The Panic of 1837

On Sunday, June 5, 1836, handbills went up around the town. Headlined THE RICH AGAINST THE POOR! they denounced Judge Ogden Edwards, who had just acquitted Richard Robinson of the murder of Helen Jewitt, as “the tool of the Aristocracy, against the People!” A week later, a gigantic evening rally drew nearly thirty thousand workingmen—roughly one-fifth of New York’s adult male population—to City Hall Park, where they berated the judge again, hanging and burning his effigy for good measure. This time, however, the huge throng was not protesting Edwards’s role in acquitting Helen’s killer but rather his sentencing of twenty journeyman tailors who had been found guilty of going on strike.

The tailors’ trial capped an employers’ effort to crush New York’s fledgling labor union movement, which had been launched three years earlier by workingmen caught in the boom era’s downdraft. In 1833 inflation had sent the cost of food, fuel, and rent climbing. To restore their real wages and reverse their declining control over the workplace, skilled journeymen set out to make Manhattan a union town.

In the spring of 1833 the Journeymen House Carpenters struck for higher wages. Other sweated carpenters joined them, multiplying the union’s ranks fivefold. The Typographical Association of journeyman printers rallied behind the carpenters’ walkout. Journeyman tailors offered support. So did stonecutters and painters.

With fraternal backing, the carpenters won. Almost immediately the allies formalized their ad hoc mutual assistance compact. Representatives of nine crafts formed the General Trades Union of the City of New York (GTU), an organization, the carpenters declared, that would stand as “one great phalanx against the common enemy of workingmen, which is overgrown capital supported by AVARICE.”

The GTU made clear, in the preamble to its constitution, that an irreparable breach had opened up between masters and journeymen—former partners in the Trades—to the latter’s detriment. “We the JOURNEYMAN ARTISANS and MECHANICS of the City of New York,” the document proclaimed, believe that “as the line of distinction between the employer and employed is widened, the condition of the latter inevitably verges toward a state of vassalage while that of the former as certainly approximates towards supremacy.”

Unionists denied their labor was a mere commodity, something to be regulated by the marketplace. Wage-work could be squared with a just society only if journeymen were paid the full value of their labor, that value to be determined by the workers themselves. Unionists were not mindlessly opposed to mechanization, chairmaker John Commerford stressed, but they wanted assurances that any worker facing replacement by a new machine would be secured “from want, until he could obtain a situation at least as good as that from which he was about to be driven.”

The General Trades Union swiftly established a vivid presence in the city. On Evacuation Day (November 25) of 1833—the “anniversary of our entire liberation from foreign thralldom”—the GTU’s now twenty-one member organizations underscored their separation from former craft masters by parading, four-thousand strong, along the Bowery and Broadway. For the first time in New York City’s history, organized labor was independently on the march.

The new movement sprouted a panoply of union songs, banners, and insignias. It launched a newspaper—the Union— to complement George Henry Evans’s popular Working Man’s Advocate, his new prolabor organ the Man (1834), and the editorial support offered by the Sun and Transcript penny papers. In 1834, moreover, New York workers formed (and dominated) the National Trades Union (NTU), a clearinghouse for reports on the state of labor around the country. It too started up its own paper, the National Laborer.

Though dominated by native-born journeymen, the GTU reached out to newly naturalized immigrants in the city. To discourage ethnic division in its ranks, the organization prohibited discussion of religion and eschewed organized politics.

Not everyone was welcome in New York’s house of labor, however. Blacks and women were left outside; indeed the GTU and NTU opposed female labor altogether. Having seen employers use women operatives as wedges to transform the textile, shoemaking, and tailoring trades, the men insisted that women’s place was in the home, supported by adequately waged fathers or husbands. The tailoresses once again made bold to disagree, with one seamstress demanding: “If it is unfashionable for the men to bear the oppression in silence, why should it not also become unfashionable with the women?” The sewing women attempted once more to organize on their own, but faced with male unionists’ stubborn patriarchy, their efforts proved evanescent.

GTU-backed strikes mounted steadily between 1833 and 1835. Many skilled journeymen, day laborers, sailors, and canal workers won higher wages and better conditions. New York workers also pushed successfully for a ten-hour day. Skilled shipwrights, then- labor irreplaceable in the booming riverfront yards, won the right to hang their own “mechanics bell” at the corner of Stanton and Goerck streets, on a twentyfive-foot-high tower next to Isaac Webb’s yard. Signaling the end of each ten-hour day, the bell overrode the customary “dark to dark” schedule, and President Jackson ordered the Navy Yard to adopt the new standard.

One of the GTU’s most vehement demands was the abolition of prison labor, which undercut wage levels and forced laborers to compete with “felons and scum.” Stonecutters and masons were incensed that New York building contractors could purchase marble cut and hewn at Sing Sing. The Manufacturers of Marble Mantels and 325 journeyman marblecutters joined in petitioning the state legislature to outlaw the practice. The GTU also condemned the “State Prison Monopoly.” All to no avail.

When the newly established New York University contracted in January 1833 to purchase prisoner marble for their University Building going up on the east side of Washington Square, workers resorted to direct action. On the evening of October 24, 1833, roughly 150 men marched to the Broadway and 4th Street marble works of Elisha Bloomer, a contractor notorious for his use of prison products. Hurling rocks and brickbats, the crowd smashed Bloomer’s doors and windows and broke some marble mantels. The mayor called out the Twenty-seventh Regiment, which dispersed the protestors, then camped out on Washington Square for four days and nights to forestall further outbursts. Continued union pressure did wring a weak ban on prison labor from the state legislature, but the law had little effect, and NYU continued to use Sing Sing stone.

In 1836 unions expanded their organizing drive in a desperate attempt to keep up with rocketing inflation. “The nominal value of every article of necessity has been greatly increased,” union leader Seth Luther told a Brooklyn labor audience, and working people were being “compelled to pay enormous rents or to be turned out of doors.” Yet despite climbing costs, Luther noted, the “price of labor has not received a proportionate advance.” Tailors, stonecutters, shoemakers, and cabinetmakers launched industrial actions—ten major turnouts in the skilled trades alone. Coal heavers and other unskilled laborers walked out as well. Even manure carters struck for an increase in pay from the Common Council.

As usual, the most convulsive strikes came on the waterfront. In February stevedores and riggers marched from ship to ship, pulling hundreds off the job, effectively shutting the port. Police efforts to disperse the strikers landed one watchman in the hospital with a fractured skull. The strike spread. One body of stevedores hived off from the docks and marched through the streets of the commercial district. Hundreds of laborers cleaning up postfire debris downed tools and joined them. High Constable Hays coaxed the fire workers back to their job, but the ongoing disruption of commerce led the mayor to call out the Twenty-seventh Regiment yet again. The troops paraded at City Hall Park in a show of force daunting enough to drive the stevedores back to work. For the first time, New York City had used the military to break a strike.

Despite this success, employers were thoroughly alarmed. In 1833 there had been virtually no labor movement. Now, in 1836, two-thirds of New York’s workingmen were enrolled in fifty-two confederated unions. Businessmen counterattacked by organizing pugnacious employer-only trade associations, like the Society of Master Tailors, which attacked unions for subverting the civic weal. Labor, the businessmen declared, was just like any other commodity, and its value should be set by the free market. Labor unions might in the short term interfere with the market’s “natural” workings and extort higher wages from businessmen, but this would only drive up prices, thus hurting consumers while making New York products uncompetitive. In the end strikers would only bankrupt their employers and liquidate their own jobs.

Workers, employers argued further, should pursue individual not collective improvement. An industrious and virtuous workman, especially if he stayed sober, would surely rise in society. Workingmen should quit unions, practice self-discipline, and join groups like the New-York City Temperance Society, which under evangelical merchant Robert Hartley’s leadership explicitly opposed trade unions.

Employers’ groups adopted tougher tactics too. Early in 1836 the Society of Master Tailors’ member-bosses cut wages and announced they would not employ union men. Journeyman tailors responded by launching a GTU-supported strike and by establishing cooperative workshops as an alternative to the wage system. February’s use of troops to end the dockworkers’ strike only redoubled the tailors’ militancy. Battles broke out among strikers, strikebreakers, and policemen. Other unions “turned out” too, so many that Bennett’s anti-union Herald perceived “a general movement over the city.”

The master tailors now turned to the courts, encouraged by a recent upstate ruling from Chief Justice Savage of the state supreme court. Declaring trade unions “monopolies of the most odious kind and injurious to trade,” Savage found that “a man has the right to work as he pleases” and that existing law forbade strikes. In late March the boss tailors, citing this precedent, won a conspiracy indictment against twenty strikers. In response, the unions took to the streets. Several thousand workers marched up Broadway with bands and banners, proclaiming their right to regulate their own wages and denouncing banks, politicians, and corporations. “Are we not on the eve of another revolution,” the Herald wondered, such “as we witnessed among the mechanics in 1829?”

The tailors’ trial began in May, Judge Ogden Edwards presiding. Edwards, a Whig and soon-to-be-nativist, had no love for labor unions. His charge to the jury followed Savage closely in stigmatizing them as illegal combinations. This enraged the Union. In a June 1 tirade, the labor paper warned that “if an American judge will tell an American jury that the barriers which the poor have thrown up to protect the growing avarice of the rich are unlawful, then are the mechanics justified the same as our own fore Father’s [sic] were in the days of the revolution, in ARMING FOR SELF-DEFENSE!!” Handbills were plastered throughout the city declaiming that “the Freemen of the North are now on alevel with the slaves of the South !, with no other privileges than laboring that drones may fatten on your life-blood!” Blazoned with a coffin, it summoned freemen to City Hall, where “the Liberty of the Workingmen” was to be interred by Judge Edwards.

On June 6 Edwards delivered the tailors’ sentence, levied heavy fines totaling fourteen hundred dollars, and lectured the courtroom that “in this favoured land of law and liberty, the road to advancement is open to all, and the journeymen may by their skill and industry, and moral worth, soon become flourishing master mechanics.” Labor unions, Edwards added, were a foreign idea, “mainly upheld by foreigners.”


Over the next week, union men collected money in taverns and shops to pay the men’s fines, while arranging for the giant rally at City Hall Park on June 13. Though the assembled multitude cheered the incineration of Edwards’s effigy, they opted in the end for a less incendiary strategy, agreeing with orators that the outlawing of strikes called for a counteroffensive at the ballot box. Since the two major parties, speakers argued, were as one in their efforts to “crush the laboring men,” the gathering resolved to form a “separate and distinct party, around which the laboring classes and their friends can rally with confidence.”

The word “friends” was crucial. The laboring men were not prepared to act on their own—as the Workingmen had in 1829—but they were willing to work with the Friends of Equal Rights, a party recently founded by veteran Workies and dissident Democrats. The new group’s leadership, after all, included such labor activists as Alexander Ming Jr. and Levi Slamm. Ming, a printer, had been prominent in freethought circles, a close associate of Thomas Skidmore, and a candidate of the Workingmen’s Party back in 1829. Locksmith Slamm was a delegate to the General Trades Union. The new party, moreover, backed repealing restraints on organizing unions, instituting a mechanic’s lien law, expanding the public schools, adopting a metallic currency, and curtailing banks.

Yet the Equal Righters were not a strictly labor party. They believed rather in a united front of all “producing classes”—including sweated journeymen, small manufacturers, shopkeepers, and professionals—against parasitic bankers, aristocrats, monopolists, corporations, and undeserving paupers. Most Equal Righters were grocers, tradesmen, editors, lawyers, small masters, or Tammany politicians disgruntled at the preeminence of bankers in their party. While open to unionist concerns, their core convictions were a hatred of “monopolies” and an insistence that New York City’s economic life be democratized.

The man who had inspired the Equal Rights movement was William Leggett, assistant editor at the Evening Post. Leggett, a native New Yorker, was a dashing and tempestuous firebrand, as passionate in his hatred of despotism and oppression as were his favorite poets, Byron and Shelley. In 1823, when a midshipman in the navy, Leggett’s railings against a tyrannical captain got him court-martialed and cashiered. Back in New York in 1825, he published verse, tried and failed to become an actor like his friend Edwin Forrest, got a job (in 1827) writing theater criticism for the New-York Mirror, then branched into writing about literature and established his own magazine, the Critic. In 1829, his journal having proved an intellectual success but a financial disaster, Leggett took the Post position as William Cullen Bryant’s second-in-command.

Leggett’s fiery editorials against banks and monopolists won him enthusiastic supporters. So did his reputation as a duelist and his street-trouncing in 1833 of editor James Watson Webb. In the summer of 1834 Bryant departed for a lengthy European sojourn, and Leggett, left in charge, escalated his war on “monopoly.”

Leggett argued that growing municipal inequality and declining working-class fortunes were alike the result of special privileges that the rich and well-connected extracted from government through cronyism and corruption. These privileges gave their holders an edge over smaller competitors, while injuring consumers by boosting prices artificially. To bring down this state-supported “order of American Barons,” Leggett demanded government cease all regulation of the economy and replace case-by-case chartering of companies with a general incorporation law. This would allow “the humblest citizens” to combine their small savings into “a vast aggregate of capital,” which could compete “with the capitals of the purse-proud men who now almost monopolize certain branches of business.”

For all his blistering denunciations of “monopolists,” Leggett was no anticapitalist. His principles were, in fact, widely accepted by many “purse-proud” businessmen: Whig organs like the Journal of Commerce cheered when the Post attacked usury laws (restraining interest rates banks could charge) as “arbitrary and unjust.” Yet Leggett pushed his antimonopolism with such ruthless consistency that it transmuted into an almost revolutionary challenge to New York’s traditional political economy, which had long fostered mutually profitable links between magistrates and merchants.

Leggett attacked the monopoly on ferry service to Brooklyn as a prime example of “exclusive privileges.” City authorities, by refusing to license new ferry operators, enabled existing ones to jack up the price of crossing the East River, generating fat profits, which they then shared with the city. Not surprisingly, affluent ferry operators and their supporters on the Common Council were as one in branding Leggett a dangerous radical. But his rationale was essentially the same as that which the Supreme Court used to dismantle the Fulton-Livingston combine, and the limits of Leggett’s radicalism quickly became apparent when the Sun advocated public ownership of, and free access to, all ferries. Leggett indignantly denounced the idea. “Why not free omnibuses, markets, and houses?” he sputtered. The city, he insisted, should simply allow “unrestricted competition with no other restraint but the laws of supply and demand and we will have enough boats.”

Leggett and his followers tackled such powerful corporations as the New York and Harlem Rail Road, the New York Gas-Light Company, and the New York Life Insurance and Trust Company. They went after the fire insurance industry and denounced the auction system that had made Philip Hone’s fortune. They lit into banks, particularly those that secured their charters by bribing politicians. And to forestall further corruption of legislators by would-be monopolists, they demanded incorporation be thrown open to all.

Equal Righters also tore into the ancient network of municipal regulations, dismissing the notion that government had any moral obligation to intervene in the economy on the public’s behalf. Society was “too much governed,” they thought, and they demanded root-and-branch deregulation. They sought to abolish inspectorships and end Common Council interference with trade. They wanted to scrap the licensing system, which fattened the purses of butchers and grocers and cartmen by protecting them from competitors, while filling the city’s coffers with fees from the protected. Licensing constituted an indirect tax on consumers. “We cannot pass the bounds of the city,” said the new party in 1836, “without paying tribute to monopoly; our bread, our meat, our vegetables, our fuel, all, all pay tribute to monopolists.”

Leggett and friends also chopped away at municipal backing for literary and cultural institutions, which privileged the established vis-a-vis newcomers. They criticized government aid to asylums for the insane poor, preferring care by kin. They decried regulation of the medical profession as a ploy by conventional doctors to drive homeopathic, botanicalist, and patent medicine rivals out of business.

In 1835, after a year at the editorial helm during which he’d managed to alienate most of the city’s elite, Leggett proceeded to outrage the leaders of his own Democratic party. He denounced President Jackson for banning abolitionist literature from the mail: the editor disapproved of the antislavery group’s tactics, but he detested government censorship. Tammany in return cut off the paid announcements that the Evening Post received as a party organ, and the post office—which Leggett had urged be stripped of its monopoly and turned over to private enterprise—likewise canceled its advertising.

In early October the Hall read Leggett out of the party altogether, which galvanized Leggett’s antimonopoly supporters into action. They had been meeting as an informal faction at the Military and Civic Hotel (on Bowery and Broome). Now they decided to wrest the Democratic party from the faction led by bankers Gideon Lee and Preserved Fish, by taking control of the general meeting. On the appointed evening, however, canny Tammany men arrived early, entered by the back door, quickly organized the meeting, nominated a bank president as chair, and were about to ram their ticket through when the antimonopoly forces burst in and forced the Tammanyites out. As they left, departing Tammany men turned off the gas lights, plunging the hall into darkness. But this was an old trick—it had been used against Fanny Wright years before—and the antimonopolists had come prepared. Whipping out their “loco focos,” the new friction matches, they lit candles and completed their business, winning the nickname of “Loco Focos” in the process. In February 1836 they formally established the Friends of Equal Rights Party and started their own paper, the Democrat.

In the April 1836 mayoral elections—which the new organization considered a test of “whether the rich or the labouring classes, the few or the many, are to rule this wide Confederation,” the Equal Rights Party ran Alexander Ming for the mayoralty. He was opposed by the “Bank Democrats,” who chose the incumbent, Cornelius Lawrence, and the “Bank Whigs,” who selected Seth Geer. Both, in Loco Foco eyes, were agents of the “souless [sic], cadaverous, unmanly aristocracy of Wall Street.” A fourth entrant, Samuel F. B. Morse, entered on behalf of the Native American Party.

Democrats worked hard to recapture Loco Foco supporters by incorporating their issues and personnel, Tammany came out for government control of the banking system. It supported the GTU’s former president Ely Moore for congressman. Democrats also appealed to party (and local) loyalty, noting that favorite son Martin Van Buren was running for the presidency. In addition, the pressure for independent action by journeymen slackened when another upstate conspiracy trial reversed direction, acquitted some accused unionists, and ushered in a more prolabor climate.

The election, quiet and orderly, proved a triumph for the Democrats. Lawrence won easily, with 60.2 percent of the vote. The Whig, Geer, got 23.5 percent. Ming and Morse pulled down a mere 10.4 and 5.9 percent respectively. Whigs and Democrats split the Common Council equally, eight and eight. The Equal Rights movement had failed to establish itself as a serious rival of the major parties, but it had succeeded in pressuring the Democrats into adopting some of its positions. For the next half century, Tammany Hall would represent itself as the de facto party of New York’s working classes, even while providing a haven for bankers and merchants with quite different interests and sensibilities.

Certainly the newly reelected Mayor Lawrence was not prepared for the enthusiasm of his followers when, on New Year’s Day 1837, he opened his house to the public in the traditional manner. To the delight of Philip Hone, who recorded the proceedings in his diary, the Democratic masses treated Lawrence’s house like a Five Points tavern. “Every scamp who has bawled out ‘Huzza for Lawrence’ and ‘Down with the Whigs’ considered himself authorized to use him and his house and furniture at his pleasure; to wear his hat in his presence, to smoke and spit upon his carpet, to devour his beef and turkey, and wipe his greasy fingers upon the curtains.” Served Lawrence right, Hone thought. Having pandered to the lower orders, he’d have to put up with them, lest they throw him out of City Hall in favor of one of their own class, who would be even “less troubled than him with aristocratical notions of decency, order, and sobriety.”


Over the next several months, as the speculative binge continued at a frenzied pace, inflation ravaged the populace. By February 1837 the price of flour had shot up to nearly $12.00 a bushel—from $4.87 back in December 1834—and pork went from $13.00 to $24.50 per barrel over the same period.

Rumors circulated that the city’s flour merchants—firms like Eli Hart and Company and S. B. Herrick and Son—were hoarding great quantities of flour and grain, hoping to drive prices even higher. New York’s commission merchants had traditionally bought farmers’ crops, stored the grain in huge warehouses, and waited for the most profitable moment to sell. Such behavior, perfectly in tune with the new market universe, was utterly at variance with the old but not forgotten moral economy, and it touched off a spate of angry editorials. “An atrocious and wicked conspiracy by rich speculators” was underway, the Herald claimed, and the New Era, a new penny press, castigated “monopolists” as “veritable vermin who prey upon the community.”

More than food was surging in cost. Coal prices were going up, and the New Era suggested forming cooperatives for the purchase and sale of fuel. Rents too were climbing rapidly, and the same paper called on the city to build small one-family dwellings, a pioneering proposal for what would come to be called public housing. Bennett counseled (in the Herald on February 3) that tenants who could not meet the exorbitant demands of the “real estate monopoly” should refuse to leave their apartments after leases expired May i, thus forcing landlords into court. He proposed a mass meeting in the Park to consider such propositions.

A week later, with the city enveloped in snow and icy winds, placards went up around town, over the signature of several Loco Foco leaders, calling for a four P.M. rally at City Hall on Monday, February 13, to air grievances. “BREAD, MEAT, RENT, FUEL! THEIRPRICES MUST COME DOWN!” it blared. “The People will meet in the PARK,” it explained, to “inquire into the Cause of the present unexampled Distress, and to devise a suitable Remedy. All Friends of Humanity, determined to resist Monopolists and Extortioners, are invited to attend.” The Post and Herald urged participation.

Monday the thirteenth was winter’s bitterest day to date, with wind whipping through the Park, but roughly five thousand people showed up. Loco Foco speakers, among them Alexander Ming, argued the connections between the flood of paper currency and the inflationary spiral. They read off and won assent to resolutions demanding hard money and an end to ferry and market monopolies and to municipal interference in trade. But what really got the crowd’s blood up were those speakers who bluntly blamed landlords and flour merchants for the outrageous price of shelter and provisions.

The last speaker, a man whose identity was never ascertained, tore into Hart and Company, ending with the peroration: “Fellow-citizens, Mr. Eli Hart has now 53,000 barrels of flour in his store; let us go and offer him eight dollars a barrel for it, and if he will not take—” at which point someone touched his shoulder, and he concluded: “We shall depart in peace.”

A voice in the crowd bellowed, “To Hart’s flour store!” Over the protests of Loco Foco leaders, the crowd headed to Hart’s, on Washington Street between Dey and Cortlandt, where they found the large brick building barricaded in anticipation of their arrival. Mayor Lawrence arrived to remonstrate with the rapidly swelling multitude. He was shouted down, barraged with stones and barrel staves, and “compelled to retreat for his life,” according to the Post.

A furious assault now carried the building. After entering the counting room, where they smashed desks and scattered papers, rioters hurled hundreds of barrels of flour and sacks of wheat to the street below. There—although a “tall athletic fellow in a carman’s frock” shouted, “No plunder, no plunder; destroy as much as you please”—women (in the words of one hostile account) “like the crones who strip the dead in battle fill[ed] the boxes and baskets with which they were provided, and their aprons, with flour, and ma[de] off with it.”

At dusk, a detachment of rioters marched to the South Street store of E. and J. Herrick, but spared it when a company representative persuaded them the firm had sold off its flour at low prices. The crowd carried on to S. H. Herrick and Son, at Coenties Slip, where it broke in and began a similar process of destruction but agreed to desist when an agent promised to give every barrel in the store to the poor. Meanwhile, the mayor had called out the militia, the marshals and watchmen having proved ineffective. The troops took several hours to assemble, but by nine P.M. they had cleared remaining rioters from the vicinity of Hart’s, and the affair was over.

The flour riot was a throwback to the colonial (and beyond that the English) tradition of crowds enforcing the moral economy by punishing those who profited from economic hardship. It constituted a violent petition to the city’s elites, a demand they act responsibly for the common good. But the appeal fell on ears more attuned than ever before to the ethics and logic of the marketplace. Conservatives, not surprisingly, denounced those who had deluded the “pillaging canaille, the colored people, thieves and Irish” into stupidly trying to lower the price of flour by making it scarcer. But the radical William Leggett concurred with their analysis. With perfect consistency, he denounced unionists who would combine to raise wages “yet attack Capital for raising flour prices.” The crisis was due to a deficient crop and inflated paper money. Violent interference with the laws of trade was useless and indefensible.

The riot did not, therefore, produce a restoration of the assize on bread. What it did do was galvanize those who had been pushing for a strengthened police force. Within twenty-four hours of the riot a hitherto becalmed plan for adding 192 more watchmen sailed into law.

It was clear to at least some of the gentry, however, that repression would not be a sufficient response to the crisis. Philip Hone, foreman of a grand jury investigating the flour riot, agreed it had been an outrageous event. But Hone couldn’t help sympathizing with the “poor devils,” at least in the privacy of his diary. “What is to become of the labouring classes?” he asked himself on February 18. “It is very cold now, if it continues so for a month, then will be great and real suffering in all classes.” Presciently, Hone added the thought that “the present unnatural state of things cannot continue.”


On the ides of March 1837, the granite office building of J. L. and S. I. Joseph and 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, and Company—suspended payment on its debts and closed its Wall Street office. Brown and Hone defaulted too. It was “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, ninety-three 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.

Demands from overseas creditors escalated the pressure. “The accounts from England are very alarming,” Hone noted; “the panic prevails there as bad as here.” At April’s end a businessmen’s committee informed newly inaugurated President Van Buren that there had been “more than 250 failures of houses engaged in extensive business” and that 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 disaster rolled on. On May 1 Arthur Tappan went belly up. The Liverpool packet had brought heavy demands from British creditors, demands his once flourishing silk firm could not meet. Weakened by the great fire, the boycott by irate southern antiabolitionists, and now the default of country and city retailers, Tappan’s debts had mounted past the million-dollar mark, a sum few merchants grossed in a year. The devout merchant’s evangelical brethren were bewildered to find God scourging saints as well as sinners. Local antiabolitionist enemies were gleeful. “Arthur Tappan has failed!” gloated George Templeton Strong. “Help him all ye niggers!” But most men on Wall Street shuddered, for if Arthur Tappan could break, a complete collapse of wholesale merchants seemed inevitable.

Other sectors of the city economy reeled and staggered. The overheated real estate boom of the 1830s abruptly iced over. The price of lots plunged. Landowners near Bloomingdale Village had been getting $480 an acre in September 1836; by April 1837, Hone noted, they were lucky to clear fifty dollars. Stunned merchants calculated that the value of their real estate had “depreciated more than $40,000,000” in a scant six months. Hundreds of Manhattan landowners and builders defaulted on mortgages and lost their property through foreclosure.

Grand development schemes—like Samuel Ruggles’s Gramercy Park and Union Square—were put on hold. Brooklyn suspended construction of its City Hall, leaving an unfinished basement in a weed patch. Greater Williamsburg winked out. So did John Pitkin’s would-be metropolis of East New York. On Staten Island, New Brighton’s developers crumpled; their hotel and houses went to the block.

Far more damaging for the city’s future was the virtual cessation of wholesale speculative building. New York’s supply of housing fell behind the growth of population. Crowding in working-class districts worsened rapidly, setting the stage for future social disaster.

The stock market fell apart too. The value of locally held shares declined twenty million dollars. The average number of shares traded daily dropped from 7,393 in January to 1,534 in June. Hot new rail stocks nosedived as their companies collapsed. On April 5 work was halted on the Long Island Rail Road with only fifteen track miles laid between Jamaica and Greenport; it would remain stalled for years. Other projected lines—including one intended to connect Brooklyn with Fort Hamilton—died and were not resurrected. The Erie Rail Road survived, thanks only to a three-million-dollar loan extracted from the state legislature by influential directors.

The crisis of the railroads sped the disintegration of city manufacturing. Cutbacks in orders for iron and engines crippled foundries and machine shops, wounding even the giant Allaire works. Failed locomotive builders defaulted in turn on notes due metal dealers like Hendricks and Brothers. The economic storm flattened less industrialized operations as well: virtually all of New York’s major clothing firms foundered in 1837.

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. When the well-connected sugar merchant Moses Taylor applied to Brown Brothers, he was told they would not accommodate even “the U.S. Bank with J. J. Astor to back it as security.” Interest rates skyrocketed to 24 percent. “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 thirty thousand 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.”

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 10, 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.

“The volcano has burst and overwhelmed New York,” Hone told his diary, and the repercussions spread swiftly throughout the country. Within twenty-four hours, most banks in the Northeast had stopped gold and silver payments. More distant states followed suit as soon as the news from Wall Street reached them. In most places—and certainly New York—suspending specie payments was blatantly illegal, but metropolitan bankers prevailed on the Albany legislature to suspend the law. This saved them from bankruptcy and enabled them to continue doing business. Indeed, now freed from having to redeem their notes in specie, banks issued them in abundance. James Gordon Bennett, noting that the banks still had millions in coin, denounced this as “legalized and chartered swindling, without a parallel in the annals of crime and imposture.”

Merchants in debt were delighted: though legally obligated to pay their debts in specie, it was now impossible to do so, and this saved them from collapse. Some businesses carried on using notes and checks. Others resorted to barter and promises. Stores, hotels, and oyster cellars issued their own scrip, called shinplasters. “Go to the theater and places of public amusement,” wrote Captain Marryat, “and, instead of change, you receive an I.O.U.”

But the city’s overall economy, tied as it was to international markets, could not so easily finesse the crisis. At 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.


What had happened? This was the prime topic of conversation throughout the city. Explanations came in many sizes and shapes, but three predominated: some people blamed the government, some the banks, others the English.

Whig businessmen indicted Andrew Jackson. He had destroyed the Bank of the United States, the financial system’s only regulator, and then, in July 1836, decreed the government would accept only gold or silver as payment for public lands. In requiring hard coin, Jackson had hoped to halt the runaway inflation, and also the monopolization of land by northeastern speculators who had been using borrowed paper money to gobble up millions of midwestern acres. The real consequence, Whigs argued, had been to deepen the monetary crisis, and the Journal of Commercesavaged Jackson for “permitting government to investigate and direct the affairs of private business.”

From Jackson’s perspective, the panic was a necessary corrective—and deserved retribution—for the inflationary expansion generated by bankers and their paper money system. It would pass once all the “speculators and gamblers are broke.” Jack-sonian politician A. Z. Flagg agreed 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. Jacksonian Senator Silas Wright gave this analysis an anti-Semitic spin when he wrote that the failure of the Joseph brothers—“Jew brokers of New York”—was cause for rejoicing.

Jacksonians and Whigs agreed, however, that the crisis also had international roots. “The barometer of the American money market hangs up at the stock exchange in Lon­don,” one Democratic congressman said, and Philip Hone believed that the Bank of England was “arbiter of the fate of the American merchant.”

They were right. Both boom and bust had originated in Europe. British and Continental investors had poured capital into U.S. canals, railroads, and lands, first cautiously, then at a frenzied pace. In addition, Old World creditors let New World merchants import goods on credit. New York City had been America’s link to these money markets. Anglo-American merchant bankers like the Barings and Rothschilds had funneled capital and credit to Hudson River firms like Prime, Ward, and King, and Alexander Brown and Sons, who relayed them to the Continent, stoking the boom. New York wholesalers, and through them country storekeepers, ran up an enormous tab. State governments accumulated huge debts, then borrowed more to pay the interest. Gold and silver imports enabled banks to issue more paper money, facilitating speculation and generating inflation.

In the summer of 1836, what the English had given, the English decided to take away. The Bank of England raised its discount rate and reined in British bankers it thought too accommodating of Americans. The transatlantic flow of capital was suddenly and severely restricted. Eurocreditors demanded U.S. merchants remit their balances due, just as cutbacks in cotton purchases were driving down the price of America’s staple. This forced U.S. businessmen to pay in gold. Specie sailed back to Europe. New York City, which had facilitated the boom, now helped terminate it. Its hardpressed banks and merchants called in their debts. When New Orleans cotton factors and country retailers couldn’t pay, Pearl Street failed, Wall Street suspended, and a vicious contraction radiated out along the same trade routes upon which credit and capital had earlier traveled.

Proposed remedies varied dramatically with ideology and interest. Whigs called for reversing Jackson’s policies and bringing back a national bank. President Van Buren and the Loco Foco Democrats wanted to extend Jackson’s policies by severing all connections between the banking system and the government.

Debtors, for their part, wanted to suspend or scale back what they owed. They favored inflating the currency so they could repay their debts with dollars cheaper than those they had borrowed. Above all, farmers, producers, and thousands of businessmen across the country—including many Pearl Street merchants, leagued in the New York Board of Trade—wanted to postpone resumption of specie payments, which they feared would force them into bankruptcy.

Creditors wanted to put the country through the wringer of deflation and depression. They favored restoring the gold standard, which would force debtors to repay them with dollars more valuable than those they had borrowed. A phalanx of New York City financiers, led by the venerable Albert Gallatin and the firm of Prime, Ward, and King, called for resuming specie payments as soon as the banks were strong enough to withstand runs. Restoring paper money’s interconvertibility with gold would regain the good graces of overseas bankers—something deemed crucial for a country dependent on imported capital—while also deflating the economy.

Gallatin and the New York bankers succeeded, with some crucial governmental assists from the Erie Canal Fund (which lent beleaguered banks over two million dollars) and the Bank of England (which chipped in one million pounds sterling). Their vaults now stuffed with metal, New York banks resumed specie payments in May 1838. The country, including Philadelphia, reluctantly followed Manhattan’s lead. Wall Street, once a lionized lender, now became a hated creditor. The hard-nosed policies of New York’s banks were complemented by the tough tactics of its land speculators. Arthur Bronson, acting for himself and for eastern and English interests, lobbied vigorously and successfully against all western and southern moratoria and debt reduction schemes.

For a short time, it seemed that resumption had indeed resurrected the economy. Credit and capital flowed again from east to west. Businesses revived. States and corporations sold their bonds on the London market and launched new projects. The price of cotton rose. But when a bad harvest in 1839 forced England to export gold in order to import wheat, the Bank of England clamped down again, and the story repeated itself.

The depression deepened through the early 1840s. Imports fell. Real estate values sagged. Railroad construction fell by two-thirds between 1838 and 1843; canal construction plummeted 90 percent. Deflation replaced inflation: prices declined 46 percent between February 1839 and February 1843. Recompense for craftsmen and unskilled workers—for those lucky enough to find work at all—dropped about onethird between 1836 and 1842, often falling faster than prices and rents, thus driving real wages down.


The panic wrought startling reversals of condition at all levels of city society, noted the Common Council, making many “who but two years since considered themselves rich, poor.” General Winfield Scott had been invited by a group of leading New Yorkers to a public dinner in his honor, but after the crash he tactfully withdrew his acceptance, deeming celebration unseemly when so many of his hosts had gone broke.

The New York elite had long been more volatile than that of other American cities, as its members’ fortunes were more closely tied to mercurial mercantilism and speculative enterprise. But the novelty and thoroughness of changes in fortune wrought by the Panic of 1837 fascinated observers, generating a novel lore and literature of bankruptcy.

One visitor, Francis Grund, noticed that the commercial insolvency of New Yorkers “changes at once their friends, their associates, and often their nearest relations, into strangers. How many ties are thus broken by a single failure in business!” Some, Grund reported, positively relished news of others’ misfortune. One lady, on hearing of the return from London of “the wife of that vulgar auctioneer that wanted to outdo everybody,” remarked with satisfaction: “Well, she will find a sad change; her husband has failed since she was gone, and is said not to pay ten cents in a dollar.”

New York writer Charles Francis Briggs, who in 1839 penned perhaps the first depression novel—The Adventures of Harry Franco, a Tale of the Panic of 1837—followed it up, in 1843, with The Haunted Merchant, a study of ruination. Briggs compared the sudden collapse of a businessman to the shutting of a wild bird in a cage while its fellows soared above. The real horror, Briggs suggested, was less the loss of luxuries than the way former associates shifted their tone from familiarity to suspicion, from deference to insolence.

Such observations caught the brittleness of social ties within New York’s upper class but missed a deeper change in attitude toward failure ushered in by the panic. New York businessmen—and American capitalists in general—began shuffling off the stigma and shame once attached to insolvency. In the summer of 1839 city merchants started a campaign to allow them to discharge their debts through bankruptcy proceedings, freeing themselves to start up business again with a clean financial and moral slate. Reformers won passage of the Federal Bankruptcy Act of 1841, which, though repealed in 1842, lasted long enough for twenty-eight thousand debtors to shed $450 million dollars of debt.

Focusing on examples of the high-brought-low also overstated the collective vulnerability of the New York rich. Their ranks were far from decimated. Some had the wherewithal to survive even such a substantial setback. In 1838 Philip Hone declared that he, like half his friends, was deeply in debt, with no prospect of ever getting out. A year later, Hone was free and clear—albeit shorn of two-thirds his fortune—and had taken up his accustomed lifestyle again.

Hone did have the grace to wonder “how the poor man manages to get a dinner for his family,” as well he might have. Mass bankruptcies had produced massive layoffs. By April 1837 collapse of the real estate industry had already devastated the construction trades; one paper reported that “six thousand masons and carpenters and other workmen connected with building had been discharged.” A citywide survey that month estimated that one-third of all New York workers had lost their jobs and that in addition to these fifty thousand unemployed, another two hundred thousand were without adequate means of support. In May Captain Marryat observed that “mechanics thrown out of employment, are pacing up and down with the air of famished wolves.” Newcomers were particularly hard hit: “The Irish emigrant leans against his shanty, with his spade idle in his hand, and starves.”


The Tunes, a cartoon depicting the Panic of 1837 and its consequences. Lithograph by Edward W. Clay. Unemployed mechanics look for work on the right, a mother and child plead for assistance from a fat banker on the left, and a run on the Mechanics Bank unfolds in the background. (© Museum of the City of New York)

Men posted notices in City Hall offering to do work of any kind for three dollars a week. In August, when a job for twenty laborers was advertised at four dollars a month plus board, five hundred applied. Asa L. Shipman, in his early twenties when the calamity struck, lost his job, looked bootlessly for work, lived for a time on credit from a local grocer, then began subsisting on one meal a day. Shipman was lucky, however. A regular at church, he attracted the attention of a gentleman who decided he was worthy of assistance and lent him money weekly until the worst was over.

Most men were not so fortunate. Some camped out in Chatham Square, hungrily eyeing the corn that African-American girls were selling at a prohibitive three cents an ear, waiting until ten P.M.—clearance sale time—when the chants switched to “Hot corn! Two cents!” Others camped out at the grogshop, downing homemade liquor at three cents a glass. By the end of 1837 many were panhandling outside oyster-cellar doors. Others had joined the throngs of women—many of them mothers with children—who begged in the streets or went door to door seeking alms.

For a time, the working-class movement of the 1820s and 1830s retained some collective energy. Laborers packed into a series of Loco Foco-orchestrated demonstrations. To cries of “Our families are famishing around us,” they backed calls for hard money, economy in city government, jobs on public works, and removal of destitute immigrants to the country. One protest meeting in Greenwich Village threatened to march on the banks unless given work. Respectable observers shivered, with one witness reminded of the “Jacobins, and the Guillotine.” No heads or tumbrels rolled, however, and the agitation came to little. Loco Foco Democrats soon effected a rapprochement with their Tammany Hall counterparts, winning concessions on the monetary issues that most agitated them. Their departure left workers leaderless, because by then their unions had been destroyed.

In May 1837 the Journal of Commerce had bugled an antilabor offensive. “Now is the time to deliver mechanics and their families from the cruel oppression of the unions,” the paper urged. “The rules of the unions as to hours, pay, and everything else ought to be thoroughly broken up.” Employers should lengthen the working day. “The ten-hour system is one of the worst deformities of their deformed code,” the Journal ranted.

Given the availability of thousands of desperate unemployed, the employers’ offensive to increase hours, reduce wages, and rid themselves of union troublemakers proved highly successful. By the end of June, as one journeymen’s association noted, bosses had effectively leagued together “to take advantage of the present depressed state of our trade and business in general, in order to reduce our present prices, and to render us, if possible, obedient vassals to the nod of the oppressor.” By midsummer the union movement in New York City was dead, the National Trades Union interred alongside it.

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