State militia soldiers fought many wars against Britain, Mexico, and American Indian nations to take land for the United States. The federal government rewarded them with military land warrants — certificates that could be redeemed for up to 160 acres of U.S. public land. The warrants were quickly sold and then traded on Wall Street to land agents in the country’s western territories. The agents made huge profits from selling and loaning them to struggling farmers. In Minnesota, German immigrants used land warrants to buy Dakota land, start farms, and found the town of New Ulm.
In 1854, a group of German immigrants joined the Chicago Land Association. They decided to seek out rich farm land in Minnesota Territory beyond the reach of speculators. There, they hoped to start a communal farming colony away from the ills of modern urban life. Ceded to the United States by the Dakota in 1851, southern Minnesota Territory was open to squatters under the preemption laws of 1841 and 1854.
On October 8, the immigrants reached their destination: the Sisseton Dakota village of Maya Kicaksa (also known as Sleepy Eye’s village) at the mouth of the Cottonwood River. Unfortunately for the colonists, a U.S. government surveyor was already in the area preparing Brown County for public sale.
Underfunded and poorly supplied, the German colonists struggled northwest toward the protection of Fort Ridgely to spend their first winter in a wooded area on Dakota land. They barely survived in frigid conditions, living off corn meal and scraps from the fort and handouts from a local trader. In spring 1855, they returned to and occupied Maya Kicaksa under the wary eyes of their Dakota neighbors.
By that time, the U.S. Land Office in Winona had opened for business. Speculators and bankers in the town had begun to sell and loan military land warrants at steep interest rates. Financing their preemption claims would become a serious problem for the Germany colony.
When a surveyor from Chicago began laying out the town of New Ulm on the site of Maya Kicaksa, the furious Dakota pulled up the survey stakes. Soldiers from Fort Ridgely arrived to protect the colony from Dakota resistance. With the first wheat crop still three years off and scarce barrels of flour selling for twenty dollars, the small community rapidly depleted its resources. By the fall of 1855, the colonists knew they would have to pay for their claims within a year. Temporary help, however, was on the way.
On March 3, Congress had passed the Bounty Land Act of 1855. The act granted thirty-four million acres of Indian land to veterans who had fought in the War of 1812 and other wars. Almost all of the aged veterans and their widows lived in Eastern states and had no use for land west of the Mississippi River. Only one warrant in five hundred was located on new land by a soldier or his heirs. Instead, most warrants were sold to agents of large Wall Street banks and brokerage houses.
Land warrant prices were listed on Wall Street exchanges. The warrants were then sold to local land agents across the country. Over six million acres of Indian land in Minnesota Territory were eventually located by the use of military land warrants. Two-thirds of these were located on Dakota lands before the U.S.-Dakota War of 1862. The military land warrant rapidly became the primary financial instrument for alienating the Dakota from their homeland.
In the land office towns of Winona and Chatfield, local land agents and bankers bought hundreds of land warrants from Wall Street brokers. In southern Minnesota Territory, land warrants streamed in from the Illinois militia veterans of the Black Hawk War against the Sac and Fox Indians; from New Mexico volunteers who had fought the Apache and Navajo; and from Utah volunteers who had repressed the Ute.
Land warrants were often loaned to struggling farmers at 40 percent to 50 percent interest. This rate came on top of a 40 percent increase on the price of the warrant. Local bankers doubled their money in a year while farmers assumed large debts. With improved farm land as a valuable security for the loans, eastern capitalists hurried to invest. Land office towns became business centers for a growing financial industry.
In early June of 1856, the president and treasurer of the Chicago Land Association made a desperate trip to the Winona Land Office. They lacked the funds to patent all their preemptions but hoped to save the core of their colony.
Traverse des Sioux lawyer Charles Flandreau negotiated with Winona land agents for the purchase of fourteen land warrants. William Thiele, for example, paid for the southwest quarter of section 29 of New Ulm Township with fifty dollars cash and the 120-acre military land warrant awarded to a Seminole War veteran. With the extra purchasing power they also secured the saw-mill quarter section of Milford Township.
The fate of the rest of the colony remained precarious until it was bought out by a larger, better-funded group from Cincinnati. In July, the newly merged German Land Association of Minnesota returned to Winona with enough cash to buy eight more land warrants and secure the rest of the New Ulm town site. Under U.S. law, forty-eight hundred acres of Maya Kicaksa were now the official property of the German colony.
The future of New Ulm, however, depended on the success of the surrounding farms. Without the financial backing of the Land Association, individual farmers faced huge obstacles. Most of them did not have the $1,000 required to purchase land and livestock, build a house, and develop a farm. Borrowing a military land warrant to pay off their preemptions became a grim necessity.
Close to 90 percent of early Brown County farmers were forced by their limited resources to buy their patents with land warrants. By 1860, they had only improved five thousand acres and produced a small first wheat crop of slightly more than six thousand bushels. With the average local farm producing livestock and crops worth less than $140, there was little chance of paying off debts that ranged from $100 to $500.
By the start of the Civil War, half of the area’s farmers had sold out or had their farms foreclosed. While military land warrants had helped the relatively well-financed colonists of New Ulm, they had been a disaster for many of the farmers on which the colony depended.
On August 18, 1862, Dakota warriors seeking retribution for the loss of their homeland attacked towns and farms across the Minnesota River Valley. The attacks marked the start of the U.S-Dakota War. Brown County farmers fled their land and sought safety in New Ulm. The next day the German colony itself was attacked. The surviving farmers and townspeople evacuated on August 25. Within a month the Dakota were defeated and driven out of the region.
After the war, most local farmers returned to their land. By 1870, wheat production in the area exceeded two hundred thousand bushels a year. When the use of military land warrants declined after the passage of the Homestead Act, southern Minnesota banks invested their land warrant profits in flour mills, railroads, and grain warehouses. The European occupation of Maya Kicaksa had exiled its former residents, impoverished thousands of immigrants, and created the capital to develop the business infrastructure of Minnesota.
For more information on this topic, check out the original entry on MNopedia.