The son of Andrew Dexter Sr., a successful merchant and one of the first cloth manufacturers in America, the younger Dexter was born in Brookfield, Massachusetts on March 28, 1779. He was raised in Providence, Rhode Island, graduated from Brown University in 1798, studied law, and became an attorney in Boston, Massachusetts.
In the early 1800s Dexter left the law to become involved in business and finance. In 1807 he began construction of the Exchange Coffee House. At seven stories, the tallest building in Boston at the time, Dexter planned the site as a location for business offices, reading rooms, conference rooms and dining rooms to facilitate public meetings and the transaction of business. In his concept, the Exchange Coffee House would also provide a service by helping establish the relative value of the bank notes of the various financial institutions in and around Boston.
At the time, banks transacted business by issuing paper notes that could be redeemed for their value in gold or silver. Banks, merchants, businessmen and workers generally exchanged the notes between each other at a discount to facilitate commercial transactions, and the discounts varied widely depending on each bank's reputation, its distance from the locality where business was being conducted, and other factors. Traders in bank notes in the Boston area set the discount rate by conducting business in outdoor meetings on several Boston streets. Dexter intended for the bank note traders to formalize their business by providing them indoor space at the Coffee House.
To finance the construction of the Exchange Coffee House, Dexter took advantage of this unregulated system by starting or gaining control of banks located far from Boston, including Rhode Island, western Massachusetts, New Hampshire, Maine and Michigan, and issuing bank notes that far exceeded the banks' gold and silver deposits. His intent was to circulate in Boston bank notes from locations so far away that no one would ever redeem them for gold or silver. This meant that he could issue bank notes in unlimited quantities, as long as no one suspected there wasn't sufficient specie to back them.
In 1807 President Thomas Jefferson implemented an embargo against Great Britain and France as a protest against violations of American neutrality during the Napoleonic Wars. Business in the United States slowed as a result, and holders of bank notes began to redeem them for specie. In addition, the traders in bank notes whom Dexter hoped to entice into the Exchange Coffee House to conduct their business preferred to continue working outdoors, so he did not realize the increased customer traffic and rents he anticipated.
Becoming suspicious of Dexter's machinations, in 1808 a group of Boston merchants led by Nathan Appleton took their story to the press. As a result, shopkeepers began to refuse the bills issued by Dexter's banks, meaning he could no longer pay suppliers and workmen. Appleton and his allies then paid individuals called "runners" to travel throughout the country, turning in to the issuing institutions the bank notes the Boston merchants had accepted as payment for goods and services and demanding payment in specie. When the banks proved unable to redeem their paper currency, they collapsed. By 1809 the extent of Dexter's fraud became widely known, and his wife and he fled to Nova Scotia to avoid prosecution.
Ownership of the Exchange Coffee House passed on to other investors, and it remained open and partially occupied until it was destroyed in an 1818 fire.
During the War of 1812 Dexter relocated to Athens, New York, where he lived with his father and brother, who assisted him in using New York's lenient bankruptcy laws to partially satisfy his creditors and rebuild his finances.
Dexter's father died in 1816 and Dexter inherited his father's claims to purchase at a discount lands in Georgia and what is now Alabama (part of the Yazoo lands). At the 1817 auctions in Milledgeville, Georgia, Dexter bought several hundred acres on the east bank of the Alabama River near a Creek Indian trading post, where he founded a town called New Philadelphia. When Alabama entered the union in 1819 Dexter's town was renamed Montgomery.
Charlotte Dexter, Andrew's wife, died in 1819 just weeks after their arrival in Alabama, probably from yellow fever. Dexter sometimes raised their three children, and sometimes left them in the care of relatives. He engaged in farming, buying and selling land, and other ventures, including land speculation in Texas and Mexico. His fortunes waxed and waned as the economy rose and fell. At the time of his death he was once again near poverty, his fortunes reduced during the Panic of 1837.
Dexter died of yellow fever in Mobile, Alabama on November 2, 1837. He is known to have been buried in Montgomery's Oakwood Cemetery, but the exact location is not known, and attempts to locate it have not been successful.
Andrew Dexter Jr. was the nephew of Samuel Dexter, the brother of Simon Newton Dexter, and the son in law of Perez Morton.