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Post: RECAP First Friday Lunch - January 2015

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RECAP First Friday Lunch - January 2015

Jane Manner, Fourth Year Graduate Student in the History Department discusses federal bailouts and the Great Fire of NYC in 1835

           Jane Manners, now in her fourth year of graduate study at Princeton History Department, made a presentation on January 9, 2015, at the Nassau Club in Princeton on her dissertation research. She already has a B.A. and a J.D. from Harvard. Early in her legal study, she developed an interest in legal history.

          Financial bailouts by the federal government are generally seen as a phenomenon that only appeared in the 1980s, but a much earlier instance can be found in the congressional reaction to a devastating fire that occurred in Manhattan on December 16-17, 1835, that leveled approximately seven hundred buildings on twenty-three blocks. The damage amounted to $20,000,000 at a time when the total value of real property in Manhattan was estimated at $400,000,000.

          Merchants affected, including two former secretaries of the treasury, asked congress for assistance. Among other forms of relief, they requested the remission of import duties on the goods that had been destroyed and for additional time for paying future import duties.

          At the time, merchants posted bonds for duties, and most federal revenues were from customs duties. Initially, congress ignored appeals for the remission of duties, although it agreed to the extension of the period for payment to four years. Then, in the summer of 1838, congress enacted a remission of duties for the goods that had been destroyed.

          This bailout was highly paradoxical, owing to the general aversion of the ruling Jacksonians to providing governmental assistance to business or, indeed, involving government with business at all.

          Although not stated precisely in those words, the argument that made the difference was that the New York City merchants were "too big to fail," because of the impact that such an event would have had on the national economy. Thus, the "common good" of the national economy was at stake. Congress received numerous petitions from business people in all parts of the United States. The term "relief" was commonly used to describe the nature of the remission, not "charity," which would have been unpersuasive in view of the prevailing ideology in the early 19th century.

          Opponents of the remission of duties turned the argument on its head by arguing against what they viewed as favoritism to one part of the country.

Critics of the proposal also noted that not a single Manhattan business had failed as a result of its fire losses.

          President Andrew Jackson signed the remission legislation, but beyond that not much is known about his view of the matter. Exploring this topic is an aspect of Ms. Manners dissertation research.

          During the extensive discussion that followed her presentation, she was asked about foreign involvement in the affair, because. European investment was vital to the economic development of the United States during the 19th century. Ms. Manners replied that owing to the failure of all the insurance companies in New York City, merchants had to seek insurance outside the city, including foreign insurers. She noted, too, that New York City effectively loaned $6,000,000 to its insurance companies.

          One member of the audience suggested that this is the story of a skillful campaign to win unmerited advantages.

          Another question related to a possible connection of the controversy over "relief" to Manhattan merchants to the Panic of 1837. Ms. Manners stated that the 1835 fire and its associated problems were mentioned frequently in bankruptcy filings under the Bankruptcy Act of 1841.

Posted by lydia over 9 years ago.