10. The Panic of 1796-97, caused in large part by unchecked land speculation concerning the new capital city of Washington D.C., obliterated the savings and wealth of many American families
The economy of the United States remained highly unstable throughout the 1780s and 1790s, enduring frequent crises, rampant inflation, and an absence of public confidence. Speculation ran wild in financial markets, with poor investments on securities wiping out the savings of many middle and working-class Americans. Desperate to recover their fortunes, these financiers turned to land speculation regarding the ongoing construction of the new capital: Washington D.C. Consolidating their holdings into the North American Land Company in 1795, these financiers acquired more than forty percent of building lots in the new city with the hopes of turning an easy profit.
However, European investors were highly wary of land schemes in the United States. The land was of poor quality, whilst the deeds held were unclear and inexact. Unable to raise capital from the continent, these partners began issuing their own notes to creditors which in turn themselves became the subject of financial speculation. Unable to repay loans, one by one these financiers slipped into debtor’s prisons, with Philadelphian Robert Morris having issued $10,000,000 in personal notes to remain afloat by 1797 when his scheme finally collapsed. The bursting of the bubble precipitated an economic downturn that lasted until the new century and led to the Bankruptcy Act of 1800 to protect individuals from debt-related imprisonment.