The boom period which culminated in 1857 was nowhere more exuberant than in Minnesota. The swelling tide of population of the previous two years had brought in a body of speculators who presently gorged themselves with the unearned increments of land and town lot values. The whole population caught the fever and bought for the expected rise. The country people found ready sale for produce in the growing towns, and the merchants profited by their prosperity. The resulting elation and extravagance were at no time more abounding than in the closing days of the constitutional convention.
It was the 24th of August when the failure of the Ohio Life Insurance and Trust Company of New York precipitated the liquidation of incredibly multiplied credits in the East. A week later the tardy mails brought the news to St. Paul, and nowhere in the country did the panic strike with greater violence. The little money, real and promissory, sank out of sight. Deposits ceasing, the banks suspended. Eastern exchange rose to ten per cent. Assignments, foreclosures, attachments, and executions made law practice the only profitable pursuit. The horde of speculators who had infested the towns and villages abandoned their holdings and made their escape. According to J. Fletcher Williams, the lamented historian of St. Paul, that city lost fifty per cent. of its population. From the crest of a high wave of fancied opulence, the new state was thus suddenly plunged into a deep trough of adversity and despondence; and it was a long day before she rose to the level of normal prosperity.
The keenest of all disappointments was the postponement of railroad building. A score or more of chartered companies could not borrow enough ready cash to pay for their surveys. A generous congressional act of 1857, engineered by Delegate Rice, had made the Minnesotians of all classes joyous. That act bestowed on the territory and expectant state a grant of public lands equal to nearly a ninth of its whole area, to aid in the building of railroads. It is probable that this benefaction was all the more willingly bestowed because the territory had three years before been deprived of a noble grant by no fault of her own. The act did not convey the lands to the state, but made the state a trustee for four different railroad “interests” each aspiring to build its portion of a system of roads coextensive with the state.