600 



PANICS, FINANCIAL, OP THE NINETEENTH CENTURY. 



Panics from 1800 to 1856. At the begin- 

 ning of the century the principal banking insti- 

 tution was the Bank of the United States, char- 

 tered in 1791. The country had been drained of 

 gold through its overvaluation by England, the 

 bank of that country having been in a state of 

 suspension since 1797, and the specie in circula- 

 tion was chiefly silver, of which the bank held 

 about $15,000,000. The note circulation at this 

 time was $10,500,000, and coin $17,500,000. The 

 bank materially contributed to the prosperity 

 of the country, raising public and private credit 

 from a prostrate to a very high condition. The 

 charter expired in 1811, and on the refusal of 

 Congress to renew it, local banks in large num- 

 bers were organized. The embargo of 1808 re- 

 duced imports from $78,856,442 for the year 

 ending Sept. 30. 1807, to $43,992,586 in the fol- 

 lowing year, and exports fell to $9,433,546 from 

 $48,699,592 in 1807, partly because of noninter- 

 course, and also in consequence of agricultural 

 depression, and serious commercial troubles fol- 

 lowed. In 1809 imports fell to $38,602,469, 

 while exports rose to $31,405,702, but during 

 this and the succeeding year specie was heavily 

 exported to adjust foreign balances, the excess 

 of imports over exports for three years ending 

 Sept. 30, 1810, having been $60,397,837. The 

 currency was redundant, bank notes amounting 

 to $26,000,000, and on the declaration of war 

 with England the country was involved in ail 

 the embarrassments that naturally result from a 

 disordered circulation. The war began in 1812, 

 and the note issues had then increased to about 

 $35,000,000. In the absence of a national cur- 

 rency, the Government was forced to rely upon 

 the local banks for loans, and these institutions, 

 being unequal to the demands, were, with the 

 exception of those in the New England States, 

 forced to suspend in August, 1814, when the 

 currency had been increased to nearly $70,000,- 

 000, of which $51,500,0i)0 was paper. Treasury 

 notes were then resorted to by the Government. 

 These were issued in great volume, and, not 

 being convertible into coin, soon began to de- 

 preciate, especially toward the Canada frontier, 

 where the war raged and where money was most 

 wanted. These Treasury notes could not legally 

 be used as currency, and they were available only 

 for the procurement of bank paper. After the 

 war imports were largely increased, and exports 

 were $64,781,896 in 1816, against $6,782,272 in 

 1814, the export movement being stimulated by 

 bad crops in Europe. But the adverse foreign 

 trade balance rapidly accumulated, ainounting 

 to $182,695,896 between 1815 and 1819 ;' the war 

 had created a debt which at the end of 1817 was 

 $103,466,633 ; during the conflict the note circu- 

 lation had been increased to $77,000,000. Spec- 

 ulation had advanced prices of all agricultural 

 products, and economical conditions were such 

 as to precipitate another panic in 1818, and 

 the local banks of the country, except those of 

 New England, again suspended, causing wide- 

 spread distress. A bill for a national bank 

 with a capital of $30,000,000 passed Congress 

 in January, 1815, but was vetoed. In 1816 the 

 application was renewed. The capital was then 

 fixed at $35,000.000, of which $7,000,000 was 

 to be subscribed by the Government, and the 

 bill became a law April 10, 1816, the institu- 



tion being known as the Bank of the United 

 States. After some time spent in making prep- 

 arations, which included imports of about 

 $7,000,000 in gold, business was begun, and 

 when the panic of 1818 came the bank was 

 obliged to meet the demands for specie, at the 

 same time reducing its circulation and discounts. 

 The operations of the bank attracted the atten- 

 tion of Congress, and an investigation disclosed 

 violations of the charter in purchasing $2.000,- 

 000 of the public debt and in not requiring full 

 payment of stock in cash. This inquiry brought 

 about a change in the bank's management, 

 and it was then found that nearly $100,000,- 

 000 of circulation had been issued by the in- 

 stitution and its branches. The change in the 

 administration of the bank was followed by salu- 

 tary reforms. The panic had been very severe, 

 extending, according to the report of a commit- 

 tee of the House of Representatives, from the 

 largest to the smallest capitalists and affecting 

 every branch of business. After the panic there 

 was a slow recovery, during which new banks 

 were organized all over the country. In New 

 York institutions with an aggregate of over 

 $50,000,000 capital were formed ; new industrial 

 and other corporations were founded the stock 

 of which was largely oversubscribed for, and 

 money became very plentiful. The bank mania 

 was at its height when, in July, 1825, there came 

 a commercial crisis caused by wild speculation 

 in cotton, which had a depressing effect upon 

 manufactures of that staple, and the trouble 

 was intensified by the expansion of bank notes. 

 In the following year there was a recovery, 

 and no further disturbance occurred until 1828, 

 when an excessive issue of paper money and 

 drafts by the Bank of the United States and 

 its branches indirectly affected the local banks 

 and brought about a minor crisis. Then money 

 again became abundant, and the country was 

 apparently prosperous until November, 1831, 

 when there was another minor crisis, resulting 

 in monetary stringency, which was relieved by 

 the issue of draughts by the Bank of the United 

 States. This action of the bank, however, was 

 severely criticised by President Jackson, and in 

 1832 the Secretary of the Treasury notified the 

 managers that the Government intended, wher- 

 ever it had representatives, to redeem half of 

 the 3-per-cent. stocks in cash. The bank offi- 

 cials requested a delay of three months, which 

 was granted, and the bank then began to foster 

 land and other speculations, and at the same 

 time made application for. a renewal of its char- 

 ter, which would expire in 1836. Congress com- 

 plied, but the President refused to sign the bill, 

 and in 1833 he ordered the withdrawal of the 

 Government deposits from the bank, and they 

 were so withdrawn after considerable opposition 

 and delay. The business of the country was 

 exceedingly prosperous, thus increasing the re- 

 quirements for money, and the threatened liqui- 

 dation of loans by the national bank in order to 

 comply with the orders for the withdrawal of 

 Government deposits was viewed with apprehen- 

 sion. The national revenues had increased so 

 rapidly that $28,101,645 was, by authority of an 

 act passed June 23, 1836, distributed among the 

 several States in proportion to the population ; 

 the public debt had been reduced to $33,733 at 



