tales than customers. Traders preferred to do business on the sidewalk, even when it rained. Then President Thomas Jefferson’s embargo slowed commerce in New England. Dexter could rent only a third of the offices. The bar stood empty, and the hotel barely had an occupant.
That wasn’t Andrew Dexter’s problem any more. To finance his dream, he had started or taken control of the Berkshire Bank in Pittsfield, Mass., the Farmers’ Exchange Bank in Gloucester, R.I., the Penobscot Bank of Bucksport, Maine, the Coos Bank of Haverhill, N.H., and the Detroit Bank, housed in the first brick building in Michigan. He issued hundreds of thousands of dollars in bank notes while building his ever-more-grandiose skyscraper.
Nathan Appleton and other Boston merchants grew suspicious of Dexter’s ‘country’ bank notes. In 1808, they took their story to the press. Shopkeepers began refusing banknotes from Dexter’s banks. Appleton and his friends sent agents to Dexter’s far-away banks to redeem the notes that Boston shopkeepers had accepted as currency. The banks couldn’t exchange the notes for gold or silver, and the extent of Dexter’s fraud began to be realized. Dexter could no longer pay his workmen, and hundreds, if not thousands of them were wiped out.
When the Farmer’s Exchange collapsed, it turned out Dexter had issued $760,000 in bank notes. The bank had a total of $86 in gold and silver on hand.
Andrew and Charlotte Dexter slumped off to Nova Scotia in 1809 to avoid prosecution. During the War of 1812 they moved to Athens, N.Y., to take advantage of that state’s lenient bankruptcy rules. By 1817, Dexter’s father had died and Dexter used his inheritance to speculate in Alabama real estate. He founded Montgomery, moving his family there in 1819. Charlotte Dexter died shortly after they arrived. Andrew Dexter continued his real estate speculation in Texas and Mexico, but died broke on Nov. 2, 1837, in Mobile, Ala.
The Exchange Coffee House had long gone by then. New owners completed it, but it never achieved the success Dexter anticipated. It then changed hands several times until Nov. 3, 1819, when a fire totally destroyed it. The remains of America’s first skyscraper smoldered for months. Three years later, another, less grand coffee house exchange was built on the site.
This story was updated in 2022.