Washington, D.C. in 1798 "consisted of 100 square miles of reddish mud, dotted here and there with houses and liberally sprinkled with tree stumps. Only the most wild-eyed optimist could visualize it as the nation's capital."

There was at least one such person, however, among the 2,000 inhabitants of what was then called simply "the federal city." His name was James Greenleaf, he was a member of a fairly prominent Boston family (related to John Adams), and his life story, told by Nathaniel Benchley in an intricate mixture of fiction and biography, might well have been labeled "portrait of an optimist," except that scoundrels fare better at the box office. Whatever tag we attach to his name, his biography serves as a sobering, perhaps a salutary, r eminder that once upon a time it was possible to go broke speculating in Washington real estate.

Greenleaf's fascination with land began when he was fresh out of Harvard, reluctant to go into business as a merchant or druggist in the family tradition and looking about for a way to make money without working. Land "was the commodity the country had most of, and while it was cheap at the moment, there was bound to come a time when more and more was needed, and then the people who owned it would be the ones to set the price. A dollar now could be $10, $20, $100 later on, and a man with large enough holdings would make his fortune 50 times over."

The process is quite simple, as he explains to his brother Daniel, who has dutifully become an apothecary. It is also very nearly a summary of the plot: "The government is putting up lots of 640 acres apiece, for sale at $1 per acre. The man who can buy that land in quantity -- say 10,000 or 20,000 acres -- will be worth millions in a very few years...

"With one lot as security, you can get long-term loans that will multiply your holdings until your word alone will be worth a million dollars. It's like coining your own money.

There is a small shock, for those who know of the later boom-and -bust cycles in our history, to see the basic dynamics of a bull market heading for a crash presented quite so clearly at the dawn of the American Republic. Using capital for leverage, buying on margin, borrowing money for speculation: tried-and-true formulas for disaster, looking slightly quaint but not unfamiliar in their post-colonial garb.

The problem, then as now, is that loans must be repaid, and investments -- even investments which would eventually turn out to be good -- tend to tie up the money necessary for such repayment. In a long, tangled tale that ultimately spans two continents and a long lifetime, James Greenleaf achieves his dream of unlimited credit, and it proves to be his undoing because he has not mastered the related disciplines of liquidity and cash flow.

To those not entranced with financial wheeling and dealing, this may seem a dry subject for a novel, but Benchley builds his story with skill, tracing the growth of Greenleaf's paper fortune from a modest beginning to the point where he is doing business with the legendary Robert Morris, having his portrait painted by Gilbert Stuart.

It almost worked. If he had had a little more capital for development and simply holding on through dry seasons, if he had been a little less optimistic, if his estranged wife had not been quite so quick to seize some of his securities, if the federal city had grown more quickly into Washington D.C., James Greenleaf might be remembered today as a financial genius rather than a footnote in the history of financial disasters. But it fell apart; the empire was destroyed, and along with Greenleaf the collapse devastated those relatives and friends who had trusted him with their money or their signatures.

Behind the financial manipulations which occupy center stage, Benchley has placed a rich backdrop, with an absorbing account of the Revolutionary War as seen by a boy growing up in Boston.