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Chapter 5: Betting the Farm
In 1873, the German immigrants 30-year old Henry Ise and his new 18-year old bride Rosie migrated west from Iowa, settling on 160 acres of fertile Western Kansas soil. A veteran, Henry had earned the claim outright fighting for the Union Army in a series of nasty campaigns in Tennessee, which left him with a creaky shoulder. After the Civil War, the freedpeople had failed to get their southern claims, as the finance capitalist Henry Cooke channeled their savings into the construction of the western railroad network. But for those willing to head west, even for the trickle of southern black “Exodusters,” the Homestead Act of 1862 had promised to open up millions of acres for settlement, in clean rectangular 160-acre quarters.
Henry and Rosie Ise would succeed in raising a thriving commercial farm. But in 1887, needing $363 to pay a quack doctor to care for their youngest son John, stricken with polio, the couple decided to mortgage their homestead to the Pennsylvania Mortgage Company. It was a fateful decision. According to John’s memoir of his childhood experience, the mortgage became the “relentless master of the family destinies.” The Ise mortgage entered into a new stream of financial circulation—the “western mortgage market.”
Indeed, after 1870 there emerged an American market in what are now called “mortgage-backed securities.” New financial intermediaries purchased mortgages on new western farms, guaranteed them, and then mostly passed them through to private and institutional investors in the east, or packaged them together into bonds for public sale. Capital consequently flowed westward while wheat, corn, and other staples flowed eastward. By 1890, homesteaders had mortgaged somewhere between 30 and 40 percent of all farm acreage west of the Mississippi River and east of the Rocky Mountains. During the 1880s the “western farm craze” had spread like a fever among the eastern investing public. But after a series of droughts and the financial panic of 1893 the market collapsed. Yet, by then the logic of American farming had been utterly transformed. The farmer’s distinctive hedge—his land—was lost. The countermovement of landed independence was over.
After the Civil War, as before, many commercial farmers migrated west in pursuit of the economic and existential rewards of a landed independence. Henry and Rosie Ises’s lone-stated aspiration was to become “independent.” Clearly, some had other, more narrow goals in mind. There were farmers, for instance, who put all possible acreage into wheat, the great western staple, in search of a short-term upside rather a sense of long-term economic security. They hoped that rain would follow the plow, and that providence or chance would dispense a friendly fate, rewarding their labors. The 1880 western guidebook Where to Go to Become Rich devoted a chapter to plains farming, next to another on southwestern gold prospecting.
Prologue: Voyage 1
1 The Assumption of Risk 7
2 The Perils of the Seas 21
3 The Actuarial Science of Freedom 60
4 The Failure of the Freedman's Bank 104
5 Betting the Farm 150
6 Fraternity in the Age of Capital 191
7 Trading the Future 231
8 The Trust Question 264
Epilogue: Freaks of Fortune 308