PANICS, FINANCIAL, OP THE NINETEENTH CENTURY. 



601 



the beginning of 1835. and it was only $87,513 

 on Jan. 1. 1N3<. against |18?,MM|984 OH the same 

 date in 1810, which was the maximum. This 

 generally prosperous condition fostered wild 

 speculation in lands, mines, canals, and rail- 

 roads, construction of the latter being 1,273 

 miles in 1836, against 215 miles in 1H30; capital 

 came in large amounts from England for invest- 

 ment, and the Hank of England, in order to 

 check this movement, advanced itsdiscount rate. 

 This aided in precipitating the crisis of 1837. 

 The conviction that a new national bank to take 

 the place of the United States Bank would not 

 be chartered led to the creation of local institu- 

 tions with an aggregate capital of $125,000,000, 

 and there was a liberal issue of notes. Imports in- 

 creased from $103,208,521 in 1834 to $168,238,675 

 in 1836, and the adverse trade balance that year 

 was $61,316,995. The advance in the Bank of 

 England rate therefore had a startling effect. 

 Banks generally suspended payment, notes fell 

 as low as 20 per cent, discount, exchange on 

 London and Paris rose sharply, gold and silver 

 were hoarded, cotton was almost unsalable, 

 failures were numerous and important, distress 

 prevailed everywhere, and the panic was at its 

 height in April, when the New York banks began 

 to suspend payment. They soon resumed, but 

 resumption was not general because of the sus- 

 pension of the Bank of the United States, and it 

 was not until the following year that specie pay- 

 ments were resumed in New York. After the 

 panic there was a, gigantic speculation in cotton, 

 encouraged by the operations of Mr. Nicholas 

 Biddle, of the Bank of the United States, who 

 co-operated with foreign capitalists and advanced 

 money to planters upon their crops, thus caus- 

 ing the investment of vast sums of money, re- 

 ported as between $150,000,000 and $200,000.- 

 000. Then came a short crop of only 400,000 

 bales, one fifth less than was expected, and an 

 advance in the price was looked for, but in vain. 

 Europeans became alarmed and withdrew from 

 their speculative ventures, and then followed the 

 panic of 1839, which resulted in the complete 

 liquidation of the Bank of the United States. 

 The monetary stringency here caused a rise in 

 interest rates to 20 per cent., and discounts for 

 the best paper advanced to 15 and 25 per cent. 

 The acute stage of the panic soon passed. The 

 failures from 1837 to 1839 were 33,000, involving 

 $440,000,000, and 55 banks with a capital of 

 $67.036,265 suspended. 



Panic of 1857. The panic of this year found 

 the country in an exceedingly prosperous condi- 

 tion. Railway extensions had been checked to 

 some extent, and a more conservative feeling 

 prevailed regarding these enterprises. There 

 were no indications of the coming crisis, and a 

 contraction of loans by the New York banks 

 early in August attracted little attention, al- 

 though one reason assigned therefor was that 

 the failure of a heavy produce house revealed 

 the fact that this line of business was not par- 

 ticularly good. Four years before, a law went 

 into effect requiring every bank in the city to 

 make weekly statements of its average condition 

 as to loans, specie, circulation, and deposits, and 

 this salutary law not only operated as a check 

 upon reckless banking, but, aided by the opera- 

 tions of the New York Clearing House Associa- 



tion, which was organized in October of that 

 year, it kept the business public informed of 

 the condition of the institutions, and tended to 

 iii-pin- confidence in them. The loans of Aug. 

 8 were reported at the then unprecedented 

 amount of $122,077,262. By the 15th they had 

 lieen reduced to $121,241,472, and in the interval 

 there had been news of a defalcation in one of 

 tin- leading railroad companies, which caused a 

 slight flurry in the stock market. On Aug. 24 

 the announcement of the suspension of the Ohio 

 Life and Trust Company had a startling effect 

 in New York. It was not a bank of issue, 

 neither was it a discounter of bills, but it was a 

 large borrower from other, institutions, and its 

 affairs were supposed to be conducted on the 

 conservative plan of trust companies. The 

 bankers and exchange dealers of Ohio and else- 

 where extensively bought its draughts for remit- 

 tance, and there was not a bank in New York 

 with Western connections that had not these 

 draughts sent in payment for collections or for 

 deposit to be drawn against by remitters. The 

 consequences of the failure were therefore widely 

 distributed among the New York banks, several 

 of which were large lenders to the company. 

 The concern had borrowed also of individual 

 bankers, exchange dealers, and stock houses, 

 hypothecating not only its own collaterals, but 

 the property of its dealers. The panic that fol- 

 lowed the news of the failure was intensified by 

 the disclosure that the entire capital of $2,000,000 

 had been virtually embezzled. This induced the 

 bank managers in New York promptly to adopt 

 measures for self-protection ; loans were called, 

 and the panic spread rapidly. Money on call, 

 and even on undoubted collateral, rose rapid Iv 

 to from 3 to 5 per cent, a month, and on ordinary 

 security and on mercantile paper money could 

 not be obtained at any rate. By Sept. 5 the 

 loans of the city bank's had been reduced to 

 $112,221,365, nearly $10,000,000 less than on 

 Aug. 5. while the deposits had been drawn down 

 an equal amount. The panic had then become 

 general. The purchase and transportation of 

 produce practically ceased : the failure of the 

 Bank of Pennsylvania in Philadelphia was fol- 

 lowed by that of other banks in that city, and 

 by those in Baltimore and of other Southern 

 Atlantic cities, and commercial business every- 

 where was suspended. On Oct. 14 the banks of 

 New York suspended specie payments, and the 

 acute stage of the panic was then reached. The 

 banks resumed Dec. 11, and the abundant crops 

 materially aided in a general recovery. After 

 the New York banks suspended specie payments 

 there was a unanimous agreement that they 

 would receive and pay out notes as usual, and 

 also would receive at par notes of all the banks 

 of the State secured in the bank department at 

 Albany, and likewise the notes of certain safety- 

 fund banks. One effect of the panic was to re- 

 duce the Government's re venues" below expendi- 

 tures, and the report of the fiscal year showed 

 $68,969,212 receipts and $71,274,587 expenses. 



The news of the crisis here reached London 

 toward the end of October, and on the 27th the 

 Borough Bank of Liverpool, and on Nov. 9 the 

 Western Bank of Scotland, were forced into 

 liquidation, as it was known that they were 

 largely involved in transactions in New York. 



