The Record · Chapter Two, the long version · Act Two

Whose Money?

The ditch took twelve years and broke the state. The men who lent the last $1.6 million got the keys.

By Jason C. Wandel and Claude for Chicago Register · Sunday, October 18, 2026

This is the stretch from 1836 to 1848, when Chicago finally dug the ditch everybody had been promising since 1673. Last time we left a town drawn up to sell, five million acres taken around it, and a New York man calling his own swamp the grossest folly. All of that was paper. Now somebody had to dig, and somebody had to pay.

They turned out to be very different people.

On the Fourth of July, 1836, Chicago threw a party on the South Branch of the river and turned the first shovel of dirt on the Illinois and Michigan Canal. The State of Illinois had put its full credit behind the canal loan. So the bill didn’t belong to the land buyers or the New York banks. It belonged to everybody who lived in Illinois.

Then the bill got bigger.

On February 27, 1837, the legislature passed about $10.25 million in railroads, river work and a mail road, on top of the canal. About 1,300 miles of track, on paper. Counties that weren’t getting a railroad got $200,000 to split, so their men would vote yes. In that same session the state capital moved to Springfield. Abraham Lincoln’s Sangamon County crew, the Long Nine, backed the package and brought the capital home. Lincoln later told his law partner Stephen Logan he had to vote for it to get the capital. Governor Thomas Ford called the whole session log rolling.

Something for every county. That’s how you pass a bill nobody can afford. You give every vote a piece and mail the bill to people who aren’t born yet.

Months later the Panic of 1837 hit. The Bank of England had tightened the year before, and money dried up from London to the lake. Lots that sold at New York prices in 1836 couldn’t find a buyer at any price.

By 1839 Illinois owed somewhere between $11 million and $15 million. That year the state took in about $67,000, spent about $80,000, and closed the books with $92.16 in the treasury. The interest alone ran more than everything the state took in. Shrink it to a household and it’s a family making $67 a year carrying a $15,000 mortgage.

Of all those railroads, one got built. The Northern Cross. It had one engine. By 1844 the engine was worn out, and the line sold at auction for about a fortieth of what it cost.

In 1841 Illinois stopped paying interest. The state didn’t finish paying off that debt until around 1880. Your great great grandparents were still paying for a railroad that ran one tired engine.

Now the men with the shovels.

Most of the diggers came off the Erie Canal, and most were Irish. Germans, free Black men and Native men worked the line too. At the peak about 1,700 men were digging by hand for a dollar a day, with days that could run sixteen hours. In 1840 a traveler from Scotland came on about 200 Irish laborers, women and children with them, living in 14 or 15 log huts near Utica. He wrote that he had “not for a long time beheld” a scene like it.

When the state went broke, the diggers got paid in canal paper that wasn’t worth much. The state’s credit went bad and the men in the ditch were left holding it. Cholera, typhoid and malaria ran through the shanty camps along the route. Nobody kept a count of the dead that we’ve found.

In 1838 the Irish fought each other over the work. Men from County Cork against men from the north of Ireland. At a spot called Kerry Patch near LaSalle, a sheriff’s posse opened fire. Seven dead and sixty arrested.

Read those two side by side. In Springfield, men traded votes for a state capital. Along the ditch, men killed each other over a dollar a day.

In 1847 the diggers struck. They wanted $1.25 a day, and a day that ran from six in the morning to seven at night with two hours off for meals. They lost, and they finished the canal at a dollar. They wanted a seat at the table where the pay got set, and asking for it is what makes them objectors. We print them because they lost.

Now back to the money, because the money did fine.

With the state broke and the ditch half dug, Illinois needed $1.6 million to finish. In 1843 it passed a law to borrow it, and the price was the canal itself. The canal and its land went into a trust with three trustees. The lenders picked two of them and the governor picked one.

In May 1845 the lenders met at the American Exchange Bank in New York and named their men. One was William Swift, an Army engineer who had helped design the canal. The other was David Leavitt, who ran the American Exchange Bank. Each of them got $5,000 a year. The state’s trustee got $2,000.

About two thirds of the money came from Europe and about $400,000 from New York. People in Illinois held $160,000 of it.

So here it is in plain words. The nations’ land, taken by treaty, paid for the start. The public’s credit paid for the crash. The diggers paid in fever and bad paper. And the men who lent the last $1.6 million got the keys and ran the canal for twenty six years.

That’s Jefferson’s 1803 play again. Lend into trouble and collect in the asset. The only change was the borrower. In 1803 it was a nation. In 1843 it was a state.

In April 1848 the canal opened, with boats running from Chicago to LaSalle and on down the Illinois River to the Mississippi. It cost about $6.5 million in all.

Then the grain did what the men in New York figured it would. In 1845, 133,000 bushels came into Chicago. In 1848 it was more than a million. The Board of Trade opened that same year to handle it. That year Chicago’s first train ran too, on the Galena and Chicago Union. Its president was William Ogden, the man from Act One who called the swamp a folly. He raised $350,000 for the line, mostly from farmers and small shop owners along the route.

Look at what that means. The ditch took twelve years and broke the state. The railroad started the year the ditch opened, and it was paid for by farmers. The next crowd had already learned something. Why dig when you can lay track?

We always print the wins, and here’s this one. The trust paid off every lender from tolls and land sales. On April 30, 1871, it handed the canal back to Illinois. The public got its ditch back, five months before the Fire.

And the diggers? Plenty of them stayed at the Chicago end of the canal, in a shanty settlement that became Bridgeport. Bridgeport went on to send five mayors to City Hall, both Daleys among them. Men paid a dollar a day to dig the ditch had grandsons who ran the city it built.

So here’s the question we keep asking, and it’s yours now. When the diggers’ grandsons got the seats, did the deals change, or only the names on the doors?

Next comes the rail, and a senator who knew where the tracks were going because he wrote the bill.

The scoreboard

Read it yourself

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