During the time between earning his undergraduate degree in 1740 and his masters degree in 1743, Samuel Adams’ family fortunes experienced a dramatic change, as did Boston and much of the Colonies. Trade in MA had fallen sharply, prices soared, and the value of currency plummeted. Boston businesses relocated to less-expensive ports, which diminished Boston’s position as the shipbuilding capital of the Colonies. Dry goods, the cod industry, and distilleries all suffered in Boston. Unemployment increased while the city’s population decreased. The number of poor people in Boston doubled, and the citizens of Boston were hit hard with city taxes.
Making matters worse was the shortage of currency in New England, since the trade imbalance (Mercantilism) meant that most of the money remained in Britain. London controlled the money supply, and London liked the monetary situation as it was, which meant that MA’s economy limped along selling beaver skins and lumber. Bills of Credit had been introduced, but in 1741 London decreed that those bills were to be withdrawn from circulation, which would make the currency shortage more acute. So what could Boston and MA do about the dire economic situation - The MA House of Representatives, based on feedback from citizens, authorized a land bank. New England was poor in cash, but rich in property; so the idea was to issue paper money which was backed up by land.
Making matters worse was the shortage of currency in New England, since the trade imbalance (Mercantilism) meant that most of the money remained in Britain. London controlled the money supply, and London liked the monetary situation as it was, which meant that MA’s economy limped along selling beaver skins and lumber. Bills of Credit had been introduced, but in 1741 London decreed that those bills were to be withdrawn from circulation, which would make the currency shortage more acute. So what could Boston and MA do about the dire economic situation - The MA House of Representatives, based on feedback from citizens, authorized a land bank. New England was poor in cash, but rich in property; so the idea was to issue paper money which was backed up by land.
The idea for a land bank had been in the works for quite awhile, and in the early-1740s in became a reality. Nearly 400 men in 64 towns pledged their property as initial capital, against which the land bank issued loans at moderate interest rates. The hope was to ease the currency shortage and to stimulate manufacturing in order to jump start the MA economy. Samuel Adams, Sr. was one of the land bank’s nine directors. None of the directors were among the wealthiest in MA, but all were persons of stature.
The land bank issued its first loans in the Fall of 1740. Over the next few months, over a thousand people took out loans to improve farms or factories. It appeared that the currency shortage problem had been solved, but a new problem emerged, in that the popularity of the land bank among small towns and farmers was matched with the land bank’s unpopularity among Boston’s merchant elite. The city’s elite merchants didn’t want to settle debts in untried currency, which was worthless to British creditors. Also, these elites didn’t want “lesser” merchants (e.g. tavern owners, bricklayers, etc) to be part of their “club”. Also, the merchant elite questioned the legality of the land bank, and that the loans would cause inflation.
Over 130 merchants officially complained to the MA governor, as well as refusing to do business with the land bank. With the merchant elite opposed to the land bank, the very same MA governor that had supported the enterprise now came out in public opposition, seeing the land bank as a provocation and a challenge to the Crown.
The land bank issued its first loans in the Fall of 1740. Over the next few months, over a thousand people took out loans to improve farms or factories. It appeared that the currency shortage problem had been solved, but a new problem emerged, in that the popularity of the land bank among small towns and farmers was matched with the land bank’s unpopularity among Boston’s merchant elite. The city’s elite merchants didn’t want to settle debts in untried currency, which was worthless to British creditors. Also, these elites didn’t want “lesser” merchants (e.g. tavern owners, bricklayers, etc) to be part of their “club”. Also, the merchant elite questioned the legality of the land bank, and that the loans would cause inflation.
Over 130 merchants officially complained to the MA governor, as well as refusing to do business with the land bank. With the merchant elite opposed to the land bank, the very same MA governor that had supported the enterprise now came out in public opposition, seeing the land bank as a provocation and a challenge to the Crown.
The MA House (the lower house of the MA Colonial legislature, with the Council being the upper house) refused to prohibit the land bank from issuing loans, after which the MA governor warned against extending and accepting loans, and he forbid those with a royal commission from doing business with the land bank. The MA governor did all he could to destroy the land bank, using threats and intimidation. In addition, the MA governor sent an official request to Parliament to formally and officially dissolve the land bank, claiming that it was a threat to the authority of Parliament and the Crown.
It wasn’t the first, and certainly wasn’t the last time that an economic problem in MA almost overnight became a political problem. There was actually nothing remotely illegal about the land bank, but by supplying those that were normally excluded from the existing economic system with currency, it was seen by the elites as a threat to the existing economic, political, and social order.
Parliament acted on the MA governor’s request, as MA found out in May 1742. While there were no prosecutions, severity was the rule, in that any money-making venture which was not authorized by Parliament or the Crown would be illegal. In addition, the directors were liable, jointly and individually, for the land bank’s current obligations, and the land bank’s loans were to be repaid immediately in gold or silver. The directors of the land bank were shell-shocked, and the amount of money needed to immediately repay the loans were colossal. There were those that suggested that maybe MA should ignore Parliament, which may have been the first time that idea had been publicly floated in the Colonies.
It wasn’t the first, and certainly wasn’t the last time that an economic problem in MA almost overnight became a political problem. There was actually nothing remotely illegal about the land bank, but by supplying those that were normally excluded from the existing economic system with currency, it was seen by the elites as a threat to the existing economic, political, and social order.
Parliament acted on the MA governor’s request, as MA found out in May 1742. While there were no prosecutions, severity was the rule, in that any money-making venture which was not authorized by Parliament or the Crown would be illegal. In addition, the directors were liable, jointly and individually, for the land bank’s current obligations, and the land bank’s loans were to be repaid immediately in gold or silver. The directors of the land bank were shell-shocked, and the amount of money needed to immediately repay the loans were colossal. There were those that suggested that maybe MA should ignore Parliament, which may have been the first time that idea had been publicly floated in the Colonies.
It seemed to the Adams family that Samuel Adams, Sr. had been singled out more than the other land bank directors. Adams, Sr. was now very exposed financially, having invested most of his fortune and all of his political capital in the land bank; and soon enough, Samuel Adams, Sr. was ruined. The MA governor was recalled from office just a few weeks later; a “bad spirit” permeated MA, and the colony’s treasury was empty.
Recovering gold and silver from the land bank loans proved to be very slow-going and difficult, but the new MA governor was able to head off any further crisis, despite formidable resistance to Parliament’s decree. The land bank existed for another sixteen months, but it took decades for the loans to be fully paid off. Samuel Adams, Sr. repeatedly had to appear in court, basically for the rest of his life, appealing his penalty as government overreach. The financial misery of Adams, Sr. translated to local political popularity, being elected as a Boston Selectman, and then two years later to the MA House. Adams, Sr. was eventually selected to serve in the Council (the upper house), but the MA governor, as was his right under the rules of that time, rejected Adams, Sr. along with all the others that were involved in the land bank from being seated in the Council.
Recovering gold and silver from the land bank loans proved to be very slow-going and difficult, but the new MA governor was able to head off any further crisis, despite formidable resistance to Parliament’s decree. The land bank existed for another sixteen months, but it took decades for the loans to be fully paid off. Samuel Adams, Sr. repeatedly had to appear in court, basically for the rest of his life, appealing his penalty as government overreach. The financial misery of Adams, Sr. translated to local political popularity, being elected as a Boston Selectman, and then two years later to the MA House. Adams, Sr. was eventually selected to serve in the Council (the upper house), but the MA governor, as was his right under the rules of that time, rejected Adams, Sr. along with all the others that were involved in the land bank from being seated in the Council.
By 1750, Philadelphia had the largest population of any city in the Colonies, and New York City was closing in on Boston. The land bank debacle was the event that opened up the question of who was actually in control in MA. The long arm of Britain had never been more intrusive or so hostile to an American Colony to that point. MA governors kept complaining to London about disorder in MA, much of it fabricated, in order to get backing and assistance from Britain. When that backing and assistance occurred, it was almost always out of proportion to the actual crisis, creating an atmosphere were an increasing number of colonists in MA started to question Britain’s authority.
The land bank crisis widened the class divide in Boston and across MA. The land bank imbroglio was a gauge to measure future unrest in MA, with John Adams later claiming that the land bank crisis was a bigger deal to MA than the Stamp Act in 1765. Samuel Adams, after the death of his father, was left with a massive debt, and the Adams estate was put up for auction in order to settle the outstanding debt. Samuel Adams not only had a large debt with which to deal, but also a truckload of grievances; it was not too much to say that the collapse of the land bank was the event that transformed Samuel Adams.
The land bank crisis widened the class divide in Boston and across MA. The land bank imbroglio was a gauge to measure future unrest in MA, with John Adams later claiming that the land bank crisis was a bigger deal to MA than the Stamp Act in 1765. Samuel Adams, after the death of his father, was left with a massive debt, and the Adams estate was put up for auction in order to settle the outstanding debt. Samuel Adams not only had a large debt with which to deal, but also a truckload of grievances; it was not too much to say that the collapse of the land bank was the event that transformed Samuel Adams.