Occasional Information of Local Historical Interest Number 56 ©2016 Robert R. Goller Autumn-Winter 2016-17 (Revised version — References corrected) Between 1836 and 1839 the Morris Canal & Banking Company’s bank became a major player in the extraordi- nary financial world of those times. Apparently little fazed by the depression that began after the Panic of 1837, it was responsible (along with Nicholas Biddle’s Second Bank of the United States — later the Bank of the United States in Pennsylvania) for multimillion-dollar internal-improvement loans to Indiana and Michigan, as well as for large investments elsewhere. But the complicated international credit system that the Biddles used so successfully eventually collapsed — in the case of the MC&BCo. revealing a hidden layer of corrupt bargains. Another Tangled Web — III Y 1839 the Morris Canal’s bank cember 1836.4 By mid-1837 Edward R. repairing and “renewing” waste weirs probably was second in interna- Biddle essentially ran the canal company and stop gates; walling and strengthen- B tional importance only to the as vice president (a position created spe- ing canal banks and gravelling towpaths; Bank of the United States. The latter no cifically for him that year) under figure- and obtaining new chains for the in- longer had a federal charter but was still head company president Samuel L. clined planes.8 the country’s most important financial Southard, United States senator from Presumably Miller’s requirements institution. It operated under a state New Jersey (who had been brought into were complied with, though the lease charter as the Bank of the United States the canal company by Nicholas Biddle) must have gone into effect before all in Pennsylvania, with branches in New and became company president himself renovations possibly could have been York City and other places. in January 1839.5 made. At any rate, early in 1839 the In the late 1830s the Morris Canal & Late in 1836 the company officers canal company annulled the renewable Banking Company could have been and directors, mostly preoccupied with five-year agreement with the LS&SRR in characterized as being under the control the increasingly large operations of the a new contract that gave the canal com- of the extended family of the Philadel- Morris Canal bank, had contracted to pany LS&SRR stock, ownership of its phia Biddles. The best known of these lease the canal itself for five years to the coal lands, and a healthy amount of cash was Nicholas Biddle, sometimes “Old Little Schuylkill and Susquehanna Rail- as assets.9 It may be that Edward Biddle Nick” to his critics, long the president of road Company, thereby leaving the ca- realized the potential value of the coal the Second Bank of the United States nal’s operation and maintenance in the lands as well as the value that the stock (and Andrew Jackson’s protagonist in hands of that company.6 The LS&S and cash would have if the canal com- the destabilizing Bank Wars of the mid- Railroad was mostly still on paper, but pany would not be able to meet its in- 1830s). While some may have consid- its future looked promising: It would be stallment payments in the near future, ered Nicholas Biddle the personification a necessary link in the chain of transpor- the economy being what it was. of the devil, his intelligence, influence, tation routes carrying anthracite coal By then the states of Indiana and and careful stewardship were, in those from Pennsylvania’s interior to the east- Michigan had placed millions of dollars days, indisputable. Biddle’s bank was ern seaboard.7 in credit loans with the canal company, closely allied with the MC&BCo. in im- One of the caveats of the railroad which were being paid off in install- portant domestic and foreign invest- company’s contract with the canal com- ments. The spectacular success of New ments. In 1839 he retired as president pany was that the Morris Canal be York’s Erie Canal after 1825 had set off of the Bank of the United States, leaving turned over to the railroad company in frantic internal-improvement programs it in charge of a son-in-law, Thomas good, usable condition. But when the in other states, most of them inade- Dunlap.1 time came for the LS&S to take over, its quately planned and recklessly funded. One of Nicholas Biddle’s cousins engineer, Edward Miller, had serious Indiana and Michigan were two such was Thomas Biddle, who had founded complaints about the canal’s condition. states, each negotiating huge loans on another Philadelphia investment house, Miller called for remedial action on a credit through the MC&BCo. to banking Thomas Biddle & Company, which also number of items: excavating silt deposit- houses in England — a common prac- was closely allied with the MC&BCo.2 ed at the canal’s outlet at Phillipsburg; tice in those times. Before long the And Thomas Biddle’s youngest brother, “renewing” 160 bridges; “renewing” the bonds themselves were disbursed among Edward Robert Biddle, a commission trunks of 10 aqueducts; “renewing” lock foreign (and domestic) investors. merchant and a partner in his eldest gates and repairing locks; rebuilding the By the beginning of 1839, however, brother’s company,3 joined the Newark outlet lock (probably the origi- the system began to unravel. The U.S. MC&BCo. board of directors in De- nal outlet lock in the downtown area); economy had rebounded slightly the 2 he was the negotiator of the five- million-dollar loan to the state of Michi- gan.17 (The company’s board minutes also record many large investment nego- tiations in other states during the late- 1830s.) Somewhere along the way Biddle became close with another director on the canal company’s board, Edwin Lord, whose early misfortunes already have been described (see Reflections 54). When Biddle became company president early in 1839 the vice-presidential position was left open until Biddle nominated Edwin Lord to fill it nearly two years later. Lord was elected vice president in October 1840.18 From mid-1837 into 1841 it was primarily Biddle and Lord who steered the MC&BCo. through the hard times of the depression, all the while with an eye on the transportation system and iron and coal industries developing in northeastern Pennsylvania and northern New Jersey. The MC&BCo. was still Shown on this page and the next are examples of the “small-denomination post standing as the 1830s ended, but its notes” issued by the canal company in 1841 to help finance the cost of the canal’s stockholders (and its creditors in Indiana enlargement. The company collapsed before the stipulated “Twelve Months after and Michigan, we may assume), were date,” so these notes saw limited circulation during 1841 and ultimately became not happy. worthless as currency. Many survivors reside in paper-money collections today. Making matters worse, it was pain- [RRG collection] fully clear that the Morris Canal as it then existed would be a bottleneck in year before, but by 1839 that small re- their fortunes in the revitalized iron in- that great transportation network being covery was erased by new calamities. dustry as well as the transportation busi- built eastward from the anthracite fields The details are too complicated to ad- ness; others would follow. of eastern Pennsylvania to the metropol- dress here, but it’s fair enough to say The anthracite breakthrough and its itan area: The canal had been built too that the depression deepened and consequences had been anticipated for a small and could not accommodate the spread. long time. The potential of anthracite larger boats of the Lehigh Navigation, That July the canal company found was to a large degree what drove George the main route by which Pennsylvania itself in dire straits and defaulted on its P. Macculloch’s advocacy for the Morris anthracite would reach the western end August installment payment to Indiana. Canal a couple of decades earlier.13 By of the Morris Canal. Clearly the Lehigh Work on Indiana’s portion of the Wa- the late 1830s Macculloch was long gone Coal & Navigation Company recognized bash and Erie Canal, the Whitewater from “the scene of action,” (as he him- this. By 1840 that company was already Canal, and other projects abruptly came self once put it)14 but others — New building 54-ton boats in two sections, to a halt.10 By April 1840 the canal York merchants and Philadelphia entre- anticipating a time when its boats could company also defaulted on its payments preneurs — were poised to take ad- travel through an enlarged Morris Canal to Michigan.11 vantage of what promised to be a lucra- and, with their two sections disconnect- tive industrial future. ed, traverse the canal’s inclined planes.19 All this financial mayhem in the Among the active participants was The MC&BCo. embarked on a country came at a particularly frustrating Edward R. Biddle. He had been watch- complete enlargement of its works in time. The “modern” world as we know ing the ups and downs of the Morris 1840, the depression notwithstanding. it was then just beginning, largely fueled Canal & Banking Company as a financial The enlargement (and the prospect of by anthracite coal — vast beds of which enterprise for some time by the late great benefits to accrue from the success existed in northeastern Pennsylvania. 1830s, occasionally seeking investment that year in fueling iron furnaces with By the late 1830s anthracite had been advice from his cousin Nicholas.15 anthracite coal) was announced by Bid- used successfully to fuel iron furnaces Even before he joined the canal dle in an address distributed to canal- — first across the Atlantic, in Wales, company’s board in December 1836, company stockholders at the end of then, conveniently, in northeastern Biddle probably had a hand in negotiat- 1840.