A History of Financial Panics in the U.S.

Discover how the history of financial panics in the U.S. is also the history of American politics.

| January 2013

  • Train Through Tunnel
    The panic of 1857 resulted from English doubts about whether American railroads had clear title to western lands and whether cash-strapped farmers on railroad land would pay off their mortgages.
    Photo By Fotolia/steheap
  • A Nation Of Deadbeats Cover
    With a historian’s keen observations and a storyteller’s nose for character and incident, Nelson captures the entire sweep of America’s financial history in all its utter irrationality.
    Cover Courtesy Alfred A. Knopf

  • Train Through Tunnel
  • A Nation Of Deadbeats Cover

From the merchant William Duer’s attempts to speculate on post–Revolutionary War debt, to an ill-conceived 1815 plan to sell English coats to Americans on credit, to the debt-fueled railroad expansion that precipitated the Panic of 1857, A Nation of Deadbeats (Alfred A. Knopf, 2012), by Scott Reynolds Nelson, offers a crash course in the history of financial panics in the U.S. — and a concise explanation of the first principles that caused them all. The following excerpt comes from the preface, “A Republic of Deadbeats.”   

After his first divorce but before he became respectable, my father was a repo man. He did not look the part, which made him all the more effective. He alternately wore a long mustache or a shaggy beard and owned bell-bottoms that were black, blue, and cherry red. His imitation-silk shirts were festooned with city maps, or cartoon characters, or sailing ships. Dad sang in the car, at the top of his lungs, mostly obscure show tunes. His white Dodge Dart had “Mach 1” racing stripes that he had lifted from a souped-up Ford Mustang. The “deadbeats” saw him coming, that’s for sure, but they did not understand his profession until he walked into their homes and took away their televisions.

A deadbeat, Dad told me, “was a guy whose mouth wrote a check his ass could not cash.” They might be rich or poor, young or old, male or female, black or white, but “deadbeat” was written all over them, and my dad could read it. Florida’s Orange, Seminole, and Volusia Counties had plenty of them. And when Dad was working for Woolco, the department store, Woolco got its goods back. Woolco lent appliances to people on the installment plan, and when they failed to pay, ignored the letters and phone calls, refused to answer the door, my father would come by. He often posed as a meter reader or someone with a broken-down car. If he saw a random object lying abandoned in the yard, he would pick it up and bring it to the door as if he were returning it. He was warm and funny, charming, but pushy. He did not carry a gun, but he was fearless under pressure and impervious to verbal abuse. He was earnest about the return of the goods. If the door opened, he was inside; if he was inside, he shortly had his hands on the appliance; the rest was bookkeeping.

As you can imagine, repo men like my father saw people at their worst. He told me that central Florida was full of deadbeats — people who borrowed and borrowed, then lied, hid from their debts, pretended they were solvent, until the guy in bell-bottoms arrived.

My dad was not inclined to be generous about how people got to this place. His own career in repossession began in late 1973, after the first oil shock brought minor financial catastrophe to central Florida. Dad, in fact, had lost a very good job as a regional sales manager at Kimberly-Clark. Repo man was a sudden and severe step down, but there were debts to pay. At the end of 1973, many central Florida families were drowning in consumer debt they had contracted when times were brighter. In this downturn these people certainly had “skin in the game,” and it was my dad who did the skinning.

In a certain sense, the story of my dad, Woolco’s debtors, and the debts he collected is the story of American history. Americans settled this nation by borrowing goods, land, and more abstract representations of those goods — land warrants, deeds, patents, concessions, and equities. They borrowed with the most optimistic assumptions about their capacity to pay. But when it became clear that Americans were not paying, banks began to doubt wholesalers and called in loans; wholesalers demanded settlement from retailers; retailers sent my dad and thousands like him out into the countryside to recall some portion of their property. Times got hard.

2/4/2013 6:33:10 PM

no dead beats....people who were abused with the interests rates charged ....0% intereats to banks but not to the people. . . . 21% interest on credit cards........HOW MANY YEARS DO YOU HAVE TO PAY ON A MORTGAGE - - -BEFORE YOU EVEN START TO PAY OIN THE PRINCIPAL>>>

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