It was headline news. By the time the survivors reached Norfolk, the news had preceded them, and their stories of the disaster were related by newspapermen, who avidly sought interviews. The first item in the New York papers on September 18th was sketchy, but by the next day, as more facts became clear, it became apparent that in addition to the appalling loss of life, there was an enormous loss of wealth.
While, in light of such a human tragedy, it may seem peculiar that the newspapers gave such prominence to the mere loss of specie, it was California gold which had fueled the country’s economy since its discovery eight years earlier. Its loss in September 1857 came at a perilous time, and threatened to take the financial underpinnings of the United States with it.
A depression in the East had gripped the economy during the fall and winter of 1854-55; in California gold production had peaked in 1853 at an estimated $65 million. The weather further exacerbated the problem; California was suffering a drought, and thus the placer miners who so desperately depended on water could not operate.
In 1855, in California, the news of the failure of some eastern mercantile houses triggered a run on banks; and although the flow was eventually stanched, public confidence ran low, while government corruption ran rampant. A malaise was settling across the country.
The New York branch of the Ohio Life Insurance and Trust Company failed in late August, 1857, leaving vast debts. Banks which had loaned funds to Ohio Life suddenly found themselves overextended. In turn they called in matured loans from their debtors, and the domino effect began. As word spread, more and more depositors demanded their gold from banks; in but a few weeks, the reserves of gold in New York banks shrank from $94.5 million to $75.8 million. Bankers were worried, and hoped that the expected gold shipment aboard the Central America would alleviate the pressure.
"That such a misfortune should have occurred, so soon after the late panic, was acknowledged to have a very calamitous foreshadowing." New York Times, September 19, 1857
"Prompt and liberal action of the New York Insurance Companies is deserving of all praise..." New York Times, September 19,1857
As the news of the catastrophe spread, so did unease; slowly at first. Eventually the Panic of 1857 took hold, ruining men and businesses. But the companies which had insured the Central America’s treasure acted with remarkable speed, covering the losses in record time and, if anything, eased the country’s mounting economic woes.
The amount of treasure carried on board the "Passenger and Gold-Ship" Central America (as the New York Times dubbed it), and indeed to whom it belonged was unknown at first. The initial reports of both the value and ownership were merely extrapolated from the manifests of other similar shipments. Indeed, the estimate of $1,600,000 was not far off, as indeed this had been the original commercial consignment aboard the Sonora. But in Panama more than a quarter million dollars were taken off, and the October 5th edition of the New York Times estimated the final count at between $1,219,184.43 and $1,324,497.13. A vast sum of gold.
Realizing at once the precarious state of the economy, the insurance companies decided at once not only to forestall any doubt about their own creditworthiness, but also more importantly assure a restive community that the loss of specie would be fully covered. Indeed, but a week after the disaster they voted to speed the payments, as soon as proof of ownership was provided. In London, the underwriters who had insured the bulk of the treasure, agreed to do the same as the item in the November 9th issue of the Boston Daily Transcript noted:
Prompt and Honorable. The London Insurance Company paid Messrs. Wells, Fargo & Co. $150,000, the amount of insurance on their specie lost in the Central America, within three hours after notification of the loss - a promptitude that is worthy of all praise.
The losses were all paid off, and the harrowing survivors’ stories were told and retold in the popular press; but eventually the Central America slipped off the front pages and into the back of the American consciousness - just as she had slipped beneath the waves. She was to remain lost for more than a century.
Q. David Bowers has been in the rare coin business since 1953 when he was a teenager. The author has served as president of the American Numismatic Association (1983-1985) and president of the Professional Numismatists Guild (1977-1979), is a recipient of the highest honor bestowed by the ANA (the Farran Zerbe Award), was the first ANA member to be named Numismatist of the Year (1995), has been inducted into the Numismatic Hall of Fame (at the ANA Headquarter in Colorado Springs), is a recipient of the highest honor bestowed by the Professional Numismatists Guild (The Founders' Award), and has received more "Book of the Year Award" and "Best Columnist" honors given by the Numismatic Literary Guild than any other writer. He has has written over 40 books, hundreds of auction and other catalogues, and several thousand articles.
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