available on notes signed by borrowers of the neighborhood, for every region had its local men of means who lent at usurious rates, bought tax titles, and acquired property below its worth at foreclosure sales. Cooke's contribution to American finance was in the discovery that there was a potential investing public, of great numbers and considerable means; and that the problem was how to acquire the confidence of the common people who owned the money.

From his success with Pennsylvania bonds, Cooke progressed at once to the sale of United States bonds, gaining immediate fame. Repeatedly, as Secretary of the Treasury Chase called for bids for issues of the bonds that he was required to place in overwhelming issues, Cooke was the banker who bid highest for them, and secured the contract. His defeated rivals attacked him for alleged collusion with the Treasury; but when the tests of their charges came at the next offering, it was Cooke who bid the highest, on the lowest allowance for handling. More than once he took issues for which the trade would not bid at all, until at last he became the unofficial agent of the Treasury for floating loans.

He found the ultimate buyers among the common people. His methods of advertising the loans included propaganda through the press, dodgers given out at the post offices, and advertisements in the local and religious weeklies that found their way into the careful families who had gold and needed to be assured that it was safe to let it go. He was never too busy in his Philadelphia office to receive in person the country buyer of a single bond, to accept the payment, and to give his word that the United States would pay. He also combed Europe for buyers, and when the English and French bankers preferred to put their faith in securities of the Confederate States, he took his samples to the Germans, Dutch, and Swiss, who bought heavily at the market price. How much he did to win the war can only be a matter of guesswork; but when it was over, his name stood out at the head of the list of American financiers.

His credit was impregnable. He had promised that the country would pay, and it did. Every buyer who bought bonds below par through him, paying in greenbacks that were even further below par, thought well of the investment. The United States paid interest charges in gold. After the war the market price of the bonds rose rapidly, at a time when the buying power of the dollar was increasing. The investments made through Cooke were so

profitable that he found himself with enhanced repute, and with a iarge class of devoted customers who looked to him to keep them provided with sound investments. There were no more bonds of the Government to sell, and he turned necessarily to railroad and manufacturing bonds, disposing of them readily in the booming years of business that followed the surrender of Lee in 1865.

In 1869 Jay Cooke became convinced that the statements of Josiah Perham and Isaac Stevens were true, and that the northern strip of territory across the United States needed only a railroad to enable it to develop into a prosperous farming country. Michigan and Wisconsin were already booming, and the timber millionaires who appeared out of their northern woods gave a foundation for encouragement. The Wisconsin railroads were pushing towards St. Paul, which was to be brought into communication with Chicago in 1872. Beyond St. Paul was the long wagon trail of the Red River ox-carts, over which the annual supplies of the Canadian Northwest had been hauled for many years. It was suspected that wheat could be grown to advantage in the valley of the Red River of the North once an outlet to a market was provided for it. It was the belief of many that the Canadian Northwest itself was attached to the British Empire by the slightest thread, and that its real destiny was with the United States.

Jay Cooke accordingly became the financial underwriter of the Northern Pacific Railroad in 1869, and acquired the determining influence upon its destiny. He selected as its point of departure the head of Lake Superior, which he had himself visited in 1868. He bought heavily in lands around Duluth, to take advantage of the increment in values when the railroad should become a fact, and he gained control over the Lake Superior and Mississippi River Railroad, already building between St. Paul and Duluth. From a point on this line, near Duluth, he commenced actual construction for the Northern Pacific early in 1870. He was already singing the praises of the investment to prospective buyers of the stock and land.

For the next two seasons the Northern Pacific built steadily through the untouched Indian country, winding its way among the lakes of northern Minnesota. It crossed the Mississippi River at Brainerd, and reached the Red River at Fargo; thence it pushed on, almost due west to the Missouri River which it reached in 1873 at a point opposite the Mandan Village where Lewis and Clark wintered in 1804-1805. It was appropriate in 1873 to call

this new station Bismarck. The ultimate destination was the Columbia River. For the present Cooke gave up the idea of building across Washington Territory to Puget Sound, contenting himself with procuring a control of the Oregon Steam Navigation Company which maintained an adequate system of river steamers on the Columbia below the junction of the Snake, and with which it did not seem profitable to offer railroad competition.

There is no room to doubt the sincerity of Cooke in promoting the Northern Pacific, despite the fact that there was no traffic to justify the regular running of trains over the 471 miles of track between Bismarck and St. Paul. He believed in it with the same enthusiasm that had marked his confidence in the United States; and sold the securities at home and abroad to investors who accepted his word. But he hypnotized himself. His prospectus was as much too hopeful as the early estimates of Lewis and Clark were too pessimistic of the future of the plains. It was not, after all, a part of the Garden of Eden that he was tapping; nor could the drifting snows of winter be made to yield to any persuasive language of the prospectus writer. Yet he not only sold the stock, but bought it, to the exasperation of his partners who did not believe as wholly in it as he did. During 1872 he found it necessary to buy increasing amounts himself in order to provide funds in accordance with the terms of his underwriting.

The boom of the later sixties reached its crest not far from the date when Cooke underwrote the Northern Pacific. Since 1861 the United States had been spending, investing, and destroying property without check. The agricultural extension of the decade, as usual, was on credit, and covered the farms with a blanket of debts. The purchases of farm implements were a new source of demand for farming capital. The railroads represented a drain upon the accumulated savings of some one; and those lines that were not immediately revenue-producing effected an absolute withdrawal from use of the capital involved. The Civil War was fought. No one dares say how much it cost, for no accounting system can cover all its charges. But for a period of four years nearly two and one half million men were withdrawn from productive work- and were devoted to the labors of destruction. The South was left flat and bankrupt, with its whole pre-war movable wealth to be replaced. In spite of the heavy increase in productivity, and the accumulations of new capital, the American people developed new demands for wealth more rapidly than they

saved it. In the early seventies they reached a stage in which the process of railroad building and other investment could continue only if money could be obtained abroad on reasonable terms. The further west one went in the United States, the completer the blanket of debt and the more universal the debtor status. What was typical of the West was universal in the South.

In the winter of 1872-1873 the European market ceased to absorb enough American securities to enable American development to proceed without a check. Local crop failures in Europe produced a cessation of investment, and American scandals gave the United States a bad name. The Tweed ring exposure in New York City was disheartening. General John C. Frémont was jailed in France under charge of promoting the European sale of bonds in a "land-grant" railroad that had not received its land-grant. The Crédit Mobilier scandal exploded in September, 1872. Cooke nevertheless was willing to do himself what he invited his customers to do. He bought Northern Pacific until his solvency depended upon a market that he could not revive. On September 18, 1873, his partners closed the doors, and admitted bankruptcy, with the Northern Pacific as the chief contributing factor.

It was, of course, more than the Northern Pacific, for the depression was everywhere, and for ten days panic was so wild upon the New York Stock Exchange that the governors of that clearing house closed it down and refused to allow sales to go to record. When they reopened at the end of the month, the crisis was a thing of the past; but so was the period of prosperity that had been ushered in with the outbreak of the Civil War. For the next five years the development of the plains was postponed. The construction gangs were disbanded, for there was no money to meet the pay roll or to buy the iron. The hard times induced a period of reflection and gave rise to frontier demands for legislative relief, such as had followed the earlier panics of 1819, 1837, and 1857. The complete absorption of the frontier was postponed another decade.

CHAPTER LV

FRONTIER PANACEAS

THERE were two general conditions that prevailed over the West when the panic of 1873 occurred. One was the debtor status; the other was the intensified dependence upon markets for prosperity, and upon railroad transportation to reach the market. Each of these was so general as to bring the frontier population, or the near frontier population, into close accord. And when the depression became acute this accord was translated into political manifestations, much as the banking theory had become political in the Jackson period, and the Mississippi Valley aspirations in the early years of the Republic. Elsewhere throughout the Union were large numbers of citizens who felt as westerners did. This was always the case. But nowhere, except near the frontier, where life was standardized by the oppressive hand of economic barriers, could the opinion become homogeneous and the reaction universal. The debtor status produced the greenback movement; the transportation problem gave rise to the Patrons of Husbandry or the granger movement.1

The greenback movement made its first appearance in the Ohio Valley States, and spread thence because of its appropriateness to the actual frontier and to the South where the Civil War had turned back the hand of time. Its first clear proponents were from Ohio, whence the name, "the Ohio Idea," that was associated with it for a time. Its advocates were to be found in both great parties, but only the Democrats in their national platform of 1868 were willing to put in words the demand that "where the obligations of the government do not expressly state upon their face, or the law under which they were issued does not provide, that they shall be paid in coin, they ought in right and in justice, to be paid in lawful money of the United States." The "lawful money" referred to was the legal tender greenback currency of the Civil War; the purpose was to prevent deflation, to aid the debtor, and to lay a tax on wealth.

The United States was forced upon a paper basis early in 1862

1 The editor of the Springfield, Massachusetts, Republican, Samuel Bowles, describes the West of his period in Our New West (1869).