On the Crises of iSjj-, 184/, and 18^7 23 



1849, the imports had increased 133 per cent, the bank capital 

 160 per cent, the bank loans 140 per cent, and the bank deposits 

 200 per cent.^ Thus we observe that trade was expanding and 

 that the banks were greatly extending their -credit operations. 



The principal loans had been made to railway companies. 

 From January 5, 1856, to August 8, 1857, the banks expanded 

 their loans from $95,000,000 to $122,000,000, most of which rep- 

 resented new railway projects. Soon, however, the banks pur- 

 sued a policy of contraction, and from August 8, 1857, to October 

 10, 1857. the loans fell from •$122,000,000 to $100,000,000. 



The situation was rendered doubly bad because railway loans 

 are necessarily long-time loans. As a result, when pressure be- 

 gan to be felt, the banks, knowing that their long-time debtors 

 could not aid them on so short notice, began to call in short-time 

 loans made to merchants. But the merchants, being in hard 

 straits also, retaliated by organizing a run on deposits. The 

 merchants were successful, and the bankers were forced to un- 

 dergo the penalty for making excessive long period loans. ^ 



Of the three crises embraced in this study, that of 1857 was 

 undoubtedly the most severe. Its leading features, according to 

 Sumner, were, "that it was world-wide, very sharp and sudden, 

 and quickly over." Unlike the other two, there were no two or 

 three distinct occasions in evidence to which the crisis could be 

 attributed. Perhaps, however, in the case of Europe, the actual 

 breaking out of the crisis in the United States may be regarded 

 as an occasion. But the real source of the panic seems to have 

 been a general expansion of business. Technically speaking, we 

 might term it a case of disproportion between fixed and circulat- 

 ing capital. There was probably sufficient 'excess of investment 

 simultaneously in many branches of industry to constitute an 

 occasion. The crisis was the culmination of the operation of 

 manv occasions. 



* Sumner, History of Banking in the United States, 423. 

 ^Ibid., 426-27. 



165 



