BANKS COLLAPSE! UNEMPLOYMENT ON THE RISE! REAL ESTATE AT A STANDSTILL!
No this is not today’s headline. It is a headline from the 1837 Oswego newspapers. What is important about this one in 1837 Oswego is that neither the City of Oswego, the State of New York , nor the United States learned anything from it.
How the Panic of 1837 came about will sound all too familiar to most. It began with the flour mills. Men like Henry Fitzhugh and Alvin Bronson speculated on flour. They owned their own flour mills and the recent building of the Oswego and Welland Canals made shipping the flour to New York City cheaper. These speculators would purchase grain from farmers in the Fall , then they would store it in warehouses and wait for the demand in winter to raise the price. When the prices, particularly in New York City, rose the flour was shipped there. What no one counted on or at least didn’t want to think about was; What if prices of flour didn’t rise? What if for whatever reason , they fell?
The Fall of 1836 saw a record crop of grain. Millers, like Fitzhugh and Bronson, filled their warehouse to capacity. Demand didn’t rise . Oswego wasn’t the only place that saw an increase in grain crop. The glut lowered prices. Soon Oswego millers were left with warehouses full of worthless flour. Only Bronson was able to weather the storm. The rest went bankrupt.
Oswego in 1837 had two banks, Oswego Bank and Comer Bank. In the 1830’s there were plenty of property to be bought in Oswego. The banks in Oswego gave out loans for this property like oven mitts with every new account. This in turn cause real estate prices to increase seventy-five percent in the first four months of 1837. Some even saw the worth of their property rise to one hundred percent.
The banks kept lending, with interest of course.
But as we all know, all good things come to and end. With the drop in flour prices farmers couldn’t demand much for their grain, millers had warehouses full of flour, and the poor guy at the bottom lost his job. There was no need for laborers to work in the mills, because the mills were closed. ( Is all this beginning to sound familiar?) This was just the beginning.
Both Oswego banks collapsed because of bad loans. With that went the real estate, which saw property prices plummet. This in turn cause building in Oswego to cease and the large lumber trade to decline.
Even in 2011 the same speculation, bad lending, and poor bank practices are still going on. And every so often people sit and wonder; What happened to the economy?