PANICS, FINANCIAL, OP TI1E NINETEENTH CENTURY. 



603 



270 per cent per annum was recorded, causing 

 failures of stork houses uiitl a panicky market. 

 In Juno there wa> an increase of about $ 10.000,- 

 000 in bank reserves, which contributed to 

 ea.sier money, but in August loanable funds 

 grew active again, and there was a partial cor- 

 ner in gold, which was broken by Government 

 sales of about $0,000,000. The great panic in 

 September was precipitated by the suspension of 

 the Warehouse and Security company, which 

 had loaned money to a construction company 

 engaged in building the Missouri, Kansas and 

 Texas Railway, the Warehouse and Security com- 

 pany taking bonds of the road, which they were 

 unable to sell because of the derangements in 

 the money market. This was followed by a gen- 

 eral shock accompanied by a rapid decline in 

 stocks, which was accelerated by vigorous bear- 

 ish demonstrations. Then came the suspension 

 of Kenyon, Cox & Co., of which Mr. Daniel 

 Drew was a special partner, and then followed 

 the failure of Jay Cooke & Co., which brought 

 about a general crash. On the 20th the Union 

 Trust Company, of New York, suspended, partly 

 in consequence' of the announcement of a defal- 

 cation oi $400,000 by the cashier, but mainly 

 because of the inability of the Lake Shore and 

 Michigan Southern to pay a loan of $1,750,000, 

 and also the refusal of Assistant-Treasurer 

 Thomas Hillhouse to buy $1,000,000 Government 

 bonds which were offered by the Trust Company 

 two hours before the time named in his instruc- 

 tions for the purchase of bonds. Then followed 

 the failure of the National Bank of the Common- 

 wealth, and the excitement was so intense that 

 the solvency of nearly every bank in the city 

 began to be doubted. Bank officials suggested 

 that under the circumstances, it would be well to 

 close the Stock Exchange, and the governors of 

 that institution thereupon decided to suspend 

 the business. On the following day President 

 Grant and the Secretary of the Treasury came 

 to New York and conferred with business men, 

 who asked that the Treasury transfer money to 

 the banks and issue $20,000,000 of the $44.000.- 

 000 legal-tender reserve. This request was re- 

 fused, and the only relief the Treasury was will- 

 ing to give was through the purchase of bonds 

 and the payment of legal tenders therefor ; bnt 

 this measure was ineffective because the banks 

 had no bonds to sell. The savings banks, how- 

 ever, took advantage of the offer, and at the same 

 time gave the customary notice to depositors in- 

 tending to withdraw their money. The bank 

 clearing house promptly made arrangements for 

 an issue of loan certificates against 75 per cent, 

 of assets of all the banks in the association, such 

 certificates being applicable only for the settle- 

 ment of bank balances, and eventually $22.410,- 

 000 of these certificates were issued. The banks 

 declined to pay legal tenders for checks, and 

 sought to obtain these notes by collecting bonds 

 from various sources for sale to the Govern- 

 ment ; but the Treasury soon after decided to sus- 

 pend purchases of bonds, claiming that the cur- 

 rency balance was low and that there was no 

 authority for encroaching upon the $44,000,000 

 reserve. This decision served to intensify the 

 gravity of the situation ; legal-tender notes com- 

 manded a premium of from 2 to 3 per cent., 

 the domestic and foreign exchanges were thrown 



into confusion, and business generally was pros- 

 trated. The Stock Exchange reopened on the 

 .'idtli, and the excitement then partially sub- 

 sided, but the markets were feverish until the 

 close of October, when there was a better feel- 

 ing, aided by the receipt of about $0,000,000 

 gold from Europe. 



The crisis of 1878 broke up a large number of 

 speculative combinations and discouraged non- 

 professional operations. The passage by Wiscon- 

 sin and other States of Granger laws had a dis- 

 turbing influence, particularly as on appeals to 

 the State courts the cases were decided against 

 the railroads. Decreased earnings resulting from 

 the depression in business, the freight war be- 

 tween the trunk lines, receiverships for the Erie 

 and the Wabash, and other influences con- 

 tributed to depress prices of stocks, and in 

 many cases lower figures were recorded than 

 during the panic of the previous year. Early in 

 1875 Mr. Jay Gould obtained control of the 

 Union Pacific, and gradually the market im- 

 proved toward the close of the year. In 1876 an 

 unfavorable effect was produced by another 

 trunk-line freight war, which continued through- 

 out the greater part of the year, and by the col- 

 lapse of the anthracite-coal combination, and de- 

 pression prevailed until about the middle of 

 1877. There was no panic, but a general shrink- 

 age of values. Commodore Vanderbilt died in 

 January, and in March the trunk-line agree- 

 ment of Dec. 16, 1876, which settled the princi- 

 ple of one rate to the seaboard, for which he had 

 so vigorously contended, was abandoned and the 

 strife was renewed. The Central New Jersey 

 was placed in the hands of a receiver in Feb- 

 ruary, the Reading had to obtain extensions, 

 and the Lackawanna and the Delaware and Hud- 

 son were compelled to issue new mortgages. 

 Railroad earnings showed a steady decrease, and 

 the bears pushed their advantage to the utmost. 

 In June the trunk lines made a new agreement 

 on freight rates ; reports of an abundant harvest 

 were received in July; the telegraph consolida- 

 tion was completed in August, and there was 

 then a strong combination operating to advance 

 stocks, and the rise was only temporarily checked 

 by the serious labor strikes. 



1879 to 1888. Specie payments were re- 

 sumed January 1, 1879, the Treasury having ac- 

 cumulated for the purpose $129,^85,563. An 

 arrangement was made by which all draughts on 

 the Treasury held by the New York Clearing- 

 House banks, and those held by the Treasury on 

 the banks, were paid in United States notes, thus 

 aiding in establishing confidence in the ability 

 of the Treasury to maintain specie payments 

 with $346,681,016 United States notes outstand- 

 ing. Resumption was a complete success, and 

 this fact tended to revive speculation in stocks. 

 The winter of 1880-'81 was very severe, and the 

 Northwest railroad traffic was obstmcted until 

 May. Then came a partial failure of the crops 

 and a great drought in the West. Business on the 

 Stock Exchange was unprecedentedly large dur- 

 ing the first half of the year, and speculation 

 was stimulated by consolidations and increases 

 of capital stocks and bonds, and by the opera- 

 tions of bull combinations. President Garfield 

 was shot July 2, 1881. Then followed a panicky 

 decline in values, and the market was feverish 



