Gotham_ A History of New York City to 1898 - Edwin G. Burrows [455]
Speculation raised moral hackles, but it also helped the city’s economy by generating a volume of trade that, together with respectable investment transactions, kept New York’s financial markets extremely “liquid.” Both buyers and sellers knew that the NYS&EB could execute trades at short notice. New York thus became ever more a pacemaker of the nation’s financial activities. Its market quotes were reproduced in Philadelphia, Boston, Baltimore. Its brokers became the country’s largest traders in state, federal, bank, canal, and insurance company offerings and the primary promoters of new issues. More than any other economic factor, railroad financing helped solidify New York City’s role in the national credit system.
PIONEERS OF CAPITAL
Those seeking less volatile outlets for accumulated pools of capital turned to western land. In the Black Hawk War of 1832, the Sac and Fox Indians were defeated in their attempt to reoccupy former homelands, paving the way for a burst of settlement into Illinois and the Wisconsin Territory. Along with the Conestoga wagons came New York money men—pioneers of capital—eager to speculate in western acres.
In 1833, with the embers of war still warm, Charles Butler and Arthur Bronson traveled by steamboat, horse, and canoe, loaded with cash and connections to local notables like General Winfield Scott, military commander in the area, who pointed out choice sites. Butler and Bronson (son of Isaac Bronson) bought town lots in as-yetlittle-known places like Chicago (population five hundred), picked up great swatches of rich agricultural land in Indiana, Illinois, and the Michigan Territory, and constructed a network of agents—leading citizens, Indian agents, and military personnel—to handle their buying in the future.
John Jacob Astor garnered western holdings too. At first Astor had been hurt by the wars, which by driving the Indians west cost his American Fur Company its cheap labor supply. But when many of the locals who had been dependent on the now defunct fur trade went bankrupt, they paid their debts to Astor with land claims, leaving him in possession of prime real estate just as immigrants began to swarm in.
Settlers and speculators ignited a land-buying frenzy. In 1830 the U.S. government had sold a respectable two million acres of public land. In 1833 it moved nearly four million acres, in 1835 over twelve million went, and in 1836 twenty million followed. For the easterners who had gotten there first, average net proceeds (after deducting agent’s share, lawyers’ fees, travel, and other administrative costs) hovered close to 20 percent, though windfall profits of 100 to 500 percent were not uncommon, especially on city property.
Much of the New York capital flowing into western lands traveled via the medium of trust companies, financial institutions established to manage old Knickerbocker and recent Yankee fortunes. These outfits were always on the lookout for prudent long-term investments—they happily settled for modest dividends of 6 to 9 percent in exchange for stability of income—and western real estate seemed like just the thing.
The New York Life Insurance and Trust Company, one of the earliest such institutions, was established in 1830. The company was dominated by conservative bankers, merchants, and land investors, many from the city’s highest social and economic echelons. Individual investors like Astor, Bronson, Kent, Lorillard, Prime, and Stuyvesant anted up a million dollars for the capital pot. Banks and foreigners added an additional five million (England’s House of Baring, with fifteen hundred shares in 1834, was by far the largest