COMMERCE AND FINANCE, AMERICAN, IN 1881. 



129 



nitude. The season's railroad construction was 

 progressing at the rate of thirty to fifty miles 

 of track per diem, for which stocks and bonds 

 were being issued at the daily rate of from 

 $1,200,000 to $2,000,000. The capital actually 

 absorbed in the work must have approached 

 $20,000 a mile. The promoters of railroad en- 

 terprise took advantage of the over-supply of 

 the money market to obtain subscriptions for 

 railroad construction a year and two years in 

 advance. Scrip dividends to an immense ag- 

 gregate amount were declared by established 

 companies and newly amalgamated corpora- 

 tions, ostensibly based upon improvements 

 made in the corporate property and additions 

 made to it by the purchase of other properties 

 or fresh extensions of their own and paid for 

 out of recent earnings. The stock thus dis- 

 tributed was fed in large quantities into the 

 market. Yet the whole vast influx of new and 

 rehabilitated stocks and bonds did not stay the 

 overflow of the money market, brought about 

 by the national prosperity and by the extraor- 

 dinary financial operations of the Government, 

 the success of which is attributable to the same 

 general cause. The prices of stocks rose higher 

 and higher, and the market showed no signs of 

 relapsing again to a lower level, although many 

 capitalists refrained from purchasing, placing 

 their money in the trust companies at 2 or 2 

 per cent interest, in expectation of a decline. 

 The calculations of the speculators were all at 

 fault. The most venturesome sold out repeat- 

 edly, thinking the flood -mark was reached, 

 only to buy in again at an advance, upon being 

 convinced of the continued upward drift. 



One incident occurred in February to disturb 

 the smooth surface of the swelling tide of pros- 

 perity. This was the sudden and simultaneous 

 action of the national bankers of New York 

 city and of a number in other parts of the 

 country in withdrawing gold and United States 

 currency from circulation to deposit with the 

 Government for the purpose of redeeming their 

 bank currency. Proceeding thus in concert 

 while the obnoxious 3 per cent funding act was 

 awaiting the final action of the House of Rep- 

 resentatives and the approval of the President, 

 they brought Wall Street to the extreme verge 

 of a money panic. The tone of the money 

 market was only partially restored by an order 

 of the Secretary of the Treasury for the re- 

 demption of $25,000,000 of bonds on presenta- 

 tion. These bonds did not come in fast enough 

 to afford much material relief, but the moral 

 effect of the order was to allay anxiety and pre- 

 vent serious embarrassments. About $5,500,- 

 000 were purchased, and money flowed in from 

 other sources after a week of severe strain. 

 There were about $18,000,000 of gold and le- 

 gal tenders deposited by the national banks 

 throughout the country, principally those of 

 New York, to enable them to withdraw their 

 bonds. The rate of money on call loans rose 

 on the 25th to 1^ per cent a day commission 

 in addition to the legal rates, from which point 

 VOL. xxi. 9 A 



it receded in five or six days to the normal low 

 rates. Stocks fell heavily on the 25th, but re- 

 covered in a few days. From the time of this 

 financial spasm until Secretary Windom for- 

 mulated his refunding plan in April and the 

 great Treasury transactions commenced, al- 

 though an undertone of hope and confidence 

 prevailed, the monetary situation changed day 

 by day, with a tendency to improve, however. 

 The real strength of the situation could not be 

 brought out while money was still only moder- 

 ately abundant and occasionally quite stringent. 

 But when the Treasury began to pour out its 

 accumulations, the tidal rise in values set in. 



In midsummer various causes combined to 

 produce a sharp decline in stocks. The super- 

 abundance of money was succeeded by dearth. 

 In addition to the usual flow to the rural dis- 

 tricts for harvesting purposes, great sums were 

 drained to the West to maintain gigantic specu- 

 lations in grain and provisions. The shooting 

 of President Garfield, and the anxious doubts 

 of his recovery, could not but strongly affect 

 the most sensitive part of the commercial sys- 

 tem. Exaggerated reports of failures in crops 

 had a still more depressing influence on the 

 stock market. A bitter war between the 

 great trunk lines was equally potent with the 

 last cause to disturb confidence in the values of 

 railroad properties. Some of the most power- 

 ful operators in Wall Street were actively 

 working at this time to bring prices down to a 

 lower level. For three or four months the 

 surplus in the New York banks oscillated 

 about the 25 per cent minimum required by law, 

 and several times sank below it. Money which 

 had lately been freely supplied at from 2 to 

 4 per cent on call, was so scarce that high 

 daily commissions were charged in times of 

 greatest demand. The drain of money to the 

 West continued until October. Upon the cessa- 

 tion of large disbursements by the Treasury, 

 a great quantity of currency was abstracted 

 from the circulation and accumulated on the 

 hands of the Government. The only relief 

 was given by large importations of gold, stimu- 

 lated by the stringency of the money market. 

 In October, at the critical moment, the immedi- 

 ate pressure was relieved by the action of the 

 Treasury Department in redeeming a large 

 amount of bonds before maturity. The inland 

 requirements began at this time to abate, so 

 that an easy money market again prevailed. 



At the same time the tone of the stock mar- 

 ket improved and prices began again to ascend. 

 The underbidding of the through lines for the 

 summer business was seen to have still left a 

 profit. The shortage of crops was found to have 

 been overestimated. The impression prevailed 

 that the deficiency would not seriously harm 

 the general prosperity, and would not have the 

 effect of diminishing railroad earnings. The 

 political fears and forebodings all vanished 

 after the inauguration of President Arthur. 



The Western Union Telegraph Company in 

 the beginning of February took possession of 



