Financial Ruin at White Haven: The Panic of 1857

Harper's Weekly's drawing of panicked depositors trying to withdraw their savings as news of a coming downturn spread in 1857. Library of Congress.

A pawned watch

The holidays can strain a family's budget, and Ulysses S. Grant knew it. On December 23, 1857, two days before Christmas, the thirty-five-year-old former army officer, farmer and father of three — with a fourth on the way — walked into J. S. Freligh's pawn shop and pawned a "gold hunting [watch] detached lever and gold chain," authorising Freligh to sell them publicly or privately.

Many have speculated that he did it to give his family a happy Christmas, but there is no firm evidence of why; what is known is that he needed the money. A big reason Grant, and many Americans, faced an uncertain Christmas that year was the Panic of 1857.

How the panic came

The panic grew out of a boom. The Industrial Revolution drove fast growth in the 1850s. As the historian James M. McPherson explains, new banks multiplied and put more banknotes into circulation; railroad mileage and capital tripled between 1850 and 1857; mills, foundries and factories expanded output, as did cotton and slavery in the South; and California gold poured money into the economy.

Much of the capital in American railroads, banks and factories came from Britain and France. But from 1853 to 1856 they fought the Crimean War alongside the Ottoman Empire against Russia, and invested heavily in colonial ventures in Asia. That drained European banks, and investors sold American securities to put their money elsewhere. By 1857 American stocks and bonds, and the assets of American banks, were losing value.

The trigger came on August 24, 1857, when the New York branch of an Ohio investment house stopped payments because "the cashier had embezzled its funds." One of the country's largest banking firms could not pay its investors. Confidence collapsed, and over the telegraph the shock spread nationwide. Banks called in loans to build up their reserves while depositors did the opposite, rushing to withdraw savings before the banks failed — which is why historians call it a "panic." Then the SS Central America, carrying $2 million in California gold to shore up eastern banks, sank in a hurricane, losing all the gold and 425 of the 578 people aboard.

Businesses and factories failed, railroads went bankrupt, and — what mattered most to a farmer at White Haven — crop prices fell.

Grant the farmer

Grant was supporting his growing family by farming at White Haven, which belonged to his father-in-law. He seemed to enjoy farming, but success was hard. In February 1857 he wrote to his father, Jesse:

"Spring is now approaching when farmers require not only to till the soil, but to have the wherewith to till it, and to seed it. For two years I have been compelled to farm without either of these facilities, confining my attention therefore principally to oats and corn: two crops which can never pay…I want to vary the crop a little and to have implements to cultivate with."

He asked for a two-year loan of five hundred dollars at ten percent interest, reminding his father that "It is always usual for parents to give their children assistance in beginning life (and I am only beginning though thirty five years of age, nearly.)" No surviving source shows that Jesse Grant made the loan.

Still, writing to his sister Mary on August 22, 1857 — just as the panic began — Grant sounded hopeful: "My hard work is now over for the season with a fair prospect of being remunerated in everything but the wheat." His oats were "good," and his corn, "if not injured by the frost this fall, will be the best I ever raised." He also grew potatoes, sweet potatoes, melons and cabbages for local markets. But farming did not pay in 1857, and in December he pawned the watch.

The bleak Christmas was followed by good news: in February Ulysses and Julia's fourth child, Jesse, was born. Grant farmed through much of 1858, moved to St. Louis that fall, and eventually took a real-estate job with Harry Boggs, Julia's cousin. Farming had not made him prosperous, but within a few years the Civil War changed his fortunes dramatically.

The pawn ticket

J. S. Freligh's nephew, Louis H. Freligh, kept Grant's pawn ticket for fifty-three years. On March 19, 1910, he offered it to the autograph dealer W. R. Benjamin, writing that he could vouch for it: "I was present at the transaction, & saw him sign his name to the document. I am now 71 and ½ years old, so as I was then less than 20, can very well remember it." He had waited, he said, because "so many people consider it a disgrace to patronize 'mine uncle'" and he had not wanted to offend the general's family — and if the dealer did not buy it, would he "kindly keep it quiet."

After the panic

The panic was short. By spring 1858 the economy was recovering: bank and currency reforms were discussed, inflation eased for a time, and California gold shipments resumed. But it left bitterness. Northern manufacturers wanted a higher "protective" tariff on imports; Southern planters and farm interests opposed it. Distrust and blame between powerful slaveholding interests in the South and industrial interests in the North deepened the country's sectional divide and the tension over slavery, just a few years before the Civil War began in 1861.

Further reading

• James M. McPherson, Battle Cry of Freedom: The Civil War Era (Oxford University Press, 1988).
• John Y. Simon, ed., The Papers of Ulysses S. Grant, vol. 1, 1837–1861 (Southern Illinois University Press, 1967).
• Kenneth M. Stampp, America in 1857: A Nation on the Brink (Oxford University Press, 1990).

Sources

• National Park Service, Ulysses S. Grant National Historic Site, Financial Ruin at White Haven: The Panic of 1857 Comes to White Haven.