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Show CASH SALES, 1840-1862 213 against the loan sharks, as the West liked to call the moneylenders, we will find that they were performing a service of considerable value to pioneers, at least as long as the government insisted on selling its land. When the public auction was held the loan shark would enter the land for the squatter (after 1841 the preemptor) who had not yet accumulated the necessary $200 for his quarter-section. Later comers, arriving in an area after the first wave of squatters had selected the most promising tracts, often preferred to buy from those who had preceded them. The sale of claims, even before the preemption entry had been filed, became an important part of the western land business. Also, many settlers who filed preemption entries on land which remained unsold after the auction did not want to wait a year for their titles. Some of the more roving class wanted to be up and away between the time they made their entry and the time they were required to prove up. Resales were easier if the preemptor could procure his title and then resell to another for the profit his early selection and his improvements justified. Transactions of both kinds were facilitated by the loan shark. In short he permitted the settler to conserve what capital he had for living expenses, stock and equipment, to secure his land with borrowed money, and to cash in on his improvements if he wanted to do so. Frontier interest rates were high, but risks were great. Ordinarily the moneylender wanted a quick turnover of his capital and preferred to have payments made at the end of the year, for he dared not charge the same 18, 24, or 48 percent interest in renegotiating the loan that he had hidden in the original transaction. He did not want the land to fall back into his hands for it then became unproductive and in poor times the cost of carrying it for years might eat up the expected profit. Foreclosures had, however, to be resorted to when the lender's equity was threatened. A moneylender engaged in the business of entering land for settlers necessarily appears in the land statistics as a large scale land speculator entering thousands of acres, but his object was to turn over his capital, not to retain the land. Few speculators could withhold their land from sale or renting for long because taxes and other costs rose swiftly, and still fewer could invest capital in developing their land. Consequently, in periods of rising prices, as in the fifties, the opportunity to sell at a profit led to a speedy turnover of many large holdings. Swierenga found, for example, that in representative Iowa counties large owners of 460,000 acres sold their land within lYz years on the average for a net profit that ranged from 17 to 115 percent on the investment.88 These owners were fortunate to have entered their land during a great rush for Iowa land that lasted several years after their entries were made, during which time some 5 million acres in the state were withdrawn from sale to permit the railroads to select their grants. This created an artificial scarcity in the midst of the land rush, thereby permitting the unusually high and quick profits. But what these did, most large landowners in less favored areas were compelled to do by financial exigencies or decided to do because they were worried about the rising costs of carrying the land and feared depredations upon their property. If they were caught during an economic depression with insufficient funds to carry their investments, taxes and court costs might compel them to sell. The case of John Grigg was exceptional-he had started selling soon after purchasing but never was in financial difficulties, even during the long depression following 1837, and could sell as the demand rose. An examination of the deed records of more than a hundred counties in the prairie states has shown that the liquidation of the speculative holdings began early and was almost fully achieved within a few years for the poorly managed investments. Not all this liquidation, it should be said, was voluntary or profitable to the owners. 88 Swierenga, p. 301. |