Rogue Finance: The Life and Fire Insurance Company and the Panic of 1826

Posted: 24 May 2009

See all articles by Eric Hilt

Eric Hilt

National Bureau of Economic Research (NBER); Wellesley College

Date Written: May 19, 2009


In July of 1826, a financial panic on Wall Street caused several companies to fail abruptly and precipitated runs on two of New York City’s fifteen banks. Life and Fire Insurance became the largest of the bankruptcies. In violation of New York’s banking statutes, the firm had engaged in lending on a massive scale during the speculative boom that prevailed in 1824-25. Innovative lending techniques had been developed outside the traditional banking sector - in this case, in the insurance industry. These lending practices, based on an instrument known as a post note, were initially sound, but were later extended to riskier borrowers and ultimately proved ruinous. In the credit crisis that began in late 1825, the value of the Life and Fire’s assets fell dramatically, and in a desperate effort to raise cash, the directors resorted to fraud.

Keywords: financial panic, stock market crash, insurance, credit crisis

JEL Classification: N8, N81, G33, G22, E50

Suggested Citation

Hilt, Eric, Rogue Finance: The Life and Fire Insurance Company and the Panic of 1826 (May 19, 2009). Business History Review, Vol. 83, No. 1, Spring 2009, Available at SSRN:

Eric Hilt (Contact Author)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Wellesley College ( email )

106 Central St.
Wellesley, MA 02181
United States


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