Gotham_ A History of New York City to 1898 - Edwin G. Burrows [723]
The torrent of western wheat that descended on the city after the Civil War would prompt the New York Central Railroad to erect this enormous grain elevator on the Hudson River at Sixty-First Street in 1870.. (© Collection of The New-York Historical Society)
Dime novels depicted western settlement as the result of ambitious efforts by innumerable individuals—family farmers and cantankerous cowboys—but pioneering the continent also demanded a far more organized mobilization of resources. Mining, lumbering, steelmaking, railroad building, cattle ranching, and “bonanza” farming were enormously expensive, requiring investment capital on a colossal scale.
Government provided much of the funding (and, of course, the requisite military muscle). No fears of socialism or debilitating dependency hindered entrepreneurs from seeking handouts. Washington and local states gave subsidies, credits, and over a hundred million acres of land to mining companies and railroads, free of charge. The legislative largesse was intended to foster economic development, consolidate the national territory, and, less high-mindedly, to line the pockets of officeholders, as evidenced by the spectacular scandals of the Grant administration.
It also provided a huge windfall for the New York bourgeoisie, who had invested so heavily in such enterprises. Industrialists turned to Manhattan to tap into eastern and European capital pools. Paced by the rapid growth of trading in railroad stocks, Wall Street’s money markets expanded rapidly. By 1868 over three billion dollars’ worth of securities were sold at the New York Stock Exchange, an even larger volume at the Open Board, and still more at the curb. Additional trading at the Gold Exchange, Produce Exchange, and Petroleum Exchange swelled New York’s capital markets until they outranked all their American competitors combined.
Industrialists turned less often now than they had before the war to the city’s merchants, more often to its financiers. Brokerage houses proliferated in downtown Manhattan, especially after the invention of the stock “ticker,” patented in 1867, allowed them to access price information from exchange floors. The crucial financing institutions, however, were the great banking firms, especially those with solid European connections, and the most critical technology was the Atlantic cable, which, restored to life in 1866, made instantaneous communication with overseas investors possible.
Once again foreigners began pouring vast sums into the American economy—the setbacks of 1857, like those of 1837, now merely a hazy memory. In 1853 fifty-two million dollars’ worth of U.S. railroad stocks and bonds had been held outside the country. By 1869 the figure had jumped to $243 million and was accelerating rapidly. Altogether, in that year, Europeans held over $1.46 billion of American securities.
Tremendous power accrued to firms that could raise and funnel funds from Europe into the U.S. economy. Some were old, established operations, like the House of Belmont, with its ties to the House of Rothschild, but new ones emerged as well, the most outstanding being the father-son team of Junius Spencer Morgan and John Pierpont Morgan.
The elder Morgan ran the largest and wealthiest American bank in London. A highly respected firm, it had long specialized in underwriting the sale of British iron to American railroads. But Junius aspired to the loftier plateau of investment banking, where Barings and Rothschilds dwelled. Morgan had developed close ties with leading railroad entrepreneurs (and iron consumers) like Commodore Vanderbilt. When galloping American iron production