In the history of financial bubbles, the assets at the center of attention have varied from equity and debt securities to commodities like tulips, indigo, and gold to real estate and land. The last of these was the object of great speculation in the early history of the United States. Indeed, it was a land bubble that drove some of the early great projects undertaken in America, including the settlement of the frontiers and the construction of its new capital, Washington D.C. Some of the very founders of the new country cravingly participated in it. In the end though, a band of the most famous of the speculators failed to exit from their investments in time to avoid bankruptcy.
A Country for Sale
In the years after independence was secured, the United States became the scene of frenzied land speculation as investors bought large swaths of the new country. Millions of acres traded hands. Land was regarded as among the surest investments in America. As new areas of the country were meaningfully settled during the colonial period, land values rose and made those who bought cheap very rich. The pattern of deserted frontier land being bought for little and then appreciating as the environs around it developed was well established.
“If we review the rise and progress of private fortunes in America, we shall find that a very small proportion of them has arisen or been acquired by commerce, compared with those made by prudent purchases and management of lands.”Silas Deane, an American diplomat in London, in a 1783 letter to the lawyer, and future Supreme Court Justice, James Wilson
Accelerating the land fever after the fight for independence were initiatives by the states to transfer ownership of public lands to private individuals. First, several states gave war veterans, as a reward for their military service, warrants convertible into allotments of public lands. At least some of these warrants were eagerly purchased from their recipients by speculators with money to spend and acres to acquire. Besides these warrants, states were also keen on selling public lands to investors so to improve their financial condition which were generally poor after the war. Land in private hands generated sale proceeds and ongoing tax revenue to the broke governments in post-revolution America.
Active in the 1790s, a trio of the most notable speculators included Robert Morris, John Nicholson, and James Greenleaf. These were all, to varying degrees, prominent men in American politics and public finance. Robert Morris was the ‘financier of the American revolution’ by virtue of his wealth and his post as Superintendent of Finance. He was a Philadelphia merchant who had signed the Declaration of Independence and the Constitution. By now, Morris was a U.S. Senator from Pennsylvania.
While less well known today, the other two were also prominent men at the time. John Nicholson was the Comptroller-General of Pennsylvania and had bought for himself land the state was selling to investors. He would be impeached for financial irregularities in 1794 but was subsequently acquitted. The last of the triumvirate, James Greenleaf, served as consul to the Netherlands where he arranged loans for the American government from Dutch investors.
In 1793, Morris, Nicholson, and Greenleaf entered into a partnership to purchase land. The partners all had previous experience with land speculation and Morris and Nicholson contributed some of their existing landholdings into the partnership. Morris was well acquainted with the strong demand for American land from investors at home and abroad. He had earlier sold over three million acres in Western New York to a Dutch consortium. Greenleaf had also arranged financing from the Netherlands to purchase 3,000 lots in the nation’s new capital, Washington, D.C. The city was still virtually completely undeveloped then and was reliant on land sales to finance its own construction.
Following Greenleaf’s lead, the group turned their focus to Washington D.C. There, Morris mimicked Greenleaf’s earlier deal and bought 3,000 more lots in the city and the trio then purchased another 1,234 from private owners. Morris and his partners thereafter owned more than 40% of the private land in the new city. These massive purchases were not made in cash. Rather, the short-term obligations incurred in purchasing the raw land was meant to be refinanced by longer term loans arranged by Greenleaf in the Netherlands, where investors previously looked approvingly on American land deals. Through 1793 and 1794, securities called ‘negotiaties’ were issued in Holland to finance land purchases in America.
However established and familiar with American securities Dutch financial markets were, Greenleaf’s financing failed to come through. It likely didn’t help matters that the Netherlands were in the midst of revolution and war, this being among the most tumultuous periods of the French Revolutionary Wars in Europe. The loan Greenleaf had arranged with Dutch financiers relied on public investors for funds and the loan was resoundingly undersubscribed. A loan raised in Amsterdam filled just 200,000 guilders of an intended two million offered. Another in Rotterdam raised just 150,000 guilders of a targeted one million guilders.
North American Land Company
Whether to local or international creditors, Morris, Nicholson, and Greenleaf became very indebted as a result of their land purchases. Morris, who already owed hundreds of thousands of dollars to various British and American banks, had also hired Charles L’Enfant, the designer of Washington D.C. to build a new mansion for himself in Philadelphia. The speculators turned to unwinding their investments and selling properties. To this end, they consolidated their assets into a single company and attempted to sell stock in that firm to the public, in America and Europe. The idea was that selling shares would be easier than selling acres and would allow the speculators to repay their creditors. Shareholders would then profit from any subdivision and sale of the properties at a later date.
The North American Land Company was formed in February 1795 to succeed the partnership previously formed by the three speculators. The group contributed six million acres of land scattered across Pennsylvania, Virginia, North Carolina, South Carolina, Georgia, and Kentucky to the company. This land was valued at fifty cents per acre or $3 million total. Contrast this to land in more densely populated parts of the new country which went for no less than $8 an acre. In exchange for their contribution of land into the company, the trio split ownership of 30,000 shares at $100 dollars each. On these and future shares the company promised a dividend of 6% per year.
In the end, even in the form of shares in a consolidated firm, the speculators found few buyers. Few shares were issued to outside investors, except some to the creditors of the company. The North American Land Company also failed to find any significant interest in the shares in Europe. In the meantime, Morris and company had to make principal and interest payments to existing creditors, pay its required installments under its Washington D.C. land deals, and pay taxes on its properties. Available funds were growing thin.
The financial difficulties strained the speculators’ relationship and Morris and Nicholson lost trust in Greenleaf who, as it happened, had actually kept the limited proceeds of the Dutch loans for himself rather than sharing them with his partners. Morris and Nicholson bought out their partner and Greenleaf sold his shares to them for $1.5 million in 1796. He received this amount in notes owed by them rather than in cash so he remained tied to the scheme indirectly. Nonetheless, the buyout of Greenleaf’s shares further indebted Morris and Nicholson.
Collapse and Consequences
The difficulties in finding domestic buyers were no less severe. The land fever had died down and other speculators were also struggling to find buyers; interest in land speculation was diminishing after 1795. Unable to liquidate either acres or shares in their North American Land Company, time was running out. Taxes were going unpaid and Morris and company risked losing their Washington properties if they failed to make installment payments required under their promise to purchase their lots there. Their creditors were also growing impatient. As it happens, in early 1795, the outgoing Secretary of the Treasury, Alexander Hamilton had tried and failed to collect on a $10,000 personal loan made to Morris. This loan, like so many of Morris’s debts, went unpaid.
By 1797, Morris and Nicholson were quite literally hiding from creditors, retreating to country homes, and Greenleaf was already in debtor’s prison. The years 1796 and 1797 were financially challenging and debtor’s prisons were crowded with new bankrupts. Benjamin Rush, another of the country’s founding fathers, recorded that in a six-week period in late 1796, one hundred and fifty businessmen had failed and seventy-seven were imprisoned. This same fate caught up with Morris and Nicholson and they too found themselves in debtor’s prison, in the same Philadelphia jail as Greenleaf. Nicholson never made it out, dying there in 1800.
In response to the business failures plaguing the country, the U.S. Congress passed the Bankruptcy Act of 1800. The legislation facilitated Morris’s bankruptcy and the discharge of much of his debts; he had owed at least $2.9 million to 86 parties. In 1801, Morris ended his over three years of imprisonment and lived for five more years after his release in Philadelphia. Needless to say, his L’Enfant-designed mansion in the city was never completed. Greenleaf, whose prison time was shorter, continued to engage in real estate transactions after leaving confinement, building houses in the ‘Greenleaf Point’ area of Washington D.C.
“My business was finished in the District Court without opposition, and I now find myself a free citizen of the United States without one cent that I can call my own”Robert Morris in a December 1801 letter to his son, Thomas Morris, who was serving his first year as a U.S. Representative from New York
Morris, Nicholson, and Greenleaf were, like other prominent men in early America, involved in a myriad of ventures. They were statesmen and speculators alike. Their collective failure tarnished their legacies, especially having come late in their lives. In any case, the land bubble in which they participated was among the most significant events in early American financial history, and one somewhat forgotten. However, the competing visions for America then imagined, whether the country should strive to be an urban mercantile power or a country of virtuous yeoman farmers could not be understood without recognizing the economic and financial context of the debate, of which the land bubble formed part.
More from the Tontine Coffee-House
Learn about other land speculators, including two intriguing firms buying confiscated estates in Scotland and Ireland. Also read about how a particularly entrepreneurial land speculator was enriched by the construction of Las Vegas’s Caesars Palace. Consider subscribing to this blog’s newsletter here.
1. Frehen, Rik, et al. “Dutch Securities for American Land Speculation in the Late Eighteenth Century.” Housing and Mortgage Markets in Historical Perspective, July 2014, pp. 287–304.
2. “Land Fever: The Downfall of Robert Morris.” The Missouri Review, vol. 15, no. 3, 1992, pp. 115–161.
3. “Plan of Association of the North American Land Company.” Philadelphia, Feb. 1795.
4. Sakolski, Aaron Morton. The Great American Land Bubble. 1966.
5. Smith, Ryan K. Robert Morris’s Folly: The Architectural and Financial Failures of an American Founder. Yale University Press, 2014.