Article Text
HOW BUFFALO CONQUERED HARD TIMES By MONTGOMERY CURTIS TEADILY prices went down, down, down. Failure, bankruptcy and disaster were the order of the day. Banks failed everywhere. As speculation had probably reached its climax in Buffalo so there the universal reaction was more strongly felt. Fortunes disappeared almost in night. Mortgages were foreclosed on every hand Does that sound like a concentrated version of Buffalo's post-1929 commercial record? For those citizens who take perverted pride in bragging about the current distress as the "world's worst depression" it will be rude shock to learn that the paragraph above is a summary of Buffalo business in 1837. Three times, 1837, 1857 and 1871, Buffalo bent double under the burden of economic collapse. She remained in that painful position for several years each time. Then the city straightened up to advance surely into new and prosperous eras. Those souls who writhe in the certainty of utter doom should look to the records. Depressions do have a mysterious way of disappearing, impossible as may seem to And the period which began late in 1929 belongs in the same pigeonhole with 1837, 1857 and 1871. The city suffered its share of the national doldrums in 1893 and again in 1907 but the comparative brevity of those disturbed periods forbids comparison with their predecessors. That history has pleasant habit of repeating itself is proven by study of H. Perry Smith's "History of Buffalo and Erie County," Mr. Smith, who wrote the quoted paragraph above, faithfully recorded Buffalo's descent, survival and rise in three major depressions. In scholarly fashion he revelled in 1837. Here are some more paragraphs from the record to compare with 1929. "In the disastrous financial revulsion and panic which swept the country in 1835-1836, Buffalo suffered as severely as most places similar in size and character. The inhabitants had raised themselves and their city to high financial and speculative altitude. and the fall was proportionately destructive the city recovered from the horrors of the cholera epidemic of 1832. and from the destructive fire, only to plunge into the abyss of financial ruin. "THE year 1836 dawned with prospects of brilliant promise, with dazzling visions of easilyacquired wealth it closed under a cloud of almost universal bankruptcy "Fortunes disappeared more rapidly than they had been acquired; mortgages were foreclosed on all sides and land that had been eagerly bought at $30 or $40 per foot would scarcely bring as much per acre. Land is known in the city which sold early in 1835 at $2 foot-about $500 an acre. It was sold and resold in parcels during the excitement. until 12 months after it sold at the rate of $10,000 an acre. In 1865 the same land was worth $18 foot." For those who might dismiss that panie as victimizing speculators only, Mr. Smith extends his remarks: "Even in the country towns the reaction produced great distress and some who had deemed themselves rich suffered for the necessaries of life. "In the course of 1837. matters probably got about as bad as they could be, so that after that they did not grow any worse; but was several years before there was any sensible recovery from the 'Hard Times' as that era was universally called. Unquestionably the designation was a correct one: for never has the country, and especially this part of it, known so disastrous financial crisis." Such is what Mr. Smith called "the great wreck of 1837.' Then he wrote paragraph unintentionally but nonetheless specifically directed at the mourners who now weep at the bier of prosperity in the gloomy City a Bulwark in Periods of Financial Stress - Hardest Hit by Panic That Began in 1837 and Lasted Nine Years— Rallied From Depression of 1871 in Two Years and in 1893 and 1907 Suffered But Little. belief that it will never return Here it is: "The county (Erie) recovered very slowly from the terrible financial crisis and it was not until near 1845 that it could be considered to have fully regained healthy condition by which time moderate prosperity was the rule throughout its borders as distinguished from the feverish fortune-making of ten years before." That was a depression which lasted nine years. Conditions of 1931-1932 will have to persist until 1938 to beat that record. Americans who take pride in extremes and think they are enjoying the "worst depression" had better look further into history. There are more gems for them to consider. culled from the local histories of Senator Wayland Hill and J. N. Larned. MAY 6, 1837, Buffalo was shocked by the closing of its banks. They were the Bank of Buffalo, City Bank and Commercial Bank of Buffalo. The state banking chancellor issued injunctions against them. This shock was felt even in New York city where Phillip Hone, former mayor, made this entry in his diary for May 8, 1837: "Three banks of Buffalo. all safety fund banks, are under injunction. and their doors closed. The Legislature immediately passed an act directing the bank commissioners to assume the payment of their notes, which will consequently be received and paid at the Manhattan bank. This will probably sweep away the famous safety fund. The bubble will burst, and the public creditors of rotten banks will look in vain hereafter to that delusive hope for protection against loss. Where will it all end?-In ruin revolution, perhaps civil war." Buffalo's banking problems became even more stringent and still they did not end in ruin, revolution or civil war. Mr. Larned writes that "the directory of 1841 names but two in its list of banks, the Bank of Buffalo and the Commercial bank (they resumed when the injunctions were lifted). In 1842 it reports the whole list of 1840 under the sinister caption "Suspended Banks' with the names of the receivers who are winding up their affairs." Now in 1933 there are many feeling the pinch who look back at the pre-1929 heyday and bemoan the present stringency. For those who reminesce and groan here is gem taken from The Buffalo Commercial Advertiser of Feb. 6, 1836. Blissfully unaware of the gathering storm, an editorial writer for that newspaper, protesting the difficulties of obtaining bank charters in Albany, wrote: our banking capital should be trebled. There not another town in the United States which does so great amount of business with so limited banking facilities. We reason to know that the banks here do all in their power to accommodate their customers, but their means are but as drop in bucket to the wants of the community. Their discount line is extended as far as is with safety; yet the notes of our best and safest men are frequently declined. from absolute necessity of the case. This state of things is unpleasant to the officers of the existing banks, as well as to the public, and however careful the banks may be possible for them to escape the charge of favoritism. Shortly after 1840 the city got its feet on bottom, liquidated the debris left by the pre 1836 speculation and started the slow drive forward. In 1842 the Buffalo-Attica railroad was completed. In 1844 six banks were chartered. The flow of grain from the west increased rapidly and the city became established as the nation's most important grain forwarding port. How did Buffalo get into the depression of 1837? She was thrown in with the rest of the country by the collapse of inflated paper money and President Jackson's specie circular ordering that payment for all public lands be made in specie when nobody had enough specie of sufficient value But Buffalo's collapse was aggravated by the failure of Benjamin Rathbun, the city's combination of Samuel Insull and Ivar Kreuger Rathbun was speculative builder who operated on credit. His schemes were in the millions. He employed 3000 people. Two assistants forged notes for large sums. Payment was demanded. He didn't have the money. His business was built on confidence, not cash. When he collapsed the whole city went with him into the chaos of 1837. did Buffalo get out of the depression of 1837? The answer is not clear. She worked her way out in common with the rest of the country. Futile remedies were tried. "panic meeting" was held May 1837, but Mr. Smith records laconically that it was "addressed by Millard Fillmore and others and resolutions were adopted but it does not appear that any special good resulted. But if the methods by which the city recovered are not clear the fact remains that she did revive slowly and surely. The citizens suffered patiently and sawed wood. Here is Mr. Smith's account of what happened: 'Following the tardy recovery from the financial crash (there) was inaugurated an era of prosperity for the city of Buffalo the of the growing West poured its profitable business into the city giving it wide reputation for prospective growth and thus attracting to its acwhich insured that growth. The surrounding country had reached a position of tolerable independence; the farming community had in most cases wholly or in large part paid for their lands; plank roads extended from Buffalo and its ready market. directly to the doors of the farms and over them were drawn the products which were turned into money in the city As Buffalo survived 1837 to forge ahead so the city survived 1857. Once again the pall of financial collapse descended. So severe was the crash that Mr. Smith records "our oldest banker" saying seemed as the whole town was not worth dollar.' Bank doors closed rapidly The Reciprocity bank suspended payment Aug. 29, 1857. Hollister's bank followed Aug. 31. Oliver Lee & Co.'s bank followed few days later. The Pratt bank ssupended Sept. 12. Reviewing this period Mr. Smith writes. referring to the prosperity of the early 1850's, this very tide of prosperity brought its own destruction: business of all kinds gradually became excessively overdone; railroads and other great undertakings were recklessly projected in all parts of the country: the banks in many states inflated the currency beyond necessity or prudence, and another crash The climax was reached in the fall of 1857 and was precipitated by the suspension of specie payments in New York. money market had become more and more stringent. if the New York banks had postponed their suspension little longer, the failures in Buffalo would have been more than they were. As was, two or three banks suspended and prices of real estate sank to mere tithe of what they had been. For three years only the depression of 1857 continued. Mr. Smith re-
