On the Crises of i8s/, 184/, and 18^/ 19 



annum. ^ The alarm spread to England and, coupled with an 

 increasing export of gold, produced a rise in the English «bank 

 rate. A reaction naturally followed, with a suspension of a con- 

 siderable number of banks in the United States ; bank-notes lost 

 from 10 to 20 per cent, and exchange on France and England 

 rose to 22 per cent.^ 



Tlie distress arising from this money stringency was greatly 

 aggravated by frauds practiced upon the public by promoters 

 and schemers. In several cases the promoters were men holding 

 ofifices of public trust. In this category Biddle, president of the 

 United States Bank, is placed by some authorities. But whether 

 or not his intent was to defraud the public, his operations were 

 at least speculative and as such are of interest as indicative of the 

 speculative spirit of the period, even if 'we can not class them 

 under frauds. 



Biddle attempted, and for a limited time succeeded in corner- 

 ing cotton. Formerly it had been the custom for the bank to 

 assist the planters by exclianging bank-notes for bills of ex- 

 change. By this means the merchants could pay the planters 

 and the planters in turn could pay the coimtry merchants. Bid- 

 dle contended that because private credit was at this time prac- 

 tically worthless it would not be safe to pursue the customary 

 plan, -and proceeded to buy up directly the whole visible supply 

 of cotton. For this purpose he secured the services of special 

 agents, one of whom he sent to England to represent him in the 

 English markets. He also entered into negotiations with several 

 strong European houses to assist him in establishing the monop- 

 oly. When the banks in the South began to run short of funds 

 and to lose their hold on the confidence of the people, he came 

 to their rescue by exchanging United States bank-notes for their 

 bonds. By this means the entire supply of cotton was bought up 

 and the price kept at a high level. 



The modus operandi of Biddle's scheme was simple. He 

 bought cotton in the United States with depreciated paper and 



* Sumner, History of Banking in the United States, 264 

 *Juglar, Les Crises Commerciales, 462. 



161 



