Merrill and Houston got off to a good start in the spring and summer of 1873. Water wheels sold rapidly and profitably - 139 being sold that year. Replacement parts also sold briskly as did milling machinery, shafting, pulleys, and other machinery commonly made in machine shops. Most profits were from water wheels and paper machinery. Debts were not yet a problem as there was no mortgage, only a permanent loan of $9000 from Governor William Hale of New Hampshire, J. B. Merrill's brother-in-law. (8) Undoubtedly, the company was worth its initial capitalization.

These were idyllic times for the leaders of the new corporation. In May, Houston and his family left for the East Coast for an extended vacation. In June, C. F. G. Collins and wife spent a week or two in Minnesota combining business and pleasure, while on July 10, S. T. Merrill and family left for a trip to Europe - not returning until mid—November. Water wheels continued to sell well, and the company made arrangements to exhibit them at the Chicago Exposition in September. (9) However, just prior to its opening, the Panic of 1873 began.

This was a world-wide depression that had been triggered by business failures in Vienna in May. As it spread, the U. S. was inevitably affected. The failure of Jay Cooke and Company of New York on September 18 caused a great drop in security prices, runs on banks, a general contraction of industry, and high unemployment. At the height of the panic, money was nearly impossible to acquire although a few loans were made at 1 1/2% per day.

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