The panic of 1855

Henry Meiggs

On February 23, 1855 the Adams and Co. Bank in San Francisco failed to open. There had been a frantic run on banks the day before and the bank had failed. Other banks across California also closed. But the collapse had really begun the year before and can be traced back to the weather, bad investments, and greed and corruption in the city’s real estate markets.

Henry Meiggs, a county Alderman, came to California in 1849 and soon began to invest in San Francisco real estate. He built a 2000-foot pier off Broadway that ended where Fisherman’s Wharf and Pier 39 are today. The boom in property prices had gone uninterrupted since the start of the gold rush, but by 1854 prices fell some 25% in the first few months of the year. Meiggs had numerous outstanding loans and found himself unable to repay them. To cover the debt he forged city warrants to use as collateral. By fall it was clear that his scheme was about to be uncovered. On October 6th Meiggs sailed for South America on the brig America. But the damage was done. There had been little rain in California for some time, drying out the steams that supplied water for both placer mining and the hard rock quartz mining that was becoming more prevalent. Less mining was done and so banks had fewer gold reserves on hand. Banks no longer were willing to lend money and when they did it was only to well known depositors and at high interest rates.

Meigg’s wharf

The local branch of Page, Bacon & Co., had recently sent one million dollars to the St. Louis office to cover investments in the Ohio and Mississippi Railroad, and when the railroad failed, so did the bank. On the 18th of February 1855 the Pacific Mail steamer Oregon arrived with news. Rumors flew throughout the gold country in spite of assurances from the newspapers that things would be fine, and on February 22 Page, Bacon announced it couldn’t cover its deposits. Montgomery Street flooded with people who besieged all the banks, crowding the counters to withdraw their funds. Every bank in San Francisco was forced to close its doors and panic spread across the gold country.

San Francisco 1855

A year before Adams and Company had reorganized, making the California operation a separate entity and leaving it under funded. While Page, Bacon had made poor investments one company, Wells Fargo, was well financed and well managed from its inception. Since 1852 it had grown steadily and at the end of 1854 its express business had surpassed Adams. The company was controlled out of New York City and there was a strong suggestion that the firm may have been forewarned of the potential trouble with Page, Bacon. And on February 24, the day after their San Francisco branch closed, Wells Fargo issued a statement saying they had the funds to cover all deposits and only needed a few days to convert some assets. Some of the Wells Fargo branches in the interior had not even been forced to close and the Sacramento branch, which had been the first to shut down, was the first to reopen. By the 26th the crisis was over and Wells Fargo, the sole survivor of the panic, was now the king of western banks.

San Francisco Bay, Albert Bierstadt

 

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