He applied the “Page 99 Test” to his new book, The Business of Slavery and the Rise of American Capitalism, 1815–1860, and reported the following:
The Business of Slavery shows how the firms that financed, traded, and transported enslaved people exemplify modern capitalism. Credit expansion was an essential building block, and in the 1830s banking expansion fueled unheard of growth. Cotton and sugar planters relied on credit. And so too did slave traders, who used it to buy captives and reallocated credit to buyers like car dealers do today.Learn more about The Business of Slavery and the Rise of American Capitalism at the Yale University Press website.
Credit expansion relied on foreign investment and banking innovations. New Orleans financiers Edmond Jean Forstall and Hugues Lavergne founded property banks, which collateralized slave property through mortgages, then securitized them. Owners leveraged lands and property in people to reinvest. And with state guarantees, slave-mortgage-backed securities were sold in the financial centers of the North Atlantic. The first such property bank was the Consolidated Association of the Planters of Louisiana. From page 99:The Consolidated Association seemed to be dwindling when the twenty-eight-year-old financier [Thomas Baring] landed in New Orleans [in 1828]. Baring liked what he saw in commercial New Orleans. Cotton, sugar, and other commodities were ripe for investment, and rapid agricultural growth created great demand for credit. Besides opportunities to own or finance actual commodities shipments, American state bonds were appealing. Their interest rates compared favorably to those of British and European bonds. A quarter century after financing the Louisiana Purchase, the House of Baring was poised to fulfill the promise of the Mississippi Valley slave country.And Barings fulfilled it in spades. They marketed Louisiana’s slave-mortgage-backed bonds, reselling them on British and European markets. With foreign investment ballooning credit, Forstall helped found other property banks. Barings sold more state bonds to investors in London, Amsterdam, and New York City. Other investment bankers followed suit. Cotton and sugar markets surged on the proceeds, and the domestic slave trade mushroomed. Louisiana became a model for banking in other Deep South states, and by the mid-1830s the region was the most credit rich, most monetized region of the country.
But like the home mortgage crisis of 2008, confidence crashed in 1837, leading to a financial panic and a slave mortgage crisis. Unlike real property, however, mortgaged humans were easy to hide. And slaveholders were supreme not subprime. They elected repudiationists who burned outside investors. Nevertheless, the cotton, sugar, and slave economy recovered, and by the 1850s the country was again awash in credit financing capitalist expansion on the backs of African Americans.