Ohio History Journal

HARRY N. SCHEIBER

 

Alfred Kelley and the Ohio

Business Elite, 1822-1859

 

 

In a rare moment of freedom from the pressures of his work as an

Ohio canal commissioner and legislator, Alfred Kelley wrote to his wife

in Cleveland, from his rooms at Columbus in January 1825: "I think it

is not altogether vanity which induces me to say that my services and

advice have been important in settling the plan of operations and the

details of the canal system which have produced so great unanimity in

the Legislature on the Canal bill & revenue bill."¹ Here was an under-

statement of the first order: for as his wife well knew, those "services"

had consisted of three years of unremitting labor as one of the two act-

ing commissioners responsible for directing the surveys for the first

Ohio state canals-long months in the field, traversing forests and

swamps, suffering from fever and exhaustion, dealing endlessly with

local politicians, conducting a shrewd campaign of publicity for the

project, and preparing a detailed plan for presentation to the legislature.

Finally, in January 1825 had come the culmination of these three years'

work. Alfred Kelley, Micajah T. Williams (the other acting commis-

sioner), and their five colleagues on the first Ohio Canal Commission

had at last obtained legislative approval of the projects whose construc-

tion would open the canal era in the West.

For all this, Alfred Kelley had received a three-dollar-per-day salary

and reimbursement for expenses. There was the respect of his con-

temporaries, which would shortly win him an assignment to share with

Williams the direction of actual construction in ensuing years. But there

was also a more personal satisfaction, revealed in this same 1825 letter

 

 

 

 

Harry N. Scheiber is Professor of History at the University of California, San Diego.

This article is a revision of a lecture delivered last year at the Western Reserve Historical

Society, for the WRHS and the Ohio Canal Sesquicentennial Commission, to com-

memorate the 150th anniversary of the opening of the Ohio Canal's first segment of

line from Cleveland to Akron in July 1827.

 

1. Alfred Kelley to his wife, January 21, 1825, The Papers of Alfred Kelley, Ohio

Historical Society (hereafter cited as Kelley Papers).

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366                                                 OHIO HISTORY

 

to his wife: "I hope, my dear wife, that we shall both live to take many a

pleasant ride in the packet boats on the Canals in Ohio-and would it

not pay you for many a solitary night to take a trip from Lake Erie to the

Ohio River on a canal which your husband had a large share in

making?"²

By the time he wrote these lines, Alfred Kelley had already won his

reputation as a masterful promoter of internal improvements, brilliantly

emulating in Ohio the role that DeWitt Clinton had played in New York.

In the years that followed, he would go beyond Clinton, however, by

mastering as well the challenge of canal construction in the field. And

once his initial work on the first Ohio canal project was done in 1833,

Kelley would pursue a much-celebrated career in state politics, banking,

public finance, and railroad development. No one in his day was more

intimately involved than Kelley in the interrelated processes that

transformed both Ohio's state government and the private business sec-

tor in the West.

Although he was a singular individual, Kelley was also representative

of a more general tendency in the society of his day. In contrast to the

strictly local orientation of the antebellum merchant-capitalists, his

perspective was that of an entrepreneur and public servant who had a

keen sense of the prospects and opportunities in the western regional

economy as a whole.³ What distinguished Alfred Kelley and a few co-

horts was a distinctive vision that transcended local concerns and em-

braced a view of statewide and regional possibilities, both in their

personal business ventures and in their public activities. Further dis-

tinguishing such men as Kelley was a willingness to devote their

energies to public institutions, both voluntary and governmental-and

especially to state government, the strength of which they correctly

understood to be of crucial importance to economic development in

that era. The men in this group did not fail to seize the main chance for

themselves; but they also devoted their efforts to seizing opportunities

for the community by mobilizing its government. And they backed their

commitment to active government by giving their time and energies to

public service. In so doing, they gained intimate knowledge of the re-

sources and geography of their state. Moreover, they exploited the

opportunities in state service to form contacts with highly placed politi-

cal leaders, commercial figures, and leading financiers in other areas of

 

 

 

2. Ibid.

3. See Richard C. Wade, The Urban Frontier: The Rise of Western Cities (Cambridge,

1959), on the merchant-capitalists of the early West; also, Harry Stevens, "Bank Enter-

prisers in a Western Town, 1815-1822," Business History Review, XXIX (1955).

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Alfred Kelley                                                         367

 

their own state and region, as well as in the East-contacts that they nur-

tured for their state's benefit and, not infrequently, for their own.⁴

The leading Ohio figures whose careers were of this type included

Thomas Worthington of Chillicothe; Governor Ethan Allen Brown,

chief promoter of the canal idea in Ohio between 1818 and 1822; and

Micajah T. Williams of Cincinnati, who with Kelley was principally

responsible for overseeing construction of the first Ohio canal and who

later became president of the Ohio Life Insurance & Trust Company,

the state's largest banking firm. Also prominent in this group were land

speculators, bankers and politicians like Ebenezer Buckingham of

Zanesville, General Simon Perkins of Warren and the Western Reserve,

Leonard Case of Cleveland, John H. James of Urbana, Leicester King

of Warren, and Elisha Whittlesey of Cleveland, best remembered for a

fascinating political career but also a major figure of his day in banking,

land speculation, and town promotion.⁵ This listing is illustrative, of

course, and not comprehensive; and it grew larger over time, as the

state economy and population expanded.

Sometimes arrayed prominently against one another on major public

issues, especially during the Jacksonian period of intense debate on key

economic issues and in the antislavery fight, these men were still in a

real sense a cohesive elite group, with many overlapping or interlocking

business interests. They were the leaders who understood possibilities

that transcended localistic interests, and they led Ohio from the era of

early western merchant-capitalism    into a new   phase of development

which, in a startlingly brief period of time, brought the Transportation

Revolution to the West, urbanized Ohio society, and gave the state a

leading role by the 1850s in the nation's industrialization and agri-

cultural development.

It is in this context that Alfred Kelley must be understood and ap-

praised. From this vantage point, his career can suggest some important

 

 

 

4. Harry N. Scheiber, "Entrepreneurship and Western Development: The Case of

Micajah T. Williams," Business History Review, XXXVII (1963). Highly suggestive in

this regard is a study of Canadian entrepreneurship in the canal era: Hugh G. J. Aitken,

The Welland Canal Company (Cambridge, 1954).

5. An invaluable series of brief biographical studies of prominent early-nineteenth-

century Ohio business and political figures is in Museum Echoes, XXXIII (1960), in-

cluding the study of Walter Marvin, "Alfred Kelley," Ibid., 11-14. See also Harry Stevens,

The Early Jacksonian Party in Ohio (Durham, 1953); William T. Utter, The Frontier

State, 1803-1825 (Columbus, 1943); and Francis P. Weisenburger, The Passing of the

Frontier, 1825-1850 (Columbus, 1944). A work offering valuable insight is Harold E.

Davis, "Social and Economic Basis of the Whig Party in Ohio, 1828-1840" (Ph.D. dis-

sertation, Western Reserve University, 1933), some main themes of which are presented

in Davis, "The Economic Basis of Ohio Politics, 1820-40," Ohio Archeological and

Historical Quarterly, XLVII (October, 1938).

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368                                                        OHIO HISTORY

 

dimensions of the palpable human element in the process of economic

and social change in his time. Kelley was a New Englander to the core,

an embodiment of the work ethic, reputed for his stern and aloof man-

ner. Born in Connecticut in 1789, he moved with his family to New York

state when he was ten and then made his own way to a new life in the

tiny Lake Shore town of Cleveland at the age of twenty-one. A suc-

cessful law practice, service as prosecuting attorney of Cuyahoga

County, and election as the youngest member of the state house of

representatives had given Kelley considerable public prominence even

before he first embarked on the canal project in 1822.6

Kelley was one of the political leaders who responded with enthu-

siasm when in 1818 Ethan Allen Brown took the leadership in Ohio to

argue for the idea of a great Lake Erie-Ohio River canal project. Al-

though Brown was inspired by New York state's bold approval of the

Erie Canal, Ohio was then still a young and relatively poor state with

public revenues and a tax base only a fraction of the Empire State's.

The panic of 1819 and protracted hard times soon discouraged even

the most ardent canal advocates. Failing to obtain a land grant or other

aid from Congress, Brown admitted in 1820 that with "the aspect of

affairs among us rather gloomy, from the depression of our agriculture,

we are compelled to view the accomplishment, and even the commence-

ment of the Ohio Canal, as more remote than our more sanguine wishes

had once imagined it to be. ..."7 Still, Brown, Kelley and other sup-

porters did not lose hope entirely. They kept in close touch with Gov-

ernor Clinton and other leaders of the canal enterprise in New York and

disseminated in Ohio optimistic reports of progress in the financing and

construction of the Erie Canal line. They worked assiduously to forge a

coalition of interests sufficient to overcome local jealousies-suspicion of

the general idea for an Ohio Canal because it did not assure any com-

munity of a place on the route-so that when the time was ripe, political

support could be mustered for the legislature to act.⁸

 

6. Marvin, "Alfred Kelley," 11-12; J. L. Bates, Alfred Kelley (Columbus, 1888); A. L.

Cummings, The Alfred Kelley House (Columbus, 1953); J. H. Kennedy, "Alfred Kelley,"

The Magazine of Western History, III, (1885-1886), 550-57. Steven Kurdziel has traced

Kelley's early land purchases at Cleveland and determined that on June 12, 1814, he ob-

tained sixty acres of land at the Cuyahoga River bend, near the mouth of the river at

Cleveland and known as The Flats; this later became the location of the Ohio Canal

terminus. Cf. Kurdziel, "How Alfred Kelley Built the Canal," The Cleveland Press,

June 16, 1977, sec. H, 8. In late 1825, Kelley deeded about one third of his Flats land to

the state, as a donation in aid of the canal project; that his remaining lands appreciated

greatly in value goes without saying.

7. Brown to Charles Haines, September 20, 1820, The Papers of Ethan Allen Brown,

Ohio Historical Society (hereafter cited as Brown Papers).

8. Harry N. Scheiber, Ohio Canal Era: A Case Study of Government and the

Economy, 1820-1861 (Athens, OH, 1969), 14-19.

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Alfred Kelley                                                    369

 

That time came in the winter of 1821-1822. Offering at least the hope

of something to nearly everyone, canal advocates called for appointment

of a commission that would investigate the engineering feasibility of

five alternate routes, each of which would serve at least one of the

state's more populous and politically powerful districts.⁹ The proposal

took specific form in an assembly committee report written by

Micajah T. Williams. Declaring that an Ohio canal would diffuse

"wealth, activity, and vigor" throughout the Ohio economy, the

Williams Report argued in favor of a state-financed, state-controlled

enterprise. Even if public resources were not ultimately committed to

the project, at least scientific surveys would inform the public of

realistic possibilities and specific obstacles.10

The measure was finally adopted in February 1822, and seven com-

missioners were appointed. The legislature heeded localistic concerns

and regional rivalries, naming one prominent politician-businessman

from each of the most populous districts of the state. This wide geo-

graphic representation proved essential, as Alfred Kelley wrote, "to

effect the object and get the bill through."¹¹ Hence, only a few days

after the bill had passed, the group that became the planners of the first

Ohio canals went to work. Its members were Ethan Allen Brown, just

elected to the U.S. Senate; Jeremiah Morrow, farmer and politician of

Warren County; Thomas Worthington of Chillicothe; Ebenezer Buck-

ingham of Zanesville; Benjamin Tappan of Steubenville, a lawyer and

former judge; Isaac Minor of Madison County, a champion of internal

improvements during his service in Congress; and, representing the

Lake Shore region of the state, Alfred Kelley. Micajah Williams joined

the Commission the next year.

From the start, Kelley played a key role in the delicate political

proselytizing and coalition-building that were no less essential than

the engineering surveys to the commission's ultimate success. During

the next three years Kelley served with Williams as acting commis-

sioner, responsible for the surveys conducted in the northern, eastern,

and central portions of the state.¹²

Several features of Kelley's work during the period of surveys, 1822-

1825, are of special importance to identifying his "style" and peculiar

contributions. In the first place, Kelley seems to have been equally

gifted in both conceiving the large design and understanding the neces-

 

 

9. Ibid., 17.

10. Report of the Committee on Canals (Columbus, 1822).

11. Kelley to Brown, February 3, 1822, Brown Papers.

12. A detailed account of the surveys is in Harry N. Scheiber, "The Ohio Canal

Movement, 1820-1825," Ohio Historical Quarterly, XLIX (July, 1960), 231-56.

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370                                                        OHIO HISTORY

 

sity for perfection and mastery of detail. Doubtless he learned much

from working closely with experienced senior engineers borrowed from

the Erie Canal staff to conduct some of the critical running of levels and

gauging of water supplies in Ohio. But he also went to New York, to

see for himself the technology being employed there.¹³ Moreover, the

knowledge gained in New York, and also what he learned at the side

of the senior New York engineer James Geddes during the 1822 sur-

veys, proved essential to Kelley when he later was left to do some of the

most difficult (and politically sensitive) surveying of alternative lines

with a small crew of assistants.¹⁴ Meanwhile, Kelley handled such de-

tails as ordering instruments from the East, maintaining correspondence

on the question of available engineering personnel, and obtaining from

the legislature a $1400 appropriation for the State Library to obtain

"some useful books on canaling."¹⁵ Few matters seem to have escaped

his notice.

A second important feature of Kelley's work during 1822-1825 was

the breadth of perspective, the comprehensiveness, with which he

viewed the transportation problems facing the state. Thus he conducted

an impressive investigation of a proposed canal at the Falls of the Ohio

in 1824 and so played a key role in forwarding the project that became the

Louisville & Portland Canal.¹⁶ This scheme was of the highest impor-

tance to Cincinnati merchants and political leaders, and Kelley's report

on the Falls Canal probably helped to generate support in Cincinnati for

the Ohio Canal proposal as well. His 1824 report on the Falls project

also expressed Kelley's faith that "every saving in the expense of trans-

porting the surplus produce of a country to market . . . will be so much

added to the wealth of that country"-a view of the necessity for public

investment that was at the core of arguments for canal promotion.¹⁷ Al-

though Kelley had also become involved at this time in pressing for

 

 

13. Williams to Brown, February 3, 1823, Brown Papers; Williams to Benjamin

Tappan, February 22, 1823, The Papers of Benjamin Tappan, Ohio Historical Society.

14. In mid-1823, for example, the controversial surveying of the Sandusky district

and the proposed route to the south was conducted by the acting commissioners without

a chief engineer. Williams to Brown, August 2, 1823, Brown Papers.

15. Kelley to Brown, February 26, 1824, Kelley Papers; also, Kelley to Worthington,

May 20, 1823, The Papers of Thomas Worthington, Ohio Historical Society; Williams

to Kelley, June 11, 1824, The Papers of the Canal Commission, Ohio Historical Society

(hereafter cited as Canal Commission Papers).

16. See Paul Fatout, "Canal Agitation at Ohio Falls," Indiana Magazine of History,

LVII (1961), 279-310.

17. Kelley quoted in Liberty Hall (Cincinnati), February 3, 1824 (printing his report).

Following completion of his survey of the Falls of the Ohio, with New York engineer

David Bates, Kelley lobbied in the Kentucky legislature at Frankfort to promote a bill

to appropriate funds for the project as a joint undertaking with Ohio and Indiana. Ben

Piatt to Brown, February 26, 1824, Brown Papers.

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Alfred Kelley                                                      371

federal expenditures for improvement of Lake Erie harbor facilities, he maintained his faith in the capacity of the state governments for effec- tive independent action. As he wrote to Senator Brown in February 1824:     You have probably seen the report on the Falls of the Ohio. I have become . . .a perfect convert to the doctrine of its practicability & pecuniary profit & a warm advocate for the States [Ohio and Kentucky] undertaking the work.

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372                                                     OHIO HISTORY

 

You have the subject of internal improvements before Congress as I see.18

This is as it should be. But it ought not to lull us to sleep. There is enough

for the States to do which will not fall particularly within the province of the

General Government.19

It would be mistaken, however, to interpret Kelley's faith in the active

state and his support for expanded commitments as an undiscriminating

enthusiasm for all public works. On the contrary, he was thoroughly

committed to a philosophy of systematic state investment in carefully

planned priorities. He demanded close analysis of costs and projected

benefits, and in his own reports of surveys he provided careful esti-

mates. Although mindful of the need for equity in providing public

improvements that would serve large numbers and many regions of his

state, and not just a favored few, still Kelley believed in extending pub-

lic commitments only after the public works most likely to be produc-

tive of revenues and benefits had been constructed first. Kelley's

philosophy was one of considered planning.

The Canal Commission approached its task during 1822-1825 with

this perspective, tempered by the vital political consideration that no

program of canal construction could win legislative support without

Cincinnati interests behind it. Critics of Kelley and his colleagues,

mainly spokesmen for localities that were to be bypassed by the canals,

charged that political considerations and not systematic planning

actually dictated the choice of routes. The Commissioners recom-

mended the Cleveland-Licking Summit-Scioto Valley route of the Ohio

Canal, and they recommended the simultaneous construction of the

Miami Canal from Cincinnati to Dayton. Thus in December 1824 a Nor-

walk man charged Kelley directly with sacrificing the north-central

region's interest to Cleveland's: "My private opinion . . . is that you

are as honest as other people but I really think . . . local interest un-

questionably has some influence upon you . . . We understand that

the commissioners are determined to report in favor of the Cuyahoga

route and this we attribute to you altogether & we do therefore most

cordially hate you. .. ."²⁰ Later, the Sandusky Clarion condemned the

choice of the Ohio Canal route as one that was "located nearly parallel

with . . . the Ohio River," designed by Kelley to assure that Cleve-

land would be the northern terminus. The Clarion denounced the com-

 

18. Congress at that time was considering proposals for land grants in aid of transpor-

tation in western states and also what became the 1824 Survey Act, authorizing the Army

Engineers to conduct surveys of projects of national importance.

19. Kelley to Brown, February 23, 1824, Brown Papers. On the Cleveland harbor im-

provement proposal, see Kenneth F. Davison, "Forgotten Ohioan: Elisha Whittlesey"

(Ph.D. dissertation, Western Reserve University, 1953).

20. James Williams to Kelley, December 27, 1824, Canal Commission Papers.

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Alfred Kelley                                                     373

 

missioners as a "band of speculators, intent upon aggrandizing them-

selves at the expense of the public." That Kelley and other officials had

used their knowledge of the proposed canal routes to enrich themselves

in land speculation would be a charge heard repeatedly in later years.²¹

Despite these accusations, the archives of the Canal Commission

and Kelley's private correspondence contain no suggestion of impro-

priety. Although Kelley and other commissioners initially hoped to

locate a canal line from Cincinnati to a Lake Erie terminus in the north-

eastern part of the state,²² he gave considerable effort in 1822 to surveys

designed to locate a route between Sandusky and the Scioto Valley.

Kelley admitted privately to Brown: "I much fear the difficulties which pre-

sent themselves to the construction of a canal over the Sandusky &

Scioto summit . . . will prevent a combination of interest sufficient to

make one on any route."²³ Moreover, in 1824, as the commission's work

came close to a conclusion, Kelley approved still another survey of the

Sandusky-Scioto route by an experienced New York engineer.²⁴ Unless

one is willing to assume that Kelley somehow persuaded both the chief

engineer and his fellow commissioners to find that route insufficiently

supplied with water (as they did, in rejecting that alternative), the

charges made so often against Kelley by his enemies in Sandusky and

north-central Ohio must be rejected as unfounded.

The Ohio legislature's adoption of the commission's plan for the

Cleveland-Portsmouth Ohio Canal route, as well as for the Miami Canal

project, opened a new phase in Alfred Kelley's career. With Williams,

Kelley served for the next eight years as one of the two acting commis-

sioners in charge of the actual construction of these first state canals.

The bill that authorized these works did not actually designate Cleve-

land as the northern terminus; and on this subject, the archives do sug-

gest some evidence of dissembling on the part of the commission. For in

the first few weeks of the newly reconstituted commission's life, Kelley

successfully solicited donations of land to the state from the private

owners on alternative routes in the Cuyahoga and Black river valleys,

on the northernmost segment of the Ohio Canal. Benjamin Tappan, one

of the commissioners, wrote to Kelley in February 1825: "I think that

as soon as you have got the people of Cleveland & the Cuyahoga valley

 

 

21. Clarion, January 22, April 30, 1825. That Kelley did benefit from the Cleveland

canal location is indisputable. See footnote 6.

22. Kelley to Brown, May 31, 1822, Brown Papers.

23. Kelley to Brown, August 13, 1822, Ibid.

24. [Kelley] to James Geddes, June 30, 1824, Canal Commission Papers. Micajah

Williams, the other acting commissioner, concurred in Kelley's and the chief engineer's

later, final finding that the Scioto-Sandusky line was impracticable. Williams to Brown,

January 24, 1824, Brown Papers.

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374                                                  OHIO HISTORY

 

to give all they will give, that the line of canal from the Portage summit

to Cleveland should be determined on, that the work may be com-

menced on that part early as possible this season."²⁵ The commission

did in fact obtain a considerable number of donations; and in May the

Cleveland-Cuyahoga route was formally selected by the board.²⁶

All responsibilities except for bond issues (handled by a separate

board) were in the hands of the Canal Commission, but the commis-

sioners devolved their powers to a remarkable degree upon Alfred

Kelley and Micajah Williams.²⁷ In their capacity as acting commis-

sioners, the two men had charge of locating the lines, adopting speci-

fications, awarding contracts to the scores of private entrepreneurs

(both professional contractors and local people) who conducted the

actual construction, and supervising the engineers and surveyors who

comprised the state officialdom under the Canal Commission. In addi-

tion, the acting commissioners had to perform the delicate task of

negotiating for purchase of land and supplies needed for the right-of-

way and for construction.

Williams and Kelley had successfully brought the first canals nearly

to completion by 1833. Their record was free of any proven corruption,

or, indeed, even serious charges of malfeasance of any sort-a remark-

able fact, given the complexity and extent of the project. The commis-

sioners had to surmount recurrent labor shortages, the failure of con-

tractors who abandoned their contracts and, perhaps most difficult of all,

constant pressure on the commission to press work forward on every

segment of the lines simultaneously in order to quiet local jealousies. In

addition to the technical skill they demonstrated in engineering mat-

ters, the acting commissioners insured their success by firm adherence

to a program of systematic priorities in building the works by stages.

This strategy led to early completion of the Akron-Cleveland portion

of the Ohio Canal in July 1827. And this initial success-this demon-

stration of the project's feasibility and the commission's competence-

unquestionably attracted the attention of eastern investors, thus assur-

ing the successful sale of Ohio state bonds sufficient to finance

completion of the works.²⁸

Of less immediate, but nevertheless great significance, was the crea-

tion by the acting commissioners of an effective state bureaucracy. In

the early nineteenth century, American state governments had only a

handful of administrative officials; but with inauguration of the first

 

 

 

25. Tappan to Kelley, February 7, 1824, Canal Commission Papers.

26. Columbus Gazette, May 12, 1825.

27. Scheiber, Ohio Canal Era, chapter 3, passim.

28. Ibid., 48-54.

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Alfred Kelley                                                            375

 

canal enterprises they began a process of administrative development

that involved the growth of bureaucratic organization and the employ-

ment of technical personnel in significant numbers. In the history of

Ohio's state government, this path was blazed by Kelley and Williams.²⁹

Invariably following their recommendations, the commission mapped

the bureaucratic organization and specified the delegation of powers.

Novelty and necessity made innovators of the acting commissioners: as

they faced each organizational and technical problem, the solutions for-

mulated became part of the fund of collective experience. Kelley's

style was one of constant and detailed personal involvement, whether it

was seeking out sources of lime for lock construction, identifying poten-

tial millsites on the line, dealing with individual contractors' complaints,

mediating differences of opinion among the engineers, or oversight and

checking of each job, he tended to do it himself.³⁰

The junior engineers and surveyors did not always appreciate the

close, often heavy-handed supervision they received on the northern

Ohio Canal line. For example, one dissident young engineer was dis-

appointed in 1829 when his colleagues, working under Kelley's direc-

tion, failed to take "energetic and decisive measures" in seeking

redress from the canal board for what he, at least, regarded as griev-

ances stemming from Kelley's style of management. Such tensions

were undoubtedly not much helped by the failure of the commision to

raise salaries for the staff engineers; the board ruled that not only was

their pay already adequate, but also that they had, as one reported,

"acquired our experience at the expense of the state" so that "the state

had a claim   upon our services."³¹ Still, while such resentments occa-

sionally surfaced, it is clear from the commission's correspondence that

 

 

 

29. Idem., "Entrepreneurship and Western Development," 345ff.

30. Kelley's mastery of details and his extraordinary personal involvement in all

aspects of the work are evident in his business and personal correspondence throughout

this period (especially in the Canal Commission Papers, and his correspondence with

Ethan Allen Brown, Brown Papers). There was no exaggeration in his claim, for exam-

ple, made in reply to charges in 1826 that he had interfered with the political campaign

of that year and "turned over" votes: "The fact is, I have been out of the District, attend-

ing to my official duties, much the greater part of the time since the candidates for

congress were announced; part of which time I have been confined by sickness, and the

remainder of it, extremely pressed with business." (Cleveland Herald, October 6, 1826.)

His devotion to the project was legendary. Thus a politician urging him to be a candidate

for the Senate that winter pleaded: ".... don't let that second wife of yours (the Canal)

answer the question for you!" (R. Harper to Kelley, December 11, 1826, Canal Commis-

sion Papers.) On several occasions, Kelley was separated from his family for three months

or more at a time. (Kelley to his wife, December 28, 1828, Kelley Papers.)

31. Francis Cleveland to R. Howe, September 18, 1828, manuscript in possession of

Mrs. Clayton Stanford; also, Cleveland to Howe, September 18, 1828, Ibid. The author

is grateful to Mrs. Stanford for permitting him to use these materials.

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376                                                      OHIO HISTORY

 

Kelley's junior colleagues fully recognized his thorough dedication to

the project and his technical competence. He was not a man, however,

who allowed any wish for his colleagues' affection to stand in the way of

what he believed was necessary for the success of the canal project.

Williams-more sensitive than Kelley to the need for developing a

bureaucracy capable of carrying the work-finally urged him to stay

away from the lines occasionally. "You have superintending engineers

on the line," he wrote, "who are mostly of your own selection. ... To

these it is proper to commit its charge. . . . The state will soon be

under the necessity of confiding the entire charge and responsibility of

the two canals to these very men."³² This appeal, significantly enough,

was timed to coincide with adoption by the board of a highly detailed

order setting down rules for the superintending engineers on the lines,

issued on January 30, 1832.³³

In what became a losing fight, Kelley and Williams attempted to

professionalize the canal service. In effect, they hoped to remove the

strong political element in the Canal Commission's structure-an

element expressed in the informal system of geographic representation.

Thus, in their 1832 report, issued as the first canals were being com-

pleted, they explicitly recommended to the legislature that the canal

commission should be abolished and replaced by a new board of three

full-time, well-paid professional engineers.³⁴ But their recommendation

went unheeded. Both political partisanship and the principal of geo-

graphic representation continued to prevail in the appointment of com-

missioners, then and later.³⁵

Interestingly, Williams and Kelley were following divergent political

paths during the period of canal construction. Williams was an early

and ardent champion of Andrew Jackson, while Kelley was allied with

Clay and eventually with the organized Whig opposition. Yet there was

no trace of partisanship in the decisions of either man on canal

matters.³⁶

One of the leading characteristics of Jacksonian-Democratic style

and preferences, however, one that drew Kelley into the Whig party in

the ensuing years, was already evident in the early Jackson period: the

 

 

32. Williams to Kelley, February 19, 1832, Canal Commission Papers.

33. Canal Commission Minutes (manuscripts), Ohio Department of Public Works,

Archival Records, Vol. I, 139-40.

34. Scheiber, Ohio Canal Era, 164-65.

35. Ibid., 165ff.

36. See Kelley to Williams, September 27, 1832, The Papers of Micajah T. Williams,

Ohio Historical Society (hereafter cited as Williams Papers). On Williams' role in the

early Ohio Democracy, see Stevens, Early Jackson Party; Kelley's role in the Whig leader-

ship is a prominent theme in Weisenburger, Passing of the Frontier.

• 12
 

Alfred Kelley                                                       377

 

Ohio Democrats tended to oppose systematic establishment of prior-

ities, gave little deference to planning proposals from the commissioners

in canal policy, and showed little interest in the professionalization of

the canal board.³⁷ And similarly, in the national arena, the Jacksonians

had little appeal for Kelley because of their comparable preference for

decentralization of power and their lack of creative, vigorous direction

in leading the economy through purposeful governmental intervention.

Kelley strongly believed in centralized direction and carefully designed

intervention in both national and state banking operations. His faith in

systematic marshalling of public resources was evident in his 1828 view

of a proposal for a government land grant to Kenyon College. Thus he

wrote to Elisha Whittlesey, urging him to support the grant: "I have

long believed that liberal donations to a few good schools is preferable

to distributing the same sum in small parcels among a great number".³⁸

On the same sort of premise, Kelley consistently adhered to a policy of

advocating caution in the expansion of Ohio's public works system.

Kelley's faith in prudent, incremental expansion of the public works

was evident throughout the first construction period to 1832. Thus he

supported the project for a Pennsylvania & Ohio Canal, then being pro-

moted as a chartered company by his close friend Simon Perkins and

others in the Western Reserve. But diplomatically and effectively,

Kelley fended off demands that the work be built with state funds before

the first canal lines had been completed.³⁹ Similarly, when pressure

gathered in western Ohio for construction of the Miami Canal's exten-

sion northward from Dayton, Kelley was not conspicuously sympath-

etic; he supported the board's vote to go ahead with the extension only

after new revenues had been derived from a federal land grant for the

project.⁴⁰

Withal, Kelley deemed "mean and contemptible" the often-expressed

doctrine that every county and hamlet in Ohio must have state patron-

age in the form of transport improvement, else they were justified in

withholding their support for projects that benefited other districts.41

He assumed a more diplomatic posture, however, when confronted with

 

37. Scheiber, Ohio Canal Era, 167.

38. Kelley to Whittlesey, January 11, 1828, The Papers of Elisha Whittlesey, Western

Reserve Historical Society (hereafter cited as Whittlesey Papers).

39. Kelley urged Philadelphia promoters and financiers to support the project; see

Kelley to Thos. Biddle and Benjamin Chew, June 14, 1832 (copy), Canal Commission

Papers.

40. Votes of the board, in Canal Commission Minutes, passim. There is no public

record of Kelley's openly opposing the scheme. In later years, Kelley remained dubious

of the advisability of pushing the Miami Extension project beyond the immediate re-

sources of the state. (Kelley to Williams, July 21, 1835, Williams Papers.)

41. Kelley to (?), March 11, 1825, Canal Commission Papers.

• 13
 

378                                                  OHIO HISTORY

 

demands for support of new state projects from close friends and asso-

ciates. Thus, in trying to bring General Perkins around to a position of

forthright support for the first canal project in 1825, at a time when

Perkins seemed more interested in the need for funding the Mahoning

(later the Pennsylvania & Ohio) canal route, Kelley urged the need for

unity and self-sacrifice in the short run. In the long run, after all, "Even

Trumbull County may . . . ask aid to make some interesting improve-

ment."⁴²

Criticism of Kelley inspired by his opposition to indiscriminate prolif-

eration of state commitments was more than matched by partisan

political criticism from Kelley's political enemies in the Democratic

party; his prominence in the Whig party made him a frequent target of

political invective. Thus, after resigning his commissionership in 1833,

Kelley returned to the state legislature; and in the 1836 campaign the

Democratic press, opposing his candidacy to represent Franklin County,

charged that he had profiteered on the canals and was now "engaged

in no business but BANKING, SPECULATING, and building a

PALACE in the City of Columbus."⁴³ Kelley offered a revealing reply,

declaring that the wages he had received from the state as acting

commissioner, "after defraying my personal and travelling expenses,

and supporting a small family on the most economical arrangement

which I could make, did not leave me an average sum of $100 per

annum, as a compensation for my labour and responsibility. This, I

believe, all will admit, is 'fattening' at a slow rate."⁴⁴ Referring to the

many donations of property he had successfully solicited for the state

in 1825 and subsequent years, "most if not all of which I might have

retained for myself with perfect integrity," as he averred, Kelley now

offered to accept from the state all that property. In return he would

reimburse the state for his twelve years' salary, pay the original cost

of such property plus interest, and in addition turn over all the land he

had himself bought since 1822 and whose value was affected by the

location of the canal lines.⁴⁵ The offer found no takers!

A measure of the value of Kelley's services is obtained from a special

resolution of the general assembly in 1832. On grounds that Kelley's

health had been "seriously impaired by his constant attention . . . to

his arduous duties as acting commissioner," Kelley would be given a

six-month paid leave of absence if he required it. "By his faithful and

 

 

42. Kelley to Perkins, March 13, 1825, The Papers of Simon Perkins, Western Reserve

Historical Society (hereafter cited as Perkins Papers).

43. Columbus Western Hemisphere & Ohio Monitor, October 5, 1836.

44. Kelley, in Ibid., March 5, 1836.

45. Ibid.

• 14
 

Alfred Kelley                                                          379

 

laborious attention to the interests of the State," the legislation de-

clared, "he has saved to the Treasury many thousands of dollars."

The lawmakers thought they should do no less, "as a tribute of respect

to a faithful public servant, and to aid in prolonging a life hitherto so

eminently useful to the state."⁴⁶

Such a recognition and praise must have been hard-won indeed for a

man who was legendary for his impatience with those who opposed his

views or failed to meet the same high standards of diligence as he

applied to himself. Yet his friend Perkins reported to him in March

1830, after an attack on Kelley in the legislature had been discredited,

that Kelley was "now     the most popular man in the State."⁴⁷ In later

years, there was a mellowing even among his opponents. Thus in 1846,

when Kelley decided to retire from the state senate, the editor of a

staunch Whig newspaper commented on reasons for his failure to attain

a more conventional popularity:

Mr. Kelley has been the best public servant the State ever had.-For his ser-

vices posterity will do him justice.

As a mere politician, the repulsiveness of his manners and the pertinacity

with which he persevered in carrying out his individual views has placed him

far behind many who possess but a small share of his talent and public spirit.

The State . . . can ill afford to lose his services.⁴⁸

Kelley's long period of work with the state had not only given him

political prominence and a seldom-matched record of constructive

achievement as a public administrator; it had also armed him with a

valuable fund of skills and personal contacts. Involvement in the first

canal project gave him an intimate knowledge of the entire state-the

terrain and geographic peculiarities of its many distinct regions, the

advantages and disadvantages of each district's resources and loca-

tion.⁴⁹ As a consequence, his sense of the totality of the state economy

 

 

46. Ohio, General Assembly, House of Representatives, House Journal 1831-32

(Columbus, 1832), 447.

47. Perkins to Kelley, March 16, 1830, Canal Commission Papers.

48. Editorial, Toledo Blade, July 31, 1846.

49. Indicative of Kelley's special qualifications in this regard is the fact that he pre-

pared the first comprehensive topographical map of Ohio, "with a view of preserving

from loss the various items of information in relation to the Geography and Topography

of the State which had been collected during the progress of the surveys and examinations

relative to the Canal." This map, he noted with some poignancy, "was mostly compiled

by employing part of that time generally occupied by sleep, and those intervals of busi-

ness which are usually devoted to exercise, relaxation, or amusement...." (Kelley to

M. T. Williams and Benjamin Tappa [Oct. 2, 1826] Kelley Papers.) His letter stated

that he had arranged for its publication by Horton Howard of Delaware, with the con-

sent of the commissioners. He was in 1826 embarrassed by the fact that the general as-

sembly had claimed copyright and wished to publish it as a legislative document.

• 15
 

380                                                   OHIO HISTORY

 

and its relationship to western regional development must have been

nearly unique. He was in constant touch with land speculators, town-

site promoters, and manufacturers with whom he corresponded during the

course of canal construction. Moreover, once the first canals had opened

in 1827, Kelley (with Williams) had been principally responsible for

establishing rates of toll on the lines. Myriad special interests jockeyed

for advantage in canal tolls. Responding both to the state's need to

maximize revenues and to these special-interest pressures, Kelley and

the commission had adopted, in effect, a tolls structure that served to

allocate markets for many vital products-both those produced in Ohio

and those "imported" from New York and the New Orleans river

route.⁵⁰ Such market allocation was entirely consistent, of course, with

Kelley's own commitment to centralized direction and systematic gov-

ernmental intervention in the economy.

Also invaluable to Kelley's private career was the relationship of his

work as canal commissioner to Ohio's banking community. He early

perceived that it would be advantageous to Ohio bankers to pay con-

tractors and laborers in their bank notes. Although the disbursing sys-

tem, through the state's banks in which deposits of funds borrowed in

the East were placed, was controlled by the fund commissioners. Kelley

had regular correspondence and meetings with the bank officers in-

volved.⁵¹ While he was not directly responsible for canal finance, Kelley

was kept well-informed concerning the fund board's intricate relation-

ship to eastern bankers; and he cooperated closely with Ohio bankers in

the effort, through canal disbursements, to give "more extensive circu-

lation [to] their Paper."⁵² Besides, his prominent role in the Ohio project

gave him an opportunity to correspond with and advise numerous

eastern financiers on the subject of western investments.⁵³

Thus Kelley emerged in the mid-1830s as a leading figure in Ohio

banking. In 1831, Kelley joined Simon Perkins, Leonard Case, John W.

Allen (mayor of Cleveland) and others in forming the directorate of the

revived Commercial Bank of Lake Erie at Cleveland. This group pro-

vided the in-state, Ohio direction for an eastern family, the Dwights

of Massachusetts, who put up most of the capital and selected the

bank's treasurer, Truman P. Handy, who had worked in a Dwight

 

 

 

 

50. Scheiber, Ohio Canal Era, chapter 10.

51. See Scheiber, "Public Canal Finance and State Banking in Ohio, 1825-1837,"

Indiana Magazine of History, LXV (June, 1969), 119-32.

52. Ebenezer Buckingham to Brown, October 18, 1825, The Papers of the Board of the

Canal Fund Commissioners, Ohio State Archives.

53. For example, see text and footnote 39.

• 16
 

Alfred Kelley                                                    381

 

bank in New York State.⁵⁴ The interpenetration of state and private

concerns, and also the impact of such linkages between Ohio and east-

ern interests upon the modus operandi of Ohio's emergent business

elite, were to be dramatically illustrated by this fusion of the Dwight

interests and Western Reserve enterpreneurship. The Commercial Bank

was quickly selected as a depository and disbursing agent for the canal

fund, following an application through Alfred Kelley to the fund

board.⁵⁵ With aid of the Dwight investments and other eastern credits,

the bank played a central role in real-estate mortgages and the extension

of mercantile credit in Cleveland while the city's canal trade increased.

And in later years, Kelley, Handy, and the Dwights were all to become

deeply involved in Cleveland's railroad projects-the Dwights again as

investors and shapers of large strategy, the Cleveland people as in-state

directors and managing officers.

Meanwhile, in the mid-1830s, Kelley was purchasing real estate,

both at Columbus and at Cleveland; and he became a leading figure in

the direction of the Franklin Bank of Columbus, which had been a dis-

bursing agent and depository for the fund board.⁵⁶ So too had Simon

Perkins' Western Reserve Bank at Warren, at a time when Perkins

served as a fund commissioner. Similarly, the Lancaster Bank, in which

Samuel Maccracken (another fund commissioner) held a large interest,

disbursed canal funds. Later, the Franklin Bank would extend a

$500,000 loan to the state fund board when in 1843 depression condi-

tions made it difficult to issue bonds in the East or abroad. Although

this loan brought considerable gain to the bank, the relationship was a

reciprocal one; its funds were crucial to continuation of the enlarged

canal program.⁵⁷

Such enterpreneurial activity by leading figures in the state canal

enterprise reached a new level with the formation of the Ohio Life

Insurance & Trust Company in 1834.58 At the time of its incorporation,

the Trust Company became the most heavily capitalized bank in the

state. Like the Commercial Bank of Lake Erie, but on a much grander

scale, it fused the interest of a major eastern investment group-in this

instance, the Bronson-Olcott-Albany Regency interest in New York

State-with the funds, managerial skill, and political influence of nota-

 

 

54. Scheiber, "The Commercial Bank of Lake Erie, 1831-1843," Business History

Review, XL (Spring 1966), 57-65.

55. Truman P. Handy to Henry Brown, June 1, 1833, Commercial Bank of Lake Erie

Letterbooks, Western Reserve Historical Society.

56. Kelley to Williams, April 29, 1833, October 24, 1839, Williams Papers.

57. Scheiber, Ohio Canal Era, 150.

58. The history of the Trust Company is considered in Scheiber, "Entrepreneurship

and Western Development," passim.

• 17
 

382                                                    OHIO HISTORY

 

ble Ohio business leaders. Without the support of the Ohio group, the

charter could not likely have been obtained from the legislature; for it

came under severe attack as a "moneyed monster," a local version of

the Bank of the United States. Significantly, its principal Ohio organizer

and first president was Micajah T. Williams. Since leaving the canal

service, Williams had been Surveyor-General for Ohio, Indiana, and

Michigan Territory; his contacts with the eastern financiers had been

formed both through his canal experience and through their interest in

western land speculation. Williams reached out effectively to build a

board of directors that would represent statewide business as effectively

as the Commercial Bank's board represented Western Reserve busi-

nessmen. Not surprisingly, he secured the commitment of Alfred

Kelley, with whom he shared an interest in the Franklin Bank as well

as long years of the closest colleagueship in the canal enterprise; Elisha

Whittlesey of Cleveland, closely connected with both Kelley and Per-

kins in politics and business; and the three commissioners of the canal

fund board, Perkins, Daniel Kilgore (also a banker) and Samuel

Maccracken.⁵⁹ Augmented by other prominent directors, the Trust

Company's board was virtually a roster of the state's business notables

-an institutionalization, in effect, of their elite relationships.

In the years that followed, the Trust Company was to be a major

supplier of funds to the state in canal finance, becoming the principal

Ohio underwriter of bond issues. The character of Williams's presi-

dency-especially his connection with an unsavory "wildcat bank" in

Michigan and his private dealings as an exchange banker in a Cleveland

partnership-led Kelley to conclude in 1841 that Williams's "arrange-

ments" had become "extremely injurious to the interests and reputation

of the Company." Insisting that their friendship remained unbroken,

Kelley nevertheless called upon him to resign.60 But until this breach

opened, Kelley's leading role in the Trust Company tightened still

further the intricate web of interlocking interests that impinged on state

canal finance; for Kelley reentered state service in 1841 as a canal fund

commissioner, and perforce he then found himself concerned both as a

state officer and as a Trust Company stockholder in financial dealings of

a highly sensitive nature.⁶¹

The intimate relationship of state canal finance and private banking

 

 

 

59. Ibid. The principal eastern stockholders included Prime, Ward & King and John

Ward & Co., both major investment houses that had been underwriters of canal-bond

issues. (Arthur Bronson to Lewis Cass, June 2, 1834, The Papers of Lewis Cass, Clements

Library, University of Michigan.)

60. Kelley to Whittlesey, December 22, 1841, Whittlesey Papers.

61. See Scheiber, Ohio Canal Era, 146ff.

• 18
 

Alfred Kelley                                                      383

 

interests confronted Alfred Kelley at least once with a hard dilemma.

This happened in the winter of 1839-1840, when the Trust Company

held $1 million in Ohio state bonds amidst depression conditions in the

commercial and money markets. In the fall of 1839, the Trust Company

had been forced to suspend specie payments; and this action risked loss

of the charter, which had specified a maximum period during which sus-

pension might be maintained. Unable to market the state bonds it held,

amounting to some $800,000 worth in December, the Trust Company

thus faced a possibly fatal crisis. For Kelley, at least, the alternatives be-

fore the board must have posed a cruel choice. To raise cash quickly and

resume specie payments, the company must throw its state bonds on

the market. This risked driving down the price of Ohio bonds and

seriously damaging the fund board's efforts to sell additional state

issues. But if the company failed to pursue this strategy, it could lose

its charter. Kelley believed that, because of the company's vast mort-

gage loans and many outstanding commercial loans, loss of the charter

would "hazard . . . general distress throughout the state.^"62 And so

Kelley concurred in the Trust Company board's decision to throw the

bonds on the market in the East "at whatever sacrifice."⁶³

In this instance, fate was kind: the money market absorbed the sales,

as other banks, both in Ohio and in England, supported the price of

Ohio state bonds by purchasing new issues early in 1840.64 The Trust

Company survived, and the state fiscal crisis was averted.

However, Alfred Kelley had not experienced his last hard dilemma

associated with state financing. Early in 1841, he accepted appointment

as a canal fund commissioner at the very moment when Ohio state

finances were in an authentic crisis stemming from the legislature's

over-expansion of the canal system in the mid-1830s. The Miami Canal

was being extended to Toledo; the Wabash & Erie was authorized; con-

struction of numerous branch lines, including a major project on the

Muskingum, had gained approval. In contrast to Kelley's prudent

construction policy of the 1820s, the program now called for extensive

work on all the projects simultaneously-even though the initial engi-

neering estimates were for $4 million of new construction, equal

 

 

 

62. Kelley to Williams, October 24, 1839, Williams Papers. Indicative of the extent

to which the Trust Company's operations might affect the Ohio economy was the following

summary of its assets in 1840: $2 million invested in Ohio mortgages; considerable

holdings of city of Cincinnati and Ohio state bonds, and also of bank stock held as

collateral on private loans; direct holdings of stock in two banks; and an unspecified

amount of mortgages and bonds held on protested notes. (Williams to Simon Perkins,

June 6, 1840, Perkins Papers.)

63. Kelley to Simon Perkins, December 12, 1839, Ibid.

64. Scheiber, Ohio Canal Era, 147-49.

• 19
 

384                                          OHIO HISTORY

in amount to the entire project that Kelley and Williams had directed. (Actual total costs ran to nearly $10 million by the time the works were completed in 1845.) The continuing, serious business depression on both sides of the Atlantic made it unlikely that the fund board could meet payments owed to contractors.65 The crisis was also the result of the so-called "Loan Law" of March 1837, which provided for the issue of state bonds to finance subscriptions, on a matching basis, to any rail- road, canal, or turnpike corporation that met certain minimum qualifi- cations. By the time Kelley had joined the fund board in 1841, over a million dollars had been committed to canal and railroad corporations while another $1.9 million had been given as stock subscriptions to turnpike corporations.66 Kelley had long been staunchly opposed to the new profligacy (as he viewed it) represented by the expanded canal program and the Loan Law subscriptions.67 Soon after becoming a fund commissioner, Kelley and his colleagues on the board put a sudden stop to new commitments of funds under this law; and he supported legislation enacted in 1842 that gave formal statutory sanction to this policy, effectively making   65. Gustavus Swan to Joseph Lake, November 20, 1840, Board of Canal Fund Com- missioners Letterbooks, Ohio State Archives (hereafter cited as BFC Letters). 66. Scheiber, Ohio Canal Era, 130-33. 67. Columbus Western Hemisphere & Ohio Monitor, March 1, 1837.

• 20
 

Alfred Kelley                                                       385

 

the Loan Law a dead letter.⁶⁸ This change in policy alone could not,

however, stem   the tide of fiscal crisis for the state. In 1841 and

1842, the fund board adopted desperate expedients, including issuance

of $300,000 in bonds as security to the Ohio Life & Trust for $200,000

loan, without authorization to do so; a grant of tacit permission to Ohio

banks making loans, to issue "illegal money" (small notes outlawed by

the state's current banking legislation); and, finally, some individual

risk-taking by the fund board members, who signed personal guarantees

of canal fund obligations.69 The fund board even drew advances from

the general tax funds in the State Treasury-and faced charges of illegal

procedure and fraud, from the Auditor, for having done so-in order to

help meet interest payments due the holders of Ohio bonds in January

1842.70

The January payment averted what had seemed a certain default and

serious harm to the credit standing of the state. Even the federal gov-

ernment was having difficulty meeting its fiscal needs, and other Ameri-

can canal states were either defaulting or repudiating their debts; in-

vestor confidence was thus at a low ebb. But at the time, Ohio's public

works were near enough completion that the commissioners could

realistically hope (if the state's credit were maintained) to raise the

funds necessary for payment of contractors. Defending the fund board's

expediential and irregular measures of that time, Kelley in 1845 re-

called that while in New York trying to raise funds he met at the Bank

of Commerce with an agent for foreign holders of Ohio bonds. Knowing

how close the board had come to defaulting in January, the agent asked

Kelley whether the July interest could be paid. Then a bargain was

struck. Kelley offered to insure at a 1 percent rate any amount of the

interest, offering as collateral his personal real-estate holdings in New

York and Ohio. The agent immediately wrote a check for $100, and

Kelley gave his personal note guaranteeing $10,000 of the July

interest.⁷¹

Again in February 1843, Kelley used his network of business asso-

ciates to bolster investor confidence in the canal fund's solvency. Thus

 

 

 

68. Kelley to acting commissioners, April 16, 1841; Kelley to C. Goddard, April 21,

1841; A. S. Chew to turnpike company presidents, August 11, 1841; Kelley to James

Worthington, July 5, 1842, all in BFC Letters.

69. Samuel Maccracken (President, Lancaster Bank) to Kelley, October 1, 1841, and

reply, October 12, 1841, Ibid., Ohio Executive Documents, 1845-46 (Columbus, 1846),

Part II, 770.

70. Fund Commissioners to John Brough, October 28, 1842, BFC Letters; and reply,

November 2, 1842, Auditor's Letterbook (marked "Canal Land Reports, . . . 1841-54").

Auditor of State Archives, Columbus.

71. Executive Documents, 1845-46, Part II, 772-73.

• 21
 

386                                                      OHIO HISTORY

 

he sent a letter to Elisha Whittlesey, who was then in touch with eastern

investors and the foreign bondholders, asserting his faith that the state

"will not fail, even temporarily." Kelley concluded by offering "to re-

ceive as cash the certificates of domestic debt in payment for any prop-

erty I have for sale, at their par value, believing the income will be

certain and regular as a means of providing for the wants of my family

should I be removed from them by Death."⁷² Since the state's bonds

were selling well below par value at the time, Kelley's offer to accept

the securities at par involved a very considerable personal risk.

Finally, Kelley's role in the travails of state finance in 1842-1843

included controversial personal negotiations with Baring Brothers, the

British merchant bankers. In the desperate attempt to raise loans to

cover the July 1842 and January 1843 interest payments, Kelley went to

England for the fund board in spring of 1842. It was an inauspicious

time for such a mission. The general economic collapse, the defaults by

other states on their bonds, and the diplomatic crisis between Great

Britain and the United States over the Maine boundary, all militated

against Kelley's chances.⁷³ But favoring Kelley was the complex inter-

relationship of Ohio Life & Trust and the Barings-for the British firm

had cooperated closely with the Trust Company in marketing Ohio

bonds in the European market. In addition, the Barings had a direct

stake in maintaining Ohio's credit standing, as they still held some of

the state's bonds on their own account.⁷⁴ Kelley did succeed in his mis-

sion, obtaining a sale to the Barings of $400,000 in Ohio bonds. The

sale, however, yielded only 60 cents on the dollar, an all-time low.⁷⁵

Kelley's efforts won him little appreciation from the Whig-dominated

fund board's partisan enemies. In addition to Auditor John Brough's

charges that he had sold out the state's interests, Kelley became the

target of a sharp attack by the Democratic newspapers. Typical was

an editorial in the St. Mary's Sentinel, charging that the sale for 60

percent of par value to the Barings was "a fair specimen of coon [Whig]

financiering." In this manner, the Sentinel declared, "the coons protect

Ohio industry . . . [and] take money out of the pockets of the people

of Ohio, and put it into the pockets of their friends, the British lords

and capitalists."⁷⁶

As the Democratic partisans charged, Kelley and his Whig colleagues

 

 

72. Kelley to Elisha Whittlesey, February 28, 1843, Whittlesey Papers.

73. See Reginald C. McGrane, Foreign Bondholders and American State Debts (New

York, 1935), passim.

74. Ralph W. Hidy, The House of Baring in American Trade and Finance (Cam-

bridge, 1949), passim, esp. 260-93.

75. BFC to Barings, June 29, 1842, BFC Letters.

76. Sentinel, September 27, 1843.

• 22
 

Alfred Kelley                                                 387

 

had in fact sold state bonds, not only to the Barings but also to various

Ohio banks in which they themselves held stock or were officers, at

varying discounts well below par.⁷⁷ But these critics had little to say

about the other side of the case: simply stated, there was no other source

of funds available; the bankers and British capitalists bought at dis-

count prices because there was an authentic risk of default.

In the scramble to salvage the state's finances, the commissioners

had drawn upon the good will and confidence that derived from long-

time business and political associations within the elite network that

populated Ohio's bank directorates and the membership of the fund

board. In the absence of this congruence of state officialdom and private

business notables, it is doubtful that the state's credit could have been

saved or its program of public works completed. When the record was

finally laid before the state legislature, the conservative Democrats and

the Whigs joined forces to uphold retroactively all the measures adopted

by Kelley and the fund board. By this time, in 1843-1844, surging canal

revenues, business recovery, and a stabilization of Ohio's state debt all

served to ease the fiscal situation as well.

Alfred Kelley's depression-era embroilment in state banking, politics,

and finance doubtless did much to inspire his subsequent role in the

reform of the Ohio banking system. After leaving the canal fund board

in 1843, he was elected to the state senate the following year and there

turned immediately to the banking issue. On January 7, 1845, Kelley

introduced legislation to incorporate a State Bank of Ohio and a group

of new "independent" banks. The conception was twofold. On the one

hand, there would be centralized direction of the bank and its branches,

under a Board of Control; the establishment of the branches would

serve to provide banking capital in areas of the state that lacked it,

while strong centralized control would help to attract private investment

capital for the bank. On the other hand, there would be strict regula-

tion, with the bank and its branches required to maintain circulation

on a specie-paying basis, and with note issues limited in relation to

capital. The "independent" banks of the state, moreover, would be re-

quired to participate in a centralized Safety Fund (a form of deposit

insurance); and limits were set on interest rates and on the size of loans

to any individual or firm.⁷⁸

Enacted in 1845, the Kelley Law reflected well its author's belief in

 

 

 

77. Especially the Wooster Bank, controlled by Joseph Lake, Kelley's predecessor as

fund commissioner, and the Ohio Life & Trust. See Sentinel, February 28, 1844. Cf.

Scheiber, Ohio Canal Era, 152.

78. Weisenburger, Passing of the Frontier, 420-24.

• 23
 

388                                                 OHIO HISTORY

 

strongly centralized, purposefully directed state intervention. It left

ample room for private investment and entrepreneurship, but it placed

Ohio banking on a sound new footing by incorporating the best experi-

ence of other states. In a sense, the Kelley Act provided for a community

of business interests operating under public scrutiny and designed to

avoid the sorts of conflict-of-interest and mismanagement that he had

seen develop in the Life Insurance & Trust Company under his friend

Micajah Williams. Moreover, Kelley's concern to extend banking facil-

ities to "neglected" regions of the state represented an extension of his

vision of economic development through internal improvements.

Instead of random or irresponsible expansion, as had happened with

transport under the 1837 Loan Law, Kelley designed a system for ex-

pansion of banking facilities on a systematic and selective basis. And,

as he predicted in early 1845, the Kelley Law provided well for "the

wants of commercial and manufacturing operations, and at the same

time [held] out proper inducements to those who have money to invest

in banking institutions."⁷⁹

Kelley's skill as a framer of legislation was more than matched by his

work on the floor of the assembly. As a Cincinnati editor later re-

called, "Amendment after amendment was introduced, many of which

would have marred if not destroyed the success of the system." But

Kelley managed either to render them "harmless" through further

amendments, or else, "waiving the proposition for a time, [to] introduce

them under some less exceptionable form  ... ."80

The substance of the Bank Law indicated, moreover, that this one-

time champion of state intervention had shifted ground. Now, instead

of calling for a massive state investment in banking, comparable to the

canal program of 1825, Kelley sought to provide the strongest possible

legal framework for private investment, with the state exercising its

chartering and police powers to assure probity and to provide systematic

coordination of private enterpreneurial activities. One can only specu-

late as to whether Kelley might ideally have preferred to set forth a

banking plan that called for direct state investment, with public man-

agement. If he did harbor such a preference, however, such a proposal

would probably have gained little public support, given disillusionment

that followed the state's close brush with fiscal disaster in the early

1840s.

If Kelley was no longer a champion of the activist state in the 1840s,

still he remained concerned to provide state govwrnment with a sound

 

 

 

79. Quoted in Ibid., 422.

80. Cincinnati Gazette, clipped in Toledo Blade, January 27, 1849.

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Alfred Kelley                                                       389

 

system of taxation. Thus he served in 1845 as the driving force behind

a comprehensive investigation of the revenue system. This study led to

substantial revisions in Ohio tax law, which in their broad features

endured for over a century.81 This was to be the last of Alfred Kelley's

great contributions to public policy in Ohio, for in the remaining years

of his life, though he did return to the state senate in 1855-1857, he

dedicated himself largely to his private affairs and to the development

of the state's railroads.

By turning his energies to railroad development, Kelley once again

assumed a central, creative role in providing Ohio with transportation

facilities-just as he had done in the canal era. Now, however, his work

was chiefly in the private corporate sector. He brought to railroad plan-

ning, finance, and management a unique fund of knowledge and experi-

ence as the result of his canal activities. His proven ability to manage a

complex, large-scale organization was not the least of Kelley's advan-

tages; for in the scope and extent of their operations, as well as numbers

of personnel employed, the antebellum railroads were without precedent

in the annals of American business.⁸² And it was through the transfer

of men such as Alfred Kelley from public enterprise to private railroad

engineering and management that the early major railroad firms were

able to tap the reservoir of talent and experience that the active state

had produced. It was an entrepreneurial asset of no small importance.

Kelley's commitment to railroad enterprise began in earnest in 1847,

when he was persuaded by the promoters of two faltering railroad proj-

ects-the Columbus & Xenia and the Cleveland, Columbus, & Cincinnati

-to accept the presidencies of the two lines.⁸³ The timing proved auspi-

cious, for at precisely this moment, Ohio's economy surged ahead, car-

ried forward by the national revival from the depression of the early

1840s. Ohio's wheat producers were prospering as the result of excep-

tional harvests and massive European demand associated with the Irish

potato famine and the repeal of the English Corn Laws. The newly com-

pleted state canals could scarcely accommodate the sudden rise in traffic

 

 

 

81. Weisenburger, Passing of the Frontier, 425-30.

82. See, e.g., Stephen Salsbury, The Stale, the Investor, and the Railroad: The Bos-

ton & Albany, 1825-1867 (Cambridge, 1967); Alfred D. Chandler, Jr., The Railroads:

The Nation's First Big Business (New York, 1965); Thomas Cochran, Railroad Leaders,

1845-1890: The Business Mind in Action (Cambridge, 1953).

83. Marvin, "Alfred Kelley," 13. Kelley's first formal association with railroads was

his appearance in 1836 as a commissioner of the newly chartered Muskingum & Co-

lumbus Railroad, planned for a route linking Zanesville and Columbus. Like many of

the railroads chartered in this period, however, the venture came to nothing. Walter

Rumsey Marvin, "Columbus and the Railroads of Central Ohio before the Civil War"

(Ph.D. dissertation, The Ohio State University, 1953), 46-47.

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390                                                   OHIO HISTORY

 

volume; and with the easing of crisis conditions in the American and

European money markets, investors both large and small showed a new

interest in American railroad equity-stock and bonds.⁸⁴ Finally, and

not least important, plans were taking shape for the formation of inte-

grated east-west railroad systems between the Atlantic Coast and the

Midwest, and Ohio lay squarely athwart these routes. Thus public en-

thusiasm in Ohio for railroads reached a historic high point. Not only did

the legislature grant liberal charters freely, but it also authorized with

equal liberality the issue of county and municipal bonds (on approval of

local voters in referenda) to finance aid to railroad companies. The pub-

lic purse was again open for the promotion of transportation, but this

time on a highly localized basis.⁸⁵

Amidst the expansion that helped build a 3,000-mile railroad net-

work in Ohio by the late 1850s Kelley embarked on his new work as

railroad president. When he took command of the CC&C line, Kelley

confronted a problem of seeming indifference toward the project on the

part of Columbus's citizenry, who had subscribed only a small part of

the funding needed and as yet had not approved municipal bond aid.

Moving vigorously, Kelley soon turned the situation around, obtaining

both private stock subscriptions and a vote in favor of aid from the

Columbus voters. As Cleveland and other local governments had al-

ready extended aid, it remained to raise additional capital in the East.⁸⁶

Able to demonstrate strong interest, now, both in Cleveland and Co-

lumbus, Kelley obtained a large subscription from the Dwight family of

Massachusetts and New York.⁸⁷ That the Dwights should have become

his allies is no surprise, for here he drew on his connections in Cleveland

banking; the Dwights had been the principal investors in the Commer-

cial Bank of Lake Erie, and Truman P. Handy-the man whom Henry

Dwight had sent to Cleveland to be treasurer of the Commercial Bank-

was also involved in the CC&C Railroad's promotion.⁸⁸

Kelley set the now-well-funded enterprise quickly in motion by ar-

ranging for its construction on highly favorable terms. The $1,250,000

line was let on contract for its entire length at once, the contractor

accepting one fourth of the contract sum in stock.⁸⁹ Meanwhile, in 1850

 

 

84. Scheiber, Ohio Canal Era, 270-94.

85. Ibid.; Robert L. Black, The Little Miami Railroad (Cincinnati, 1941); Alfred D.

Chandler, Jr., "Patterns of American Railroad Finance, 1830-1850," Business History

Review, XXVII (September, 1954); Arthur M. Johnson and Barry E. Supple, Boston

Capitalists and Western Railroads (Cambridge, 1967).

86. Marvin, "Columbus and the Railroads," 168-90.

87. Ibid., 193.

88. Scheiber, "The Commercial Bank of Lake Erie," 47-52.

89. Marvin, "Columbus and the Railroads," 189-90.

• 26
 

Alfred Keller                                                       391

 

Kelley set out for New York, England, and Montreal, where (armed

with a guarantee signed by George Bliss) he successfully obtained iron

rails on credit terms for the line. From New York, he wrote to his wife:

I find my friends here, and at Cleveland, as I hear, highly gratified at the result

of my trip to England. And I have no doubt I could easily get-more easily than

get rid of-divers commissions to buy rails for other companies. Indeed you can

hardly realize your poor husband['s] growing popularity as a financial manager

for R.R. Companies. Are you not delighted with the prospect that I shall not

be soon out of business, if I choose to accept it for little or no compensation?⁹⁰

 

The line was quickly built, and in 1851 it opened for its full length. It

became so successful, moreover, that its earnings generated funds

sufficient for it to aid in fiancing of several other major Ohio lines

with which it connected; in fact, the CC&C became a major source of

funding for some of the state's most important new lines. This process

of intercompany investment, and the consequent community of corpo-

rate interests that emerged, set the stage for several mergers and joint

operating agreements in the mid-1850s. Largely designed by Kelley,

these mergers and other initiates force-fed the transformation of

Ohio's railroads from a congeries of individual short lines to a set of

genuine systems.⁹¹

While seeing the CC&C project to completion, Kelley was also busy

promoting the Columbus & Xenia line, designed to connect with the

Little Miami and provide an extension of the Cleveland-Columbus line

to southeastern Ohio and Cincinnati. This project too was languishing

when Kelley assumed the presidency. But again he used substantial local-

government bond aid as leverage with which to raise private subscrip-

tions in Ohio and the East. The $1 million line was built in 1850 and

soon carried traffic at a rising rate, generating substantial profits in the

early fifties.⁹² For this line too, Kelley personally arranged the pur-

chase of rails in England.⁹³ Moreover, he took personal charge of nego-

tiations with the Little Miami directors, which assured close operating

relationships between the two lines.⁹⁴

In 1851 Kelley also became president of the Cleveland, Painesville,

 

 

 

90. Kelley to his wife, May 30, 1850, Kelley Papers. On Dwight and Bliss in the

Michigan Central promotion, see Johnson and Supple, Boston Capitalists, 94-95.

91. Scheiber, Ohio Canal Era, 289-94. See also Randolph C. Downes, History of

Lake Shore Ohio (3 vols., New York, 1952), I, passim.

92. Marvin, "Columbus and the Railroads," 139ff.

93. Alfred Kelley to his wife, July 2, 1849, Kelley Papers (dating marked on letter;

verified by reference to date of construction in Ohio).

94. J. Ridgway, Jr., to Erasmus Gest, October 28, 1847, The Papers of Erasmus Gest,

Ohio Historical Society.

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392                                                OHIO HISTORY

 

& Ashtabula Railroad, which had been incorporated in 1848 and planned

for construction eastward along the Lake Shore. This road, destined to

be Ohio's link with the main lines then building westward from New

York and Philadelphia, was struggling when Kelley took control.

President of the CP&A until 1854, Kelley oversaw its construction; and

he forged an agreement for its joint operation with the CC&C.⁹⁵ At the

time that he finally withdrew from active involvement in railroad affairs

in 1854, Kelley could justly claim to have been as much the architect of

Cleveland's modern railroad lines as he had been the designer of his

state's canal system thirty years earlier.

There is apparently no record from that time until his death in 1859

of Kelley's private reaction to the decline of traffic and revenues on the

Ohio canals, or to the strong movement to abandon the state works in

the 1850s, largely in consequence of his and other promoters' achieve-

ments in creating a new privately controlled transport system with a

more advanced technology. The ironies could not possibly have escaped

him; but one can surmise, I think, from the spirit that infused all his

labors from 1822 to the 1850s, that Kelley found exhiliration as well as

some nostalgia in the consequences of growth and material progress.

Like many other members of that business elite in Ohio who played

so instrumental a role in shaping the contours of material progress,

both through state intervention and private enterprise, Kelley made the

transition successfully as the Ohio economy underwent rapid change.

He gave leadership many definitions, consonant not only with changing

technology but also with the changing economic goals and aspirations

of the society. His career gave continuity to the infrastructure of politi-

cal and economic power, and he proved remarkably flexible and skilled

in adapting himself to rapid economic development. The activities of

Alfred Kelley over four decades of hectic change in the Ohio economy

and the state's government serve well to indicate how the western

business elite functioned in relation both to public service and to the

transformation of economic institutions.

 

 

 

 

 

 

 

 

 

 

 

 

95. William G. Rose, Cleveland, The Making of a City (Cleveland, 1950), 211; Mar-

vin, "Columbus and the Railroads," 206.

• 28