The Financial Panic of 1837

In Reminiscences of Early Chicago, John Wentworth provides an overview of the economic crisis that befell the country around 1837 due to massive land speculation in former partially settled states such as Illinois. The population growth was staggering as white settlers displaced Native Americans whose leaders had ceded land to the U.S. through treaties that were largely unethical. There also was forced removal of indigenous people due to the 1830 "Indian Removal Act," which empowered President Jackson to exchange traditional Native land on the east side of the Mississippi River with land to the west of the river. The graph below shows the approximate growth in population as European and American settlers purchased property that had become available due to the above-stated circumstances.

Year Non-indigenous Illinois population

1800 2,458

1810 12,282

1820 55,211

1830 157,445

1840 476,183

1850 851,470

As Wentworth states, "The history of Chicago furnishes one with a complete history of an irredeemable paper-money system. Emigration was fast tending westward in 1835. Government land was $1.25 per acre. The emigrants had little or no money, and would purchase land on credit at greatly advanced prices. Eastern speculators flocked here and took advantage of this condition of things."

Money received for lands was deposited in financial institutions, then the government was credited, and funds were reloaned to the speculators. The government's assets largely consisted of notes from these speculators. Precious metals had been driven out of the country, a point of contention with President Jackson. The president issued a "specie circular," in July of 1836, ordering land payments to be made in specie (gold and/or silver). The banks did not have the necessary specie, and they subsequently failed. As this occurred, both individuals and corporations issued "certificates of indebtedness" that were used as currency. "Scrip" was given to contractors who paid their workers in a lesser scrip in order that people had the ability to purchase goods and services.

As Wentworth explains, "Nearly every man in Chicago doing business was issuing his individual scrip, and the city abounded with little tickets, such as, 'Good at our store for ten cents,' 'Good for a loaf of bread,' 'Good for a shave," 'Good for a drink,' etc., etc ... . The times for a while seemed very prosperous. ... But after a while it was found out that men were over-issuing." Confidence failed when it became apparent that this currency system was being abused. The author summarizes, "The bubble soon burst, and every one was the poorer for the good times they had enjoyed."

The white settlers outside of Chicago were very aware of the economic downturn. Letters written in 1836-38 from members of the Torode family in Brush Hill (which became Fullersburg) to their relatives in Ohio detail the inflated prices that were asked for land. Nicholas writes to his father on 1/30/1836 (before the financial panic of 1837), "...I believe that the land you can buy now you can in a short time trible your money, when I was to the office thare was several lots unsold so many speculators around here one has to be verry sly about entering a piece of land or else they will loose it." (sic)

Interestingly, J.J. Torode (brother of Nicholas) wrote to his family on 11/26/1838 complaining about the specie circular that "the Banks lacked up their vaults, and the Govermen gathere

all the circulating Specia, this causes a great distrefs throug out the Country." (sic) He also observed the inflation occurring, writing, "Horses from $50 to $200 a yoke or pare oxen $50 to $100, Cows from $15 to $40, Land an Acre from $8 to $20... ." (sic) He notes that the government land would all be bought by the settlers at $1.25 per acre.

The residents of Fullersburg (just west of Chicago) were all in the same situation. They were neighbors and friends, and the Torodes mention in their letters socializing with several families whose names are familiar to local historians, including the Fuller family. Ben Fuller, the founder of Fullersburg, boosted the population when he brought his wife, parents, and eleven siblings to the area in 1835. Although the Fullers became farmers, Ben also helped to establish businesses in the village, including an inn and "The Farmer's House," where the local residents were able to gather and purchase necessities. One can assume that the unique currency arrangements that were made in nearby Chicago also were utilized here during the 1837 financial crisis.

In their book A History of the County of DuPage, Illinois, historians C. W. Richmond and H. F. Vallette discuss the township of York, which included Brush Hill/Fullersburg and part of Salt Creek. "The first settlers of this town were preeminently fitted to endure the trials incident to frontier life. They were 'made of the right stuff,' and advanced boldly with the standard of civilization, regardless of danger, and knowing no dread of hardships." The Torode family letters also describe the camaraderie between these resident pioneers, as they shared seeds for planting and helped each other in their time of need. Ben Fuller even assisted the local Potawatomi by teaching them how to shoe their horses. It is likely that the fellowship between them was a factor in their survival of a major financial crisis along with other difficulties. Richmond and Vallette might have speculated that they navigated this economic downturn because of their nature; as stated by the authors, "Perhaps no town in this county can justly claim to itself a more hardy, daring class of pioneers."

S. Devick, M.A.