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 Introduction | 1792 | 1837 | 1857 | 1874 | 1930 | 2011




At the end of August, 1857, the New York branch of the Ohio Life Insurance and Trust Company suddenly closed its doors. It soon transpired that the putatively rock solid institution had been deftly looted by its manager. Worse, it had made loans with abandon to speculators playing the stock market -- and done some gambling itself -- in railroad stocks, which had been gliding steadily downward.

Since the Crimean War ended the previous year -- restoring Western Europe's access to Russian grain -- demand for American wheat had dropped steadily; shipments east had tapered off considerably; and railroad earnings (and stock prices) had dipped disappointingly. Farmers and merchants, too, had been squeezed. By the spring of 1857 metropolitan merchants found it difficult to collect on midwestern debts. In August, unfortunately for Ohio Life, European farmers harvested a bumper crop and the sudden glut threatened to further depress world farm prices. Worried midwestern businessmen had begun telegraphing New York banks asking for the return of their surplus funds. Ohio Life, caught short, went under, and many Manhattan banks had loaned funds to Ohio Life.

Now, finding themselves suddenly and dangerously overextended, the banks panicked. Terrified that soon other institutions (or even their own) might be proved rotten, they demanded payment of all matured loans from all their debtors. In the ensuing fiscal sauve qui peut, banks jammed on the credit brakes at precisely the moment businessmen were in direst need of accommodation. The financial institutions, especially banks newly hatched during the boom, saved themselves, but forced merchants into bankruptcy.

On October 13th eighteen banks suspended specie payments and crowds milled from Water to Broadway, numb with fear and disbelief. Prices plunged on the stock market as investors dumped thousands of shares in a vain race to stay ahead of the avalanche. As sell orders were telegraphed to exchanges elsewhere, the crisis spread like a “malignant epidemic” across the country. Soon almost half the brokers on Wall Street were wiped out.

The "bursting of bubbles in New York," the Chicago Tribune had soothed at first, "need not alarm anybody in the West," for regional prosperity rested on solid foundations. But as the panic radiated outward from the metropolitan center, howls were heard around the country. The impact proved far greater than that, however, as the Panic soon reached London and Paris, affecting more than a third of the stocks traded on Lombard Street and the Bourse. In Britain, only Bank of England intervention held the line. Modern communications sped the Panic along to Northern Germany, then Scandinavia, leaving a trail of bankruptcies and unemployment. From Europe, the crisis hopscotched back across the Atlantic to South America. Though the ensuing depression had many causes, New Yorkers could (had they wished) have taken a perverse pride in having managed to trigger a crisis of the entire world capitalist system.

In New York's own house the result was a by now familiar story. By December, nearly a thousand merchants had failed, with losses totaling $120,000,000, and the shock waves from their collapse had toppled many other kinds of enterprises. Maritime construction halted, and the clipper ship industry, already weakened by competition from railroads and steamers, would never recover. Railroads were forced into receivership, foundries laid off hundreds of mechanics, four-fifths of the city's coopers lost their jobs. Textiles were badly hurt: retailers suffered accordingly. "Chinamen who peddle cigars" and Italian "organ grinders" were hard hit. Merchant princes fired servants in droves.

By October estimates of New York unemployment ran to 100,000. Landlords turned out those who didn't pay their rents; during three severe winter months of 1857-8, 41,000 were forced to seek shelter in police stations. Thousands more were forced out of respectable lodgings into crowded tenement apartments and slum conditions surged.

Analyses of the crisis again varied. The pastor of New York's largest Presbyterian Church, announced that the Panic was God's work. Many Wall Streeters agreed and hied to their churches to pray for relief. By mid-winter 1858, merchants and clerks were jamming lunch hour prayer meetings at the local John Street Methodist Church. The Journal of Commerce encouraged more readers to participate: "Steal awhile away from Wall Street / and every worldly care, / And spend an hour about mid-day / in humble, hopeful prayer."

Editor Horace Greeley argued the collapse was of more secular origin, due to the country's excess of imports over exports. This imbalance did, he believed, have its moral dimension, having been fueled by the buying binge of luxury-mad New Yorkers (and other Americans), purchases made possible by the tremendous levels of speculation in stocks and real estate ("paper bubbles of all descriptions".)

Among the working classes, resistance had gotten tougher, and theoretically more sophisticated, paced by German and British emigre radicals. The working classes claimed state assistance as a right, not as charity or patronage, a call that resonated powerfully even amongst non-socialists, especially in an Irish immigrant community profoundly scarred by the recent Great Hunger. As Gotham's Irish News wrote: "When famine stares fifty thousand workmen in the face -- when their wives and little ones cry to them for bread, it is not time to be laying down stale maxims of economy, quoting Adam Smith, or any other politico-economical old fogy."

One largely German group, the American Workers' League, announced a "work and bread” demonstration. On November 5, 4000 radicals, unionists, and land reformers gathered in Tompkins Square. Speakers declared that "those who wrought by the sweat of their brow, the actual producers, were not to be thrown out of employment when capitalists, by wicked speculation, lost their ill-gotten gains." Marching to City Hall Park they presented a "Mass Petition for the Unemployed" to Mayor Fernando Wood. "Every human being has a right to live," it declared, "not as a mere charity, but as right, and governments, monarchical or republican, must find work for the people if individual exertion prove not sufficient."

Specifically the unemployed demanded a program aimed at launching the new Central Park, building a new reservoir, leveling and sewering the city's streets, "or any other public works so indispensable for the sanitary condition of the people and the comfort and safety of the wealthy themselves." When Wood responded he would give the petition to the aldermen the following week, a spokesman named Bieler said of the massed jobless outside, "we cannot warrant that, their patience being exhausted, they will not help themselves by employing physical power with its accompanying brutalities." Thus prompted, Wood passed on the plea that evening, and the councilmen announced they would advertise for bids to undertake the project of leveling Hamilton Square (Third and Fifth Avenues, 66th to 69th Street).

The next day, November 6, the fight was carried to Wall Street. A procession of 5000, behind a banner emblazoned "We Want Work!" trooped to the steps of the Merchants Exchange. There a blacksmith named Bowles vowed that "We will keep the peace, but we will show to the merchants and wealthy classes here before us that we are starving, with our wives and children, and that we must have relief." And they would, he warned, keep on demonstrating: "We will increase in numbers every day, in numbers irresistible in strength, and we will march through the streets with these increased numbers, day after day"; they would "go to Wall-street, and show those who had their pockets lined, that they wanted work."

Three days later, City Councilmen agreed to authorize a $250,000 bond issue for Central Park, and it became the major public work – and public legacy – of that particular calamity. By January 1858, 1000 men had been set to clearing debris from the site; ten months later, 2500 were so employed; by the following year, on a peak day in September 1859, 3,600 were laboring away.

[For a fuller account, see Burrows & Wallace, Gotham, Chapter 47]


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