BEFORE “OCCUPY WALL STREET”
NOTES ON PRIOR NEW YORK CITY PROTESTS AGAINST ECONOMIC CRISES
CROWDS ROLL TOWARD BANKS
On the ides of March, 1837, the granite office building of J.L. and S.I. Joseph & Company caved in with a crash that shook every building on Wall Street. Two days later the firm itself collapsed, frightening the financial district far more than had the tumbling stonework, for the fall of the House of Joseph presaged general disaster.
The firm failed because New Orleans merchants, caught short by a drop in the price of cotton, had defaulted on vast sums they owed their Manhattan creditor. Soon, hundreds of other New York City brokers, commission houses, and dry goods jobbers also found their bills to southerners coming back unpaid. Many of these companies were far weaker than the defunct Josephs, who had been agents of the mighty Rothschilds. One after another, dragged down by the foundering cotton economy, they sank into default.
Mayor Lawrence's firm -- Hicks, Lawrence & Company -- suspended payment on its debts and closed its Wall Street office. Brown & Hone defaulted too. It is "a dark and melancholy day," former Mayor Philip Hone informed his diary. "My eldest son has lost the capital I gave him, and I am implicated as endorser for them to a fearful amount."
Failure after failure jolted Wall and Pearl Streets. By April 8, the Journal of Commerce reported, 93 firms had gone under. Three days later the total reached 128. "The merchants are going to the devil en masse," wrote George Templeton Strong, a student at Columbia College who had begun keeping a diary as meticulous and opinionated as Hone's.
At April's end, a businessmens' committee informed newly inaugurated President Van Buren that there had been "more than 250 failures of houses engaged in extensive business," and the merchandise in New York's warehouses had lost a third of its value. As their fortunes melted away, some desperate merchants set fire to their own stores, seeking insurance payouts worth double and treble the value of their stock.
The ruin of merchants and manufacturers alike had been hastened by, and in turn exacerbated, a crisis of the financial system. To protect their reserves of specie -- gold and silver coin -- banks virtually ceased lending, turning away even the most respectable merchants. Leading brokerage houses were equally tightfisted. Interest rates skyrocketed to 24%. "Money is exorbitantly dear," wrote Hone in March. "The bloodsuckers are beginning to be alarmed, and keep their unholy treasures locked up."
Worse, banks began calling in outstanding loans, pushing more merchants over the edge into default. In turn, businessmen, who feared the banks might not survive, rushed to convert their deposits and bank notes into precious metal.
So did the citizenry. The Loco Focos, who all along had been denouncing banks and paper money, called a mass meeting in City Hall Park on March 6. Over 30,000 people turned out, more than had attended the February rally preceding the Flour Riot. The assemblage urged noteholders to cash in their banknotes, "and thus make these soulless corporate extortioners pay their debts to the people as promptly as they compel payment from the people." In April, with the panic spreading, angry crowds of the "poor and laboring classes" (Hone noted) gathered at the banks, demanding the return of their deposits "in a most alarming manner." Hone believed High Constable Hays and his "clubadiers" could protect private property, but George Templeton Strong was less sanguine. He feared that if the banks collapsed, "political convulsion and revolution, I think, would follow."
On May 3 milling crowds besieged the Dry Dock Savings Bank. Mayor Lawrence managed to convince them that their money was safe. But the next day, the President of the Merchants' Bank was found dead -- "Some say prussic acid," Strong reported -- and the bank runs began again. Captain Frederick Marryat, a noted English writer, arrived to find that "suspicion, fear, and misfortune have taken possession of the city," and that "the militia are under arms, as riots are expected."
Early next morning, the Dry Dock stopped payment. A score more merchants promptly failed. Throughout the city, people began jamming toward bank tellers shouting "Pay! Pay!". By May 9, $652,000 in coin had been drained from Manhattan vaults. Then, on May tenth, all twenty-three of Manhattan's banks announced they would henceforth refuse to exchange specie for paper. An infuriated crowd boiled into Wall Street. But the city had summoned up the Twenty-Seventh Regiment -- "the monopoly aristocracy of New-York garrisoned their fortresses with arms and men," as one Loco Foco put it -- and the day passed with much tumult but no bloodshed.
Other sectors of the city economy reeled and staggered. The overheated real estate boom of the 1830s abruptly iced over, with stunned merchants calculating that the value of their real estate had "depreciated more than $40,000,000" in a scant six months, and foreclosures became rampant. There was a virtual cessation of speculative building in working class districts, and crowding worsened rapidly, setting the stage for future social disaster. Hot new rail stocks nosedived as their companies collapsed, halting construction work (the Long Island Rail Road would remain stalled for years), and speeding the disintegration of city manufacturing as cutbacks in orders for iron and engines crippled foundries and machine shops. Virtually all of New York's major clothing firms foundered.
By the end of May, Hone wrote, "a deadly calm pervades this lately flourishing city. No goods are selling, no business stirring, no boxes encumber the sidewalks of Pearl Street." Barges and boats lay idle at the docks. "Many of the counting houses were shut up, or advertised to be let," wrote a British traveler. "The coffee houses were almost empty, the streets near the water side were almost deserted; the grass had begun to grow upon the wharves." Panic had given way to depression. It would last till the mid 1840s.
There were a host of competing explanations for what had happened. Whig [think Republican] businessmen blamed Democratic president Andrew Jackson for "permitting government to investigate and direct the affairs of private business." Jacksonians argued that New York City bankers had blown up "land bubbles and stock bubbles" and now were "reaping the bitter fruits" -- an animus strengthened when investigators found that bank officers had filched perhaps $1.5 million from various Manhattan institutions.
There was less debate over how to respond on the local level to an explosion in unemployment. On the surface, the municipality's response seemed munificent. The number receiving relief in New York City leapt from under 30,000 in 1837 to over 80,000 in 1838. In addition, the population of the Almshouse jumped by a third, to over 2500. But the Mayor worried that New York would get a reputation for liberality that would attract out-of-town "beggars, paupers, vagrants and mischievous persons." Propertied Whigs and Democrats were as one in demanding municipal retrenchment and threatening to move to Brooklyn, which publicized itself as a refuge from onerous impositions.
In 1841, the Mayor called for isolating able bodied paupers in a Workhouse on Blackwell's Island. Zealots urged more ruthless measures, the complete elimination of any public aid that would keep paupers alive. Such sentiments remained beyond the pale of decent opinion, but so did Horace Greeley's assertion that it was the depression itself that had made it impossible for many who wanted work to find jobs. What New York needed, Greeley declared, was not a Workhouse but a "House of Industry" that could provide temporary employment in hard times. The elite consensus, disagreed, and soon a Workhouse was up and running.
Dominant opinion was equally opposed to government's providing public works jobs for the unemployed. The Council did authorize a few street and sewer projects (in part to take advantage of low wages), but established such stringent conditions for contractors that no bids were submitted, and no work provided.
There was however one magnificent exception. The Croton Aqueduct had been authorized before the panic struck, and powerful backers would sustain the gigantic state undertaking throughout the depression. Its construction would serve as New York's de facto jobs program.
[For a fuller account, see Burrows & Wallace, Gotham, Chapter 37]