Listener Appreciation Week: The Wreck That Crashed the Stock Market

The Shipwreck That Crashed the Stock Market 

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Rich Napolitano: Gold fever has swept through nations like a virus. Whenever new gold deposits were uncovered, the Klondike Gold Rush of 1896 resulted in a population boom, improvements in transportation, and the creation of many towns in Alaska and the Yukon Territory.  

The Australian Gold Rush near Melbourne helped build networks of railroads, port towns, and help create the colony of Victoria independent from New South Wales. When Gold was found at Sutter's Mill in Coloma, California in 1848, over 300,000 people flocked to California in the coming years with dreams of striking it big. 

While most left California penniless, massive amounts of gold were mined, melted down into ingots and coins, and shipped off. The side wheel Paddle steamer Central America was built for the US Mail Steamship company by William H. Webb in New York. Launched in 1852 as the [00:01:00] PSS George Law. She provided mail and passenger service from New York with stops in New Orleans, Havana, and the isthmus of Panama. 

The Panama Canal was not yet in existence, and mail cargo and passengers were transported overland by train to another ship on Panama's West Coast for its final destination to California. This regular pattern of steamship service to and from California was a result of the California Gold rush. The Transcontinental Railroad was still over a decade away. 

And travel by wagon train was long and dangerous. Steamship travel was faster, more comfortable, and usually safer. In 1857, the George Law was renamed to the Central America after spending some time in dry dock. On September 8th, 1857, the Central America departed Havana bound for New York under the command of Captain William Lewis Herndon. 

On board were 477 passengers returning [00:02:00] from California. Having struck it rich in the gold rush, the mood was festive as the passengers enjoyed their newly found wealth. An estimated 10 tons of gold was on board, including coins, ingots, and gold dust. In 2025 values, this would be about $800 million. Its departure from Havana was pleasant with calm seas and beautiful weather. 

As the passengers enjoyed themselves in the saloons and parlors. The following day, the weather began to turn. Winds picked up and the seas rose, creating a far less enjoyable experience for the passengers. Throughout the day, fewer and fewer passengers were seen partying and more and more were seen expelling their last meal over the side. 

Winds and waves battered the vessel for two days as Captain Herndon unknowingly steamed directly into the path of a hurricane. By the 11th of September, the battered ship had sprung leaks, which extinguished the fires in its boilers and its paddle wheel and pumps stopped [00:03:00] working. A bucket brigade of crew and passengers formed and bailed water from the sinking ship. 

Captain Herndon ordered the ship's flagged, flown upside down, indicating a ship in distress. The Central America was left drifting helplessly into the path of a major hurricane. The following day, the Central America was rocked by 105 mile per hour winds and monstrous waves. When the vessel Marine arrived, captain Herndon ordered approximately 100 women and children into the lifeboats. 

This was extremely dangerous As the surging waves threatened to swamp the lifeboats, miraculously, all of them reached the Marine and were put safely on board. However, there was no time to save the men and the crew. At 8:00 PM the Central America was overcome and sank 8,000 feet to the ocean floor. 160 miles off the coast of Charleston, South Carolina. Only 49 of the men survived the night and were picked up by the Norwegian vessel, Ellen Eloise.[00:04:00]  

This was a terrible loss, and by no means do I wish to gloss over the human lives that were lost. Normally this would be my focus, but also normally a shipwreck would not cause a financial crisis. But the loss of the Central America was a whole different situation. Due to a number of factors, including the Crimean War in Europe and falling stock prices, 

New York banks were suffering from a lack of capital. The gold from the Central America was desperately needed to bolster their reserves and its arrival was anxiously awaited. News spread quickly of the loss of the ship. Thanks to the relatively new invention of the telegraph, the public was horrified by the human loss, but the lost gold created a financial panic, a run on the banks, and their already depleted reserves caused many of them to collapse. 

Of the surviving banks most suspended specie payments meaning gold for paper money, hundreds of thousands of Americans lost their jobs, and the [00:05:00] Federal Treasury operated at a deficit. This downward financial spiral was named the Panic of 1857. The loss of the SS Central America was not the singular cause of the 1857 financial crisis, but it certainly served as a catalyst for the reaction. It has ever since been called The Ship of Gold. 

The wreck of the Central America was found in 1988 by the Columbus America Discovery Group of Ohio, led by Deep Sea Explorer, Tommy Thompson. Approximately 100 to $150 million of gold was recovered, including a single ingot weighing 80 pounds. It sold for a record at the time of $8 million. Legal issues have plagued Thompson since, and he is currently serving a two year prison term for criminal contempt. 

A charge stemming from his refusal to provide the location of 500 missing gold coins. Today, Recovery Limited Partnership owns the rights to the wreck and any future recovery of [00:06:00] treasure. Another story related to the Gold Rush involves the passenger vessel Princess Sophia, which sank in 1918 after being stranded on Vanderbilt Reef in Alaska's inside passage. 

Listen to episode 74 of Shipwrecks and Sea Dogs to hear that full story.