Between 1854 and 1857, a craze for platting town sites and selling the deeds to settler-colonists swept through Minnesota. Speculators poured into the territory hoping to make their fortunes, and many succeeded. An estimated 700 town sites were platted during this time, though most of them were never developed or were abandoned after a few years. Ultimately, the mania of land speculation ended when the Ohio Life Insurance and Trust Company went bankrupt in 1857, causing a financial panic through the country.
Minnesota before the 1850s was a non-industrial region populated primarily by Dakota, Ojibwe, and Métis people. The white settler-colonists living there—most of them fur traders and government agents—were estimated to number less than 5,000. There were some white settlements, such as the logging town of Stillwater, but they were surrounded by forests and land not used for farming. This changed rapidly when Minnesota officially became a territory of the United States on March 3, 1849. Through the treaties of Traverse des Sioux and Mendota, which were signed in the summer of 1851, the federal government acquired millions of acres of land from the Dakota people.
After the signing of the two treaties, a flood of settler-colonists from the eastern United States and Europe came to Minnesota to buy land and start farms. The idea of transforming the land from a “savage wilderness” into farms that produced food and other commodities attracted many white Americans, and advertising campaigns encouraged them to come west and “settle” the land. Fur traders turned politicians such as Henry H. Sibley, who had initially resisted white settlement, switched their focus from the fur trade to real estate and land speculation in order to stay relevant in a changing Minnesota.
The new territory, with its constant stream of settlers looking to buy land, offered newcomers the perfect opportunity to make money. Speculators of all backgrounds began platting townsites in 1854 and seized more land each year as the decade progressed. Buying up potential town sites was the most profitable form of speculation, and an estimated 700 town sites were platted between the years 1855 and 1857.
Speculators used tricks to make the land they were selling seem more desirable. Even the smallest rumor that a railroad was going to be built near a piece of land prompted them to raise their price. There was also a corrupt intermingling of politics and land policy. Many of Minnesota’s prominent public figures, such as Sibley, Henry M. Rice, and Franklin Steele, were involved in real estate and land speculation.
In one large-scale example of corruption, Moccasin Democrats (the party of Sibley and Rice) rigged the 1857 territorial census to claim that thousands of settler-colonists were living in southwestern Minnesota. In reality, there were five. Democrats did not carry out the scheme to benefit speculators outright so much as rig the vote to keep themselves in power. The census, however, helped speculators by announcing there were more settlers already living in southwestern Minnesota than there actually were. This reassured families who wanted to buy land and move there but feared living in an isolated place.
Land prices in the period of land speculation were highly inflated. Farmers could purchase plots from the land office for as little as $1.25 an acre, but speculators would buy them as soon as they were available and immediately raise their prices for resale. This put speculators in conflict with farmers and their supporters. Settlers became frustrated with US land policy, which they felt did not protect them from speculators looking to buy the land they intended to farm.
Settler-colonists could not legally buy and live on a plot of land until it had been surveyed by the US land office. Most of them, therefore, were squatters. However, they arrived in Minnesota so quickly and in such large numbers that the land office failed to keep up. Congress granted preemption rights to squatters, promising that when their land was surveyed, they would get the first chance to buy it. But officials executed this policy clumsily, opening land for sale only to put it on hold for months. As a result of settlers’ fears about losing land to speculators, organizations began to form that advocated for their rights against the speculator.
Land speculators were unpopular in the public eye for other reasons, as well. Speculation was considered dishonest because it hoarded land from settler-colonists looking to farm it. Newspaper articles in the 1850s criticized speculators for their selfish and immoral business practices. St. Paul resident J. Fletcher Williams (a future secretary of the Minnesota Historical Society) referred to them as “shysters.” This reputation was not undeserved. Many speculators sold town lots to unsuspecting newcomers that were not, and never would be, developed. Sometimes, the speculators did not even own the land they were selling, giving people false deeds in exchange for their money.
Speculators proposed creating “paper towns”—communities that could be platted and named before they were populated—across Minnesota Territory. In 1856, W. G. Cowell platted a town to be built on Lake Superior in St. Louis County and named it Buchanan, after President James Buchanan. A land office was established on the chosen site, but it was moved when it became clear that the town would never develop. Judge John Carey confirmed that while an office did exist in Buchanan, there was nothing around it but wilderness. Cowell never acquired the deeds for the land he platted, and by 1857, there was no one living there.
Some paper towns, like Washington and Manchester, saw even less development than Buchanan. They were platted in the counties of Washington and Anoka, respectively, but never materialized beyond the pages they had been mapped on. This was the fate of most paper and led to buyers losing their money.
Minnesota’s era of land speculation did not survive the 1850s. California’s Gold Rush and a European grain shortage, both of which had inflated farmland prices, ended in 1855 and 1856, respectively. The credit that had driven speculation tightened. When Ohio Life Insurance and Trust Company—one of America’s largest banks—collapsed as a result, a mass sell-off ensued, ruining many investors. This triggered the Panic of 1857, and many banks in Minnesota closed their doors. Land values dropped, and speculators lost their fortunes. Most Minnesotans were left in debt, and people moved outside of the state to seek wealth elsewhere.