A Counterfeiter's Paradise

by Ben Tarnoff

  Life on the Osceola involved stretches of numbing boredom punctuated by moments of extreme terror. Most of the time there was nothing for the passengers to do. Their only exercise came from strolling about on deck, and they soon became lethargic; Upham gained so much weight on the trip that he could barely fit into his clothes. Then, after days of uninterrupted dullness, a storm would suddenly appear and wreak havoc. This schizophrenic pace must have been exhausting, and everyone dealt with it differently. Many got drunk, escaping the claustrophobic world of the Osceola in booze-fueled parties that Upham called “jollifications.” One jollification had just gotten under way when a gale hit: “[W]ith the roaring of the elements and the carousing of the revelers,” Upham wrote, “the night was rendered hideous.” Others gambled, betting several hundred dollars on games of cards or dominoes. When a player ran out of money, he would cut the buttons off his coat and use those, or promise to buy the winner a pet monkey when they reached the next port. The most popular pastime, however, was fighting. Brawls provided an excellent way to relieve pent-up frustrations, especially when the weather heated up.

  Although he faithfully recorded these activities in his journal, Upham preferred to spend his time reading and writing; his greatest vice was sipping a little whiskey to calm his nerves during a storm. His level disposi-tion earned him the respect of his fellow passengers, who made him a mediator in their ongoing dispute with the captain. Captain James Fairfowl had been causing problems from the moment the brig set sail. He was a curmudgeonly Scot with big ears, imperious eyebrows, and an unfortunate tendency to take unreasonable positions from which he refused to back down. When the steerage passengers demanded to be served more potatoes, Fairfowl threatened to throw the food overboard.

  On the night of May 13, 1849, Captain Fairfowl almost ran the Osceola into a reef off the Chilean coast. He was looking for Talcahuano, a popular port for whalers and passenger ships bound for California. After his near-collision, Fairfowl stayed close to the shore, hoping to find the right harbor. But the darkness obscured his view, and when day broke, a heavy fog fell. He piloted the Osceola into a small bay and dropped anchor. Once the haze lifted, he resolved to go ashore to try to figure out where they were, and gave the passengers permission to join him.

  They learned that they were only twenty-seven miles from Talcahuano. As long as the wind kept blowing the Osceola toward the mouth of the bay, however, the ship couldn’t leave. Upham didn’t want to wait for the weather to change. He persuaded Fairfowl to let him and thirteen other passengers travel to Talcahuano on their own and reunite with the Osceola later. After the dreariness of life at sea, tramping through the Chilean countryside must have been invigorating, and Upham devoted long, colorful journal entries to it. He and his companions started down a muddy road lined with apple orchards, vineyards, and strawberry patches, stopping at huts along the way to sample the wine that people generously offered the travelers. Upham drank the wine, but immediately disliked the Chileans. He found them “idle, indolent,” “a poor, flea-bitten, priest-ridden people” who were too lazy to develop their great natural resources. The men he admired the most in Chile weren’t the Chileans but the American expatriates who had become local entrepreneurs—men like Brooks, a New Englander who had deserted from a whaling ship six years earlier and now ran a profitable hotel. Upham saw Americans everywhere: the Chilean coast seemed overrun with them.

  It took the Osceola another sixty-nine days from Talcahuano to reach California. On August 2, 1849, the passengers glimpsed land through the fog, and three days later, they passed through the Golden Gate into a harbor teeming with ships unloading people and cargo from every part of the world. After seven difficult months, they had arrived in San Francisco. It was a “queer place,” Upham wrote. San Francisco had grown rapidly in the past year, but it still seemed more like a large campsite than a proper town. Most of its five thousand residents lived in tents planted in the shifting sands along the beach or in the nearby dunes. They hadn’t come to build a community—many didn’t even share a common language—but to get rich as quickly as they could. Their ephemeral dwellings were regularly incinerated by fires, only to be rebuilt within weeks. When heavy rains fell in the winter of 1849–1850, the streets they hadn’t bothered to pave flooded—Upham, who witnessed the deluge, saw men and mules drowning in “rivers of mud.” San Francisco wasn’t a destination but a transit point for people headed to the mines farther east. Its most perma-nent establishments were those that catered to the appetites of the mostly male newcomers, places where they could drink, gamble, and fornicate before trekking into the interior to look for gold.

  Upham pitched his tent in a portion of the beach called Happy Valley. In his pocket was $6.75; he would need more money to make it to the mines, so he took a job at a lumberyard. Instead of recoiling from San Francisco’s rawness, Upham enjoyed it. He felt it had a democratizing effect. “A graduate of Yale considers it no disgrace to sell peanuts,” he noted approvingly. In California the aristocratic distinctions of the East meant nothing; men competed as equals, and succeeded through their own initiative and hard work. Determined to try his luck in the mines, Upham booked passage in September aboard a ship that sailed up the San Joaquin River to Stockton, an inland town about ninety miles away. From there, he hired muleteers to take him to the Calaveras River and, armed with a pick, a crowbar, a spade, and a tin pan, began panning for gold. Upham would dig dirt from the riverbed and then place it in a pan with water, letting the heavier gold dust settle to the bottom and the rest wash off. On his first day, he extracted a quarter of an ounce of gold this way. He dedicated himself to the task, waking up at dawn and toiling for hours, moving boulders to locate richer lodes underneath.

  The successful prospectors, he noticed, were those who took a patient, methodical approach. “Those who had expected to realize a fortune in a few days or weeks were sadly disappointed,” Upham remarked. His persistence paid off, as when he found a patch of earth that held almost $400 worth of gold. But the job proved too physically demanding. In Philadelphia he had worked behind a desk, and he wasn’t accustomed to strenuous manual labor. After nearly a month of mining, Upham’s joints became so badly swollen that he could barely walk. He had no choice but to sell his tools and quit.

  When Upham returned to San Francisco in November 1849, he couldn’t believe how dramatically it had grown in his absence. “The saw and hammer of the carpenter could be heard in every square, and the voice of the crier and the auctioneer at the corner of nearly every street,” he marveled. The campsite was becoming a city: the flimsy canvas tents had given way to sturdier wooden structures, built to accommodate an exploding population. Every day more gold-seekers showed up on the piers, and by the end of the year, around twenty-five thousand people lived in San Francisco. This influx created a huge demand for goods, and Upham came up with a plan. “I had a vision,” he recalled, “and in that vision I saw—pickles.” He bought cucumbers and vinegar from a ship newly arrived from Boston and cornered the market on pickles. Within a week he had netted $300, and soon started another profitable trade in tobacco pipes.

  While he clearly had a gift for it, Upham hadn’t sailed twenty thousand miles to sell pickles and pipes. If he couldn’t dig for gold, he needed to find a satisfying way to spend his time or he might as well go home. So he closed his business and applied for a position signing up subscribers for a local newspaper, the Pacific News. Published by a pair of former gold prospectors who met in Chile on their way to California, the News appeared three times a week and cost twelve and a half cents. It carried reports from all over California as well as news from faraway capitals like Havana and Rome. San Francisco’s isolated residents craved information from the outside world, and Upham had no trouble increasing the newspaper’s circulation. The News’s publishers rewarded him by hiring him as their bookkeeper and providing him with a bunk in their offices where he could sleep.

  Living and working in the rudimentary wood-frame building on Kear
ny Street that housed the News thrust Upham right into the hectic heart of early San Francisco. The newspaper was located north of the Plaza, which had been the town’s center since its early days as a Mexican village. When something significant happened, like a fiery political speech or San Francisco’s first theatrical performance, it took place in the Plaza. So many pairs of boots had trampled it that no grass could grow, and on the brown ground merchants had set up stalls to peddle items from the different continents represented by the swarm of ships in the harbor.

  Upham loved newspapers. They appealed to his fondness for hard facts and engaging anecdotes. The Pacific News printed wholesale prices, election returns, and firsthand stories from the mines. It did for the citizens of San Francisco what Upham had been doing privately in his journal since departing Philadelphia: documenting what might otherwise go unrecorded. Upham liked the News but wanted to be more than an accountant. So in the spring of 1850, when a New Orleans printer named George Kenyon Fitch invited him to help publish a newspaper in Sacramento City, he agreed. They rented the second floor of a house near the American River and assembled the first issue of the Sacramento Transcript. Upham slept on the office counter, using a roll of paper for a pillow. He served not only as the newspaper’s business manager but also as its local reporter. While Sacramento was only a fraction of the size of San Francisco, it didn’t lack for excitement. In the summer after Upham arrived, a dispute over land titles escalated into a firefight between an angry mob of squatters and a group of armed citizens. The sheriff was shot dead, but the mayor survived.

  Upham had come west for gold but found something else: a society in the process of being created. He felt exhilarated by the “almost magical” growth of Sacramento, watching its residents build the town’s first levee or organize its first concerts. These weren’t prospectors but pioneers, people who, like his ancestor John Upham, cleared the wilderness and planted the standard of civilization. Upham could have become one of them but he had a family waiting for him in Philadelphia, and in late August 1850, he decided to return home. He sold his stake in the Transcript and set off for San Francisco, where he began the voyage east. His friends at the newspaper were sorry to see him go. “We sincerely wish him a speedy return to his family,” they wrote in their announcement of Upham’s departure, “and success in the business in which he may hereafter engage.”

  WILLIAM LEWIS HERNDON HAD SPENT nearly his whole life at sea. He had joined the navy at fifteen, cruised the Gulf of Mexico in the Mexican-American War, and at thirty-eight, became the first American to explore the Amazon River. So in September 1857, when his ship, the Central America, sailed into a hurricane on its way from Panama to New York, he reacted calmly. The Central America, equipped with three masts and steam-powered paddle wheels on the port and starboard sides, had made the trip dozens of times before. Now it careened through mountains of swirling water, trying to keep its balance as the hull started to flood.

  Herndon, a slim man with a red beard and round glasses, could be seen racing around the ship, raising his voice to be heard over the shrieking of the wind. He assembled bucket brigades to bail out the boat, but the water continued to rise, eventually extinguishing the fires in the steam engine’s boilers. Herndon tried raising the sails, but the wind shredded them. He was adrift in a hurricane with no power to maneuver, and on the night of September 12, he stood on deck in dress uniform while the Central America sank. Moments later, the sea submerged him and everyone else on board. Some clung to floating debris but most thrashed about helplessly, crying or praying. One survivor saw hundreds of “human beings floating out on the bosom of the ocean, with no hope but death.”

  Four hundred and thirty-five people drowned in the wreck of the Central America. The story made headlines all over the country and inspired many artists’ renderings of the ship’s final moments. Frank Leslie’s Illustrated Newspaper ran an engraving showing the Central America’s frantic passengers buried by a cresting wave, an image that captured the horror of the scene. While the human tragedy was considerable, lives weren’t the only things lost. In the hold of the Central America was a large quantity of California gold, about $2 million worth, being transported to New York City banks. News of the disaster sent shock waves through Wall Street, and it couldn’t have come at a worse time. The banks, facing a crisis of confidence that had been building since late August, had hoped to fortify their reserves with a fresh infusion of specie. Wall Street had become precariously dependent on regular shipments of gold from California, and the incident underscored the fundamental fragility of the nation’s financial establishment. In the end, however, the banks weathered the disappointment fairly well, and the pangs of fear soon faded. But the sudden scare surrounding the Central America demonstrated how tense the situation was. And in the coming weeks, that tension would intensify into outright hysteria as the nation entered its next meltdown, the Panic of 1857.

  To get from California to New York, the gold had sailed from San Francisco to Panama and crossed the isthmus before being loaded onto the Central America. This was the same route Upham had taken home seven years earlier, a trip that lasted only thirty-eight days, far shorter than his voyage around Cape Horn. His time in California had transformed him, and he kept thinking about it long after returning to Philadelphia’s comparatively tranquil cobblestone streets. Californians, he believed, were a “manly, vigorous, intelligent race of freemen” who lived independently, without the benefit of unfair privileges or monopolies. This ideal had a long history in American life, championed in some form from Thomas Jefferson to Andrew Jackson. By Upham’s time, however, it had become more of a fantasy than a reality for many people, as the economy grew more complex and interconnected. The most striking examples of the trend could be found in the industrializing cities, where workers did backbreaking labor for little pay and had no illusions about being “freemen.” By the middle of the nineteenth century, even the rural agrarians idolized by Jefferson felt their self-reliance slipping away. The economy had made them more vulnerable to forces beyond their control, a fact that became painfully evident in the Panic of 1857.

  On August 24, 1857, one of New York City’s most respected financial institutions—the local branch of the Ohio Life Insurance and Trust Company—failed. While it didn’t issue notes, it had lent a lot of money and held large sums of deposits. It was also in debt to almost all the other New York banks, and its abrupt collapse frightened them. Then news emerged that most of the company’s capital had been embezzled by its cashier, which proved even more unsettling: if fraud could be committed at a place as reputable as Ohio Life, it could happen anywhere. Worse, people might lose faith in the New York banks and demand their deposits or redeem their notes, creating a specie drain that could lead to more bankruptcies. So New York’s bankers drastically curtailed their liabilities. They cut their lending, called in their loans, and pressed banks throughout the country to redeem notes that had accumulated in their coffers.

  This contraction of credit, beginning in New York and radiating outward, shuttered businesses, crippled commerce and industry, and eventually forced almost every bank in the nation to suspend specie payments. The scale of the crisis surprised most Americans, who didn’t expect a financial tremor in a faraway city to have much of an impact on their lives. Western farmers had an abundant harvest in 1857. But the crisis caused crop prices to plummet, so despite full granaries, they had a terrible season. Southern planters suffered a similar decline in demand for tobacco and cotton. Companies everywhere—New England textile mills, Wisconsin lumberyards, Pennsylvania coal mines—went bust or shed jobs. The pain was worst in New York City, where the number of unemployed reached as high as a hundred thousand. On November 5, 1857, four thousand people rallied at Tompkins Square near the East River to demand work. The crowds swelled in the following days, and after they marched through Wall Street and stormed City Hall, the mayor called in the police, the state militia, and federal troops. On the steps of the Merchants’ Exchange
, a blacksmith named Bowles declared that workingmen didn’t intend to starve while millions of dollars’ worth of specie sat idle in bank vaults.

  Decades of laissez-faire hadn’t produced a ruggedly egalitarian society of the kind Upham imagined in California. Instead, it had created a great scramble for wealth where some had power and others had none. As with previous panics, the Panic of 1857 capped an era of tremendous growth. The Mexican-American War from 1846 to 1848 had invigorated the economy and vastly increased the size of the country. The new territory came with significant natural resources—gold, most important—which further spurred the economy. At the same time, political instability in Europe caused a spike in immigration. The foreigners energized American industry with a flood of cheap labor. They also accelerated the migration westward, creating a booming real estate market and heightening demand for the railroads that had begun traversing the country. Railroad companies went deeply into debt to raise capital, borrowing from European creditors and issuing stocks and bonds that were traded on Wall Street.

  Underwriting these ventures was a banking sector that almost doubled in size from 1850 to 1857. Paper money soared to perilous heights. By the 1850s, more than ten thousand different kinds of notes circulated, printed by incorporated and unincorporated banks, insurance firms, and railroad companies, among others. This made simple transactions mind-bogglingly complex. A baker selling a loaf of bread couldn’t be expected to recognize most of the bills a customer might present as payment. His best option would be to consult a periodical like Thompson’s Bank Note Reporter, which listed the latest values for different notes and catalogued known counterfeits. But the economy moved so fast that an edition of Thompson’s, which subscribers received twice a week, could become obsolete almost as soon as it appeared. A bank might have failed, rendering its bills worthless, or a new type of forgery might have eluded detection. Even the most reliable sources of information couldn’t keep up.