George Washington's "Retirement"
In October 1798, George Washington was living at Mount Vernon and enjoying his post-presidential life. However, he was not spending time on leisure activities. This was no cushy "retirement" with an 11 a.m. tee time followed by cocktails by the pool (or Potomac River). No, America’s first president found enjoyment in his work at Mount Vernon. He labored daily with a disciplined routine best articulated by Benjamin Franklin’s aphorism “early to bed, early to rise.” His relentless focus, hard work, and diligence helped make him both successful and forward thinking as a businessman.
Consequently, George Washington was rich. In fact, he acquired up to 70,000 acres throughout his life to include 8,000 acres across five farms surrounding Mount Vernon.[1] However, he was land rich, but frequently cash poor. Since his wealth was tied up in illiquid assets like land, Washington was eager to break this pattern by selling his land and re-investing the proceeds in projects that could generate cash.
A Speculative Real Estate Investment
At the age of 66, perhaps Washington stood on the piazza at Mount Vernon, peered across the expanse of the Potomac River, and envisioned a plan to build two adjoining townhouses on a lot that that he owned on Capitol Hill. He anticipated that the project would be financed from the sale of western lands. However, he also wanted to see about the availability of funds from the Bank of Alexandria.
Thus, on October 4, 1798, Washington wrote a letter to the Bank of Alexandria president William Herbert. The bulk of the letter reads as follows:
Observing to you, not long since, that the want of money prevented my doing something (I have forgot now what) you said, if I understood you rightly, that I might be accomodated at the Bank of Alexandria.
I think it not unlikely that in the course of next spring, or summer, if I undertake a measure which is in contemplation, that I shall have occasion for a larger Sum than I see a prospect of receiving from what is due to me. Let me ask then (if I was not mistaken in what you said) what sum you think I could obtain? On what terms? for what time? and what security wd be required? I am Dear Sir Yr Obedt Hble Servt
Go: Washington [2]
Herbert did not waste any time responding to his most prominent customer as he wrote a reply on October 5, 1798. In the letter, Herbert told the General that he could receive a 60-day discount note in the amount of “six to ten thousand Dollars.” As previously discussed in "George Washington and the Bank of Alexandria: Part One", the discount note was a short-term loan. Herbert explained that 60 days was the maximum number of days allowed under the Bank’s charter. However, the term could be extended every 60 days until the note was paid off. Herbert wrote:
This Note or Notes, you must renew at the Expiration of every Sixty Days, as long as you may Want the Money, or until you find it Convenient to pay off the Debt.[3]
Washington’s reply was a cordial thank you and that he would consider the offer if the need arose. At the same time that he was communicating with William Herbert, he was finalizing plans to break ground on two adjoining townhomes that were built in the new federal district aka Washington D.C. In preparing to build his townhomes, Washington discussed the project with D.C. Commissioners including William Thornton, who was also serving as Architect of the Capitol. Thornton recommended a builder named George Blagden.
The request for proposal (RFP) process was straightforward. In fact, Washington appears to have selected Blagden based on Thornton's suggestion. As a result, on October 18, 1798, Blagden quoted Washington a price of $11,000 to build two adjoining three-story townhomes on Capitol Hill.[4] Also included in the contract was a guarantee of $150 to make the "Frontispiece of the front Doors... Stone instead of Wood." There was also an extra $100 for a wine cellar.[5] With the assurance of cash from the Bank of Alexandria along with the anticipation of cash from land sales, Washington agreed to Blagden's price. While Blagden was contracted for the job, Washington still communicated and made payments through Thornton.
William Thornton was the first Architect of the Capitol because he had not only a brilliant eye for architectural style but also he had submitted Capitol design plans which were approved by Washington's administration. However, in the case of the two townhouses, Washington did not take Thornton's architectural recommendations. Instead, Washington had a very specific design from a Philadelphia house on his mind as well as features from the Mansion House at Mount Vernon. In fact, he had an exchange with Thornton about a pediment and two dormers, which Washington wanted because they looked similar to what he had on the Mount Vernon Mansion House. However, Thornton was unenthusiastic about the addition of the pediment and wrote, “The Pediment may with propriety be introduced but I have some doubts with respect to its adding any beauty.”[6]
Nevertheless, the back and forth over design was brief and inconsequential. Washington had made up his mind. So, the construction began shortly after the negotiated price with Blagden, and the work moved at a quick pace. As it did, Blagden sent calls for money (aka invoices) to Washington at regular intervals. Washington made a $500 payment from the Bank of Columbia on October 28, 1798.[7] This was followed by a $500 payment from the Bank of Alexandria on December 20, 1798.[8]
Washington Uses a Bank of Alexandria Loan
By the summer of 1799, construction on the two townhouses proceeded faster than Washington had expected. Moreover, the quick pace was out of synch with when Washington anticipated receiving cash from his land sales. As a result, in a letter dated June 16, 1799, Washington admitted to Thornton that “Mr Blagdens last call for $1000 is, I must acknowledge, sooner than I had contemplated.”[9]
What was the solution to this problem? Where would he get the funds to pay Blagden? Washington still had written assurance from William Herbert's letter on October 5, 1798 that the Bank of Alexandria could help him. Thus, he concluded his letter to Thornton by saying, “I will make arrangements with the Bank of Alexandria.”[10]
Washington sent William Herbert a letter on June 25, 1799, in which he requested the 60-day discount note. He offered an explanation in that he had hoped to have a windfall of nearly $15,000 from the sale of land. However, the cash did not come in as expected and Washington had only received $1,700 from the sale. In Washington’s letter to Herbert, he told the Bank president that he would need to come up with $1,500 by the first of July.[11] As promised, Herbert was able to secure a loan for His Excellency.
After receiving the discount note from the Bank, Washington sent a letter dated July 2, 1799 to William Thornton in which he enclosed a Bank of Alexandria check to George Blagden.[12] This was the first time that Washington used money from a discount note to make a house payment. The note was good for 60 days with the possibility of renewal. At the end of 60 days, Washington tried to renew the note. In fact, he did so despite having the necessary cash to pay it back. He wanted to keep a cash cushion in his account. Therefore, he concluded it was practical to keep the loan outstanding. Washington wrote to Herbert the following:
Although I have more than a sufficient deposit in the Bank of Alexandria to take up my note; yet, as I know also that there will be calls upon me that may not be conveniently answered without that aid.[13]
Thus, we see that Washington was worried that quick progress on his townhomes meant that he should keep additional cash in reserve to be able to pay Blagden.
However, there was a slight miscommunication between him and Herbert. Herbert appears to have thought that Washington was planning to pay off the note at the end of 60 days, which would have been the end of August 1799. When that did not happen, the solution was to simply issue a new note of payment with the terms of 60 days. Washington confessed that in the “business of borrowing… I am quite novice.”[14] Nevertheless, the confusion was clarified, and the new loan was extended from September through October.
During the fall of 1799, one of the next phases of work on Washington’s townhomes was painting. Like his vision for the pediment, Washington had a specific plan for the exterior and stipulated that it be “painted and sanded.” He explained to William Thornton that the sanding had two purposes which were “durability and representation of Stone.” This was the same method as the “rusticated” process that had been used on the Mansion House at Mount Vernon. Washington described the operation as sand being thrown “upon a coat of thick paint.” The result was a grainy, stone-like appearance.[15]
During the time that the painting was taking place, Washington wrote one of his last letters to Herbert. In the letter dated October 21, 1799, Washington anticipated the expiration of the 60-day bank note that had been re-issued on September 1. Washington wished to renew the note again and believed that “measures for accomplishing it may be taken in time.” The note must have been renewed. But Washington did not live to see the term expire 60 days later. If the note was renewed on November 1, 1799, then Washington died within 60 days on December 14, 1799.[16]
A Speculative Real Estate Deal that Never Paid Off
George Washington’s plan for his townhouses was to sell them. The property in the new capital city was a speculative real estate investment. He had rented other properties to include his townhouse in Alexandria on Cameron Street. He had also been planning to rent another property in Alexandria on the corner of Pitt and Prince Street. With his Alexandria properties, he knew friends in the city who could help him find reliable tenants. With the D.C. property, he needed to find a buyer. Thus, Washington sent a letter to William Thornton dated October 6, 1799, in which he talked about his plans for the townhouses and asked Thornton if he knew potential buyers. Washington wrote the following:
As soon after this work is accomplished as I can make it convenient, I will visit the City, & take a view of my Buildings. To part with which, if it could be done on terms any ways advantageous, would comport better with my finances, than to retain them for the purpose of Renting. If, therefore, you should hear of any person, or persons, disposed to buy, and who are able & willing to advance part of the purchase money, and the residue on reasonable credit, I pray you to mention mine.[17]
One month after asking Thornton about potential buyers, Washington visited his townhouses. In a diary entry from November 9, 1799, Washington wrote, “Viewed my building in the Fedl. City.”[18] The work was nearly completed, and it had been only one year since finalizing the contract with George Blagden.
The Final Check
On November 26, 1799, Washington sent one of his last letters to Thornton which included a check to George Blagden. The check was from the Bank of Alexandria. The total amount was $906.57.[19] Washington also wrote a check from the Bank of Columbia for $93.47 to bring the total payment to $1,000. Each payment of $1,000 in 1799 is equivalent to about $25,000 in 2024. The November 26, 1799, check appears to be the last payment that Washington made. The check was signed only two and a half weeks before Washington’s death on December 14, 1799.
After Washington’s death, the responsibility for managing the completion and sale of his townhouses fell to the executors of his estate. The townhouses were completed in 1800. In George Washington’s will that included the Schedule of Property, he stipulated a sale of his properties in Washington D.C. Washington wanted to sell the townhouses for $15,000 including the lot upon which they were built.[20] In today’s dollars, that is about $380,000. He agreed to pay $11,250 for the townhouses and bought the land for $963. Those prices combined would be worth $305,000 today. Thus, Washington was hoping to net a roughly $75,000 profit from the sale of his townhomes. If that had happened, then it would have been a 25% return on his investment.
However, it was not meant to be. In 1802, Washington’s estate executors rented the property to Secretary of War, General Henry Dearborn for $450 (~$13,135.00 in 2024). During the War of 1812, British troops sacked the city of Washington D.C. and burned the White House and the Capitol in 1814. Unfortunately, Washington’s house was so close to the Capitol that it was also “consumed by fire.”[21]
The remains of the property sold in 1817 for $1,446, which was far below the price that Washington had hoped for in 1799. According to Mount Vernon, “The federal government finally ordered the building razed in the early 20th century.” A memorial plaque is the only remnant testifying to the existence of Washington’s D.C. townhouses.[22]
Conclusion
While George Washington’s D.C. townhouses no longer exist, the construction of them reveals a lot about the latter part of George Washington’s life. Additionally, Washington’s relationship with the Bank of Alexandria provides excellent insight into both his finances and the history of early American banking.
During his presidency, Washington’s Treasury Secretary, Alexander Hamilton, created a financial system that became the bedrock of American capital markets. While Hamilton was the mastermind behind the details of the system, it could not have been implemented without George Washington’s approval. As we have seen, Washington benefited from the new banking system as a customer and shareholder in the Bank of Alexandria. While the Bank of Alexandria did go out of business in 1834, other banks filled its place. Modern day banking customers still engage in the same activity with the same financial goals as America’s first president.
Works Cited
[2] “From George Washington to William Herbert, 4 October 1798,” Founders Online, National Archives, https://founders.archives.gov/documents/Washington/06-03-02-0042.
[3] “To George Washington from William Herbert, 5 October 1798,” Founders Online, National Archives, https://founders.archives.gov/documents/Washington/06-03-02-0044.
[4] “To George Washington from George Blagdin, 18 October 1798,” Founders Online, National Archives, https://founders.archives.gov/documents/Washington/06-03-02-0071.
[5] “From George Washington to the District of Columbia Commissioners, 27 October 1798,” Founders Online, National Archives, https://founders.archives.gov/documents/Washington/06-03-02-0106.
[7] “From George Washington to William Thornton, 28 October 1798,” Founders Online, National Archives, https://founders.archives.gov/documents/Washington/06-03-02-0108.
[8] “From George Washington to William Thornton, 20 December 1798,” Founders Online, National Archives, https://founders.archives.gov/documents/Washington/06-03-02-0187.
[9] “From George Washington to William Thornton, 16 June 1799,” Founders Online, National Archives, https://founders.archives.gov/documents/Washington/06-04-02-0096.
[10] Ibid.
[11] “From George Washington to William Herbert, 25 June 1799,” Founders Online, National Archives, https://founders.archives.gov/documents/Washington/06-04-02-0117.
[12] “From George Washington to William Thornton, 2 July 1799,” Founders Online, National Archives, https://founders.archives.gov/documents/Washington/06-04-02-0137.
[13] “From George Washington to William Herbert, 30 August 1799,” Founders Online, National Archives, https://founders.archives.gov/documents/Washington/06-04-02-0226.
[14] “From George Washington to William Herbert, 1 September 1799,” Founders Online, National Archives, https://founders.archives.gov/documents/Washington/06-04-02-0233.
[15] “From George Washington to William Thornton, 1 October 1799,” Founders Online, National Archives, https://founders.archives.gov/documents/Washington/06-04-02-0282.
[16] “From George Washington to William Herbert, 21 October 1799,” Founders Online, National Archives, https://founders.archives.gov/documents/Washington/06-04-02-0309.
[17] “From George Washington to William Thornton, 6 October 1799,” Founders Online, National Archives, https://founders.archives.gov/documents/Washington/06-04-02-0288.
[18] “[Diary entry: 9 November 1799],” Founders Online, National Archives, https://founders.archives.gov/documents/Washington/01-06-02-0008-0011-0009.
[19] “From George Washington to William Thornton, 26 November 1799,” Founders Online, National Archives, https://founders.archives.gov/documents/Washington/06-04-02-0368.
[20] “Enclosure: Schedule of Property, 9 July 1799,” Founders Online, National Archives, https://founders.archives.gov/documents/Washington/06-04-02-0404-0002.
[22] Ibid.