Betting the farm : western railroads, eastern money, the Home League, and the first foreclosure crisis

Author / Creator

Riddiough, Thomas J., author

Available as

Online

Summary

Crop transportation problems intensified as Wisconsin's immigrant population expanded rapidly during the late 1840s and early 1850s and settlers located further inland from Lake Michigan. While rai...

Crop transportation problems intensified as Wisconsin's immigrant population expanded rapidly during the late 1840s and early 1850s and settlers located further inland from Lake Michigan. While railroads were an obvious answer, they did not yet penetrate state borders. Significant capital was required to build railroads, and there was a constitutional prohibition against state government funding of internal improvements that was taken to apply to railroads. As a result, railroad promoters turned to capitalists in eastern states to invest. Because the new Wisconsin railroads were unknown to the investors, they required local investment. The population of farmers at that time had little money for investment, so the railroad turned to farm mortgages as a way to raise funds. Farmers were eager to have a railroad built nearby, and the railroads devised a scheme that allowed the farmer to purchase stock by taking on debt. Investors were sold on the guarantee provided by the mortgages. The railroad promoters told the farmers they didn't have to pay the 8% interest on their mortgages because the dividend they received would cover the obligation. The bust that ultimately followed the boom in railroad construction led to a severe depression and failure of the railroads. Stock investors were pitted against farmers who stood to lose their only asset and source of income. The outcome was debated and decided in the courts, which were not friendly to the farmers who mortgaged their livelihoods to bring railroads close to home. Central to the story is the freedom to contract, a powerful piece of the nation's value system.

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