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A BRIEF HISTORY OF PANICS
AND THEIR PERIODICAL OCCURRENCE
IN THE UNITED STATES

CLEMENT JUGLAR
k
MEMBER OV THK INSTITUTE, VICE-PRESIDENT OF LA SOCIBTB
D'BCONOMIE POLITIQUB

THIRD EDITION
TRANSLATED AND EDITED WITH AN INTRODUCTION AND
BROUGHT DOWN FROM 1889 TO DATE

BY
D E C O U R C Y W. THOM
FORMER MEMBER OP THB BALTIMORE STOCK BXCHANGB AND OF THB
CONSOLIDATED EXCHANGE OF NEW YORK

G. P. PUTNAM'S SONS
NEW YORK AND LONDON
Zbc fmlcfterbocftet p r e s s
1916

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Ube ftnfckertoclier pceM, «ew Dock

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TO GOLDEN DAYS
Tonight at " Blakeford," I set down this dedication of
the third edition of this book which has proved to be the
pleasant companion of two visitaiions—one at "Wakefield
Manor," Rappahannock County, Virginia, in 1891, the other
at my old home " Blakeford," Queen Anne's County, Mary,
land, in 1915. The memories that entwine it there and here
mingle in perfect keeping and have made of a dry study something that stirs anew within me as I consider the work accomplished, my love and remembrance of the old days, and my
love and unforgettingness of these other golden days under
whose spell I have brought the book up to the present year.
DECOURCY W.

THOM.

•• BLAKEFORD,"
October 10, Z915.

341848
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PREFACE TO THIRD EDITION
THE second edition of this study of
Panics in the United States brought us
through the year 1891. I originated about
one fourth of it.
This third edition brings us practically
up to date. Of this edition I originated
about one half. I hope it will prove
helpful in many ways. I trust that it
will force an appreciable number of men
to realize that "business" or "financial"
panic is not merely fear, as some have
asserted; but is based upon the knowledge
that constriction, oppression, unhappy and
radical change in this, that, or the other
kind of business must tend to drag down
many others successively, just as a whole
line of bricks standing on end and a few
inches apart will fall if an end one is
toppled upon its next neighbor. Indeed,
the major cause of "business" or "financial"

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Preface to Third Edition
panic is just reasoning upon existing conditions rather than a foolish fear of them.
Over-trading and loss of nerve constitute
the medium. Recent national legislation
has gone far in enabling the business world
in the United States to prevent panics, and
farther yet in providing the means to cope
with them when, in spite of precautions,
they shall recur.
DEC. W. THOM.
"BLAKEFORD,"

October 10, 1915.

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A BRIEF HISTORY OF PANICS

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INTRODUCTION
COMPRISING A CONDENSATION OF THE THEORY
OF PANICS, BY M. JUGLAR, RENDERED INTO
ENGLISH, WITH CERTAIN ADDITIONAL MATERIAL, BY DECOURCEY W. THOM.

IN this translation, made with the
author's consent, my chief object being to
convey his entire meaning, I have unhesitatingly rendered the French very freely
sometimes, and again very literally. Style
has thus suffered for the sake of clearness and brevity, necessary to secure
and retain the attention of readers of this
class of books. This same conciseness has
also been imposed on our author by the inherent dryness and minuteness of his faithful inquiry into hundreds of figures, tables
showing the condition of banks at the time
of various panics, etc., etc., essential to his
demonstration. As an extreme instance of
the latitude I have sometimes allowed my-

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* Introduction.

self, I cite my rendering of the title: " Des
Crises Oommerdales et de Leur JRetou/r
Periodique en France^ en Angleterre et aux
iZtats-Uhis" merely as "Panics and Their
Periodical Occurrence in the United States":
for M. Juglar himself states that a commercial panic is always a financial panic, as a
falling away of the metallic reserve indicates its breaking out; and I have only
translated that portion dealing with the
United States, deeming the rest unnecessary, for this amply illustrates and proves
the theorem in hand.
To this sketch of the financial history of
the United States up to 1889, when M.
Juglar published his second edition, I have
added a brief account to date, including
the panic of 1890, the table headed "National Banks of the United States," and
some additions to the other tables scattered
through this book.
Prom the prefaces to the French editions
of 1860 and of 1889, and other introductory
matter, I have condensed his theory as follows:
A Crisis or Panic may be defined as a

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Introduction.

stoppage of the rise of prices: that is to
say, the period when new buyers are not
to be found. It is always accompanied by
a reactionary movement in prices.
A panic may be broadly stated as due to
overtrading, which causes general business
to need more than the available capital,
thus producing general lack of credit. Its
precipitating causes are broadly anything
leading to overtrading:
In the United States they may be classed
as f0II0W8:
1. Panics of Circulation, as in 1857, when
the steadily increased circulation, which
had almost doubled in nine years, had rendered it very easy to grant excessive discounts and loans, which had thus overstimulated business so that the above
relapse occurred; or, we may imagine the
converse case, leading to a quicker and
even greater disaster: a sudden and proportionate shrinkage of circulation, which,
of course, would have fatally cut down
loans and discounts, and so precipitated
genera] ruin.

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Introduction.

2. A Panic of Credit, as in 1866, when the
failure of Overend, Ghirney, & Co. rendered
the whole business world over cautious, and
led to a universal shrinkage of credit [I
take the liberty of adding that it seems
evident to me that such a danger must
soon confront us in the United States, unless our Silver Law is changed, because of
a finally inevitable distrust of the government's ability to keep 67-cent silver dollars
on an equality with 100-cent gold dollars.]
3. Panics of Capital, as in 1847, when
capital was so locked up in internal improvements as to prove largely useless.
4. General Tariff Changes. To the three
causes given above the translator adds a
fourth and most important one: Any
change in our tariff laws general enough to
rise to the dignity of a new tariff has with
one exception in our history precipitated a
panic. This exception is the tariff of 1846,
which was for revenue only, and introduced
after long notice and upon a graduated
scale. This had put the nation at large in
such good condition that when the appar-

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Introduction.

ently inevitable Decennial Panic occurred
in 1848 recovery from it was very speedy.
The reason for this general effect of new
tariffs is obvious. Usual prices and confidence are so disturbed that buyers either
hold off, keeping their money available, or
else draw unusually large amounts so as to
buy stock before adverse tariff changes,
thus tightening money in both ways by interfering with its accustomed circulation.
This tendency towards contraction spreads
and induces further withdrawal of deposits, thus requiring the banks to reduce
their loans; and so runs on and on to increasing discomfort and uneasiness until
panic is speedily produced. The practical
coincidence and significance of our tariff
changes and panics is shown by an extract
below from an article written by the translator in October-November, 1890, predicting the recent panic which was hastened
somewhat by the Baring collapse.1
1
Inter-relations of Tariffs\ Panics, and the Condition of
Agriculture, as Developed in the History of the United States
of America.
This brief sketch of our economic history in the United
States seeks to show that Protective Tariffs have always im-

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Introduction.

The retarding or precipitating influence
of a good or bad condition of agriculture
upon the advent of a panic is also indicated.
poverished a majority of our people, the Agriculturists ; that
agriculture has thus been made a most unprofitable vocation
throughout the States, and that this unsoundness at the very
foundation of the business of the American people has often
forced our finances into such makeshift conditions, that under
any unusual financial strain a panic, with all its wretched
accompaniments, has resulted.
To consider this properly, we must note the well known
fact that in this land, those who live by agriculture directly,
are more than one half of our population. Their votes can
cause to be made such laws as they see fit, hence, one would
expect the enactment of laws to raise the price of farm products, and to lower the price of all that the farmer has to buy.
But the farmers vote as the manufacturers and other active
classes of the minority of our voters may influence ; and only
twice in our history, from 1789 to 1808, and from 1846 to
i860, have enough of the minority found their interests sufficiently identical with that of the unorganized farmer-majority
to join votes, and thus secure at once their common end. In
consequence of this coalition during these two periods, two
remarkable things happened: 1st, agriculture flourished,
and comfortable living was more widely spread: 2d, panics
were very infrequent, and the hardships and far-reaching discomforts that must ever attend adjustments to new financial
conditions after disturbances were, of course, minimized.
It is not fair to deduce very much from the first period of
prosperity among the farmers, 1789 to 1808, for, during this
time, there were no important business interests unconnected
with agriculture; but we may summarize the facts that from 1789
to 1808, there was, 1st, no protection, the average duty during
this time being 5 per cent., and that laid for revenue only ; 2d,
that agriculture flourished ; 3d, that there was not a single panic

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Introduction.
T h e qyprmhonns of flpprpa/Vh 1 p ct

generally patent to every one, are wonderful prosperity as indicated by very numer" The Embargo" of 1808, followed by the Non-Intercourse
Act in 1809 and the War of 1812-15, and the war tariff, by
which double duties were charged in order to raise money for
war purposes, caused us to suffer all the economic disasters
flowing from tariffs ranging between absolute protection, and
those practically prohibiting, and intensified by the sufferings
inseparable from war.
During this period agriculture, for the first time in our his.
tory, was in a miserable condition. It is significant that for
the first time too, we had a protective tariff. Though our
people made heroic efforts to make for themselves those articles
formerly imported, thus starting our manufacturing interests,
they had, of course, lost their export trade and its profits.
When the peace of 1814 came, we again began exporting our
produce, and aided by the short harvests abroad, and our own
accumulated crops, resumed the profitable business which for
six years our farmers and our people generally had entirely lost.
Our first panic, that of 1814, came as a result of our long
exclusion from foreign markets, being followed by the stimulation given business through resumption of our foreign trade
in 1814, which was immensely heightened by the banks issuing
enormous quantities of irredeemable paper, instead of bending all their energies to paying off the paper they had issued
during the war.
But worse than the suffering entailed by this panic, was the
engrafting upon our economic policy of the fallacious theory
made possible by the Embargo and the Non-Intercourse Act,
(which was equivalent, let me enforce it once more, to that
highest protective tariff, a prohibitory one) that all infant
manufactures must be protected, that is, guaranteed a home
market, though such home market be one where all goods cost
more to the purchaser than similar goods bought elsewhere,

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Introduction.

ous enterprises and schemes of all sorts,
by a rise in the price of all commodities,
of land, of houses, etc., etc., by an active
and this in order that the compact little band of sellers in the
home market may make their profit. This demand for protection was made by those who had started manufactures during the years from 1808 to the end of the war of 1815, when,
as we have seen, imports were practically excluded.
In 1816 their demand met explicit assent, for, in the tariff of
that year, duty for protection, not for revenue, was granted;
and an average of 25 per cent, duties for six years, to be followed by an average of 20 per cent, duties, was laid upon
imports. For a few years bad bread crops in Europe, demand
for our cotton, and an inflation of our currency delayed a
panic.
But, we had started on our unreasoning course. We had
tried to ignore the laws of demand and supply, and had forgotten that it is also artificial to attempt preventing purchases
in the cheapest, and selling in the highest markets; and to
help a few manufacturers we had put up prices for all that a
large majority of our population,—-the agriculturists mainly—
had to buy. In a short while the demand for what the
farmers had to sell fell away, and bills could not be met, and
their troubles were added to those of the minority of the consumers of the country ; the volume of business fell off, and a
panic came in 1818. The influences that led up to it continued until 1846, as follows: The great factors in producing
this state of affairs were the successive tariffs of 1818, with
its 25 per cent, duty upon cottons and woollens, and its increased duties on all forms of manufactured iron, (the tariff of
1824 which increased duties considerably), and the tariff of
1828, imposing an average of 50 per cent, duties, and in which
the protective movement reached its acme (omitting, of course,
the present McKinley Bill with its 60 per cent, average duty).
In 1832, consequently, a great reaction in sentiment took

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Introduction.

request for workmen, a rise in salaries, a
lowering of interest, by the gullibility of
the public, by a general taste for speculating in order to grow rich at once, by a
growing luxury leading to excessive expenditures, a very large amount of discounts
and loans and bank notes1 and a very small
place, and the " Compromise Tariff" was passed and duties
were lowered. From this period, the advocacy of a high
tariff in order to protect " Infant Industries," no longer "Infant " was largely abandoned, and its advocacy was generally
based upon the fallacy, less obvious then than now, of securing high wages to laborers by means of high import duties.
This plea for high duties the laborer found to be fallacious.
They (agriculturists mainly) found that they had to pay
more for manufactured goods, so that the manufacturers
could still buy their raw materials at the advanced prices, pay
themselves the accustomed or increased profits, and then
possibly pay the laborer a small advance in wages.
The advance did not compensate for increased cost of necessaries of life. If competition reduced the manufacturers'
profit, the first reduction of expenses was always in the
laborer's pay. The recognition of these truths brought about
the further reduction of duties until 1842, in which year the
tariff was once more raised. It was not until 1846 that we
enjoyed a tariff which sought to eliminate the protective
features. It is significant that a period of greater profit and
stability among our business men, but especially among our
1

Our recent banking history has proved rather an exception to this law as far as bank notes are concerned, because of
the obviously unusual cause of sudden and enormous calling
in of government bonds, the basis of bank-note issue.

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Introduction.

reserve in specie and legal-tender notes and
poor and decreasing deposits.
On the other hand, the lowest point of
farmers, was then inaugurated. This was the first tariff, since
that of 1816, not affected by politics. It lasted until 1857,
and the country flourished marvellously under it.
From 1816, when protection was first resorted to, until today, tariff rates have been almost continually raised, mainly
by votes of the agriculturists, misled by the manufacturers and
politicians, influenced by the manufacturers' money. And a
fact worth noting is that financial panics have come quick
and furious. They came in 1818, and in 1825-26, in 1829-30,
and so on, (see page 13). Sudden changes in our tariff rates
have unvaryingly been followed by financial panics within a
short period. Changes to lower rates have not brought panics
so quickly as changes in the reverse direction.
Low tariff without protective features, maintained steadily,
has been coincident with constantly increasing prosperity to
the country at large: but most especially to the agriculturists.
This is readily understood, for purchases of imported and manufactured goods and all outfit needed for the farmers' land
and family can be made at low—and owing to the competition
that always arises to supply a steady and natural market—lowering prices. Moreover, the settled prices prevailing throughout the country allow of assured calculations and precautions
as to business ventures, and permit such a ratio to be established between expenses and income, that at the end of the
fiscal year a profit, not a loss, may be counted upon.
This was the experience of our agriculturists during the
second and last prosperous time of our farmers, 1846-60.
During that period agriculture flourished ; the tariff was low
and there were only two panics, that of 1848, and the one of
1857, and the first (a non-protective one) should not be considered as precipitated by the tariff of 1846, except that some
few suffered briefly in readjusting themselves to the changed,.

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Introduction.

depression following a panic is accompanied by the converse of the symptoms
(though better^condition of the new tariff. The vast majority
of the nation reaped enormous benefits from the changes
inaugurated.
The panic of 1857 was caused by over-activity in trade
speculation, and over-banking, and the tariff of the same year
was really passed to help avert the panic threatening. It had
the contrary effect, it is believed, for it still further, of course,
unsettled rates for goods, when prices were already unstable.
But the point is to be noted that in reality tariff change followed practical panic in this instance rather than practical
panic tariff change. The high protective war tariffs, beginning in i860, and increased for war purposes and granted
largely as an offset for those internal revenue taxes laid to
carry on the war, have been continued as a body ever since,
as is well known, despite the internal revenue taxes having
been abolished except on whiskey and tobacco. It is equally
well known that farming has grown less and less remunerative since i860, and that the panics of 1864, 1873, and 1884
have been unfortunate culminations of almost unceasing
financial discomfort, which has been most forcibly exemplified
during the last two months. Even now the financial fabric is
in unstable equilibrium, and this latest monstrosity—the
McKinley Bill—imposing the highest tariff we have ever
exacted—an average duty of 60 per cent., and coming when
a panic was due, bids fair to hurry us into another and a terrible financial panic. If it does not do so, it will be because
our crops are too bountiful to allow it, but it will at least
have made the agriculturists and all buyers of other, commodities than agricultural produce pay more for all purchases.
It will bring no more money into their pockets, but it must
take out considerably more. The people appreciate this. The
nation's pocket nerve has been touched. This is the meaning

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Introduction.

Bank balance sheets reflect in cold
figures the result of the above influences.
Prices being high, and discounts and loans
of the recent election, it seems to the writer. But whether
the impending danger can be averted even if a prompt, though
wise and slow reversal of tariff policy can be forced by the
next Congress is doubtful, for unrest and timidity have been
evoked and require time to be allayed before easy and orderly
business operations will in general be resumed, unless indeed
bountiful crops here and demand abroad once again reverse
the logic of the situation.
Certain it is that our tariff laws must interfere as little as
possible with the natural law of demand and supply in making prices, or we must be content to suffer from the instability
that artificiality always brings with it.
Our plain duty is to enact as speedily as possible a tariff that
shall by small but continued changes cut down our protective
duties and substitute non-protective duties until our tariff is
for revenue only ; for thus and thus only can the vast majority
of the agriculturists buy what they need most cheaply, and so
find that to purchase necessaries does not cost them more than
the total of their sales; and our exports of produce, chiefly
owing to agricultural prosperity, would increase, thus materially helping to build up our general business so that the other
nations will have to pay us, in the gold we require for comfortable management of our business, the growing trade balances
against them.
The rough table belowxsuggests that sudden tariff changes
have precipitated panics, which have come quickly if the
change was to higher protective duties and somewhat slower if
the change was to lower protective duties; that slow and well
considered changes doing away with protective duties generally have not caused disturbances; and that agriculture has
flourished in proportion as we approached tariff for revenue
only. It has for obvious reasons required about one year for

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Introduction.

large in proportion to deposits, and having steadily increased for years, danger
is near; further, when discounts and loans
financial trouble to be shown by decrease in value of farm
produce as evinced by wheat-flour exports.
Special conditions, such as excessive wheat corps here and
deficiency abroad or special tariff favors to flour export, may
even increase the amount exported despite an otherwise untoward effect of the new tariff upon farmers. I have selected
flour exports as the article best reflecting the chief interest of
the farmers, and at the same time the state of general business
for manufacturing, transportation and such other branches as
are concerned with it.

TARIFFS.

They have
all been designedlyProtective save
t h e one o f
1846.

Panto.

Condition of agriculture and incidentally of general business as
suggested by export of
wheat-flour from
1790-1890.

Year.
1790.
1791-

1792.
1793.
17941795.
1796.
17971798.
1799.
18OO.
1801,
I8O2.
1803.
1804.
1805,
1806,

Barrels.
Dollars.
724,623 4,591,293
619,681 3,408,246
824,464
1,074.639
846,010
687,369
725,194
515.633
567,558
519.265
653.O56
I,IO2,444
1,156,248
I,3",853 9,3IOtOOO
8lO,OO8

7,100,000

777.513 8,325.000
782,724 6,867,000

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Introduction.

are not only large in proportion to deposits,
having increased steadily for years, and
then suddenly fallen off noticeably for a

Practical exclaO
sion of all imports I
through the war = f
Prohibi tory Tariff. J
x8x6

1814

Duties for sixi
thereafter § » * !

)

1818

f Duties art onl
I Cotton and Wool1818-liens, and all duties \
on Manufactured
I Iron increased. J
1825-26

Compromise Tariff, gradual reduction of duties from
jojt average until
in 1842 the average
was so*. But this
was levied for Protection not merely
for Revenue.

*•{*&"*

1836-39

1807.
1808.
1809.
1810.
1811.
1812.
1813.
1814.
1815.
1816.
1817.
1818.
1819.
1820.
1821.
1822.
1823.
1824.
1825.
1826.
1827.
1828.
1829.
1830.
1831.
1832.
1833.
1834.
1835.
1836.

1,249,819
263,813
846,247
798,431
1,445,012
1,443,492
1,260,943
193,274
862,739
729,053
1,479,198
1,157,697
750,669
1,177,036
1,056,119
827,865
756,702
996,792
813,906
857,820
868,492
860,809
837,385
1,227,434
1,806,529
864,919
955.768
835,352
779,396
505,400
1837.
318,719
1838.
448,161
923,151
1839.
,897,501
1840.
,515,817
1841.
,283,602
1842.
841,474
1843.
,438,574
1844.
,195,230
1845.

10,753.000
1,936,000
5,944,000
6,846,000
14,662,000
13,687,000
13,591,000
1,734,000
7,209,000
7,712,000
i7,75i,376
11,576,970
6,005,280
5,296,664
4,298,043
5,103,280
4.962,373
5,759,176
4,212,127
4,121,466
4,420,081
4,286,939
5,793,651
6,085,953
9.938,458
4,880,623
5,613,010
4.520,781
4,394,777
3.572,599
2,987,269
3,603,299
6,925,170
10,143,615
7,759.646
7,375,356
3»763,O73
6,759,488
5,398,593

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Introduction,

considerable time, only to increase again,
danger is imminent.
On the other hand, a steady and radical

Imposed lower")
duties a n d these I
were
not for Pro- I
1846 tection purposes j
they were simply I
forRevem

win")
Reduced Tariff
rates on above plan I
«857 because of redunlun-f
dant prosperityI- J
' War Tariff pro-]
tection restored as
i860 compensation for >•
Internal Revenue
taxes.
J
1863. .As above
1864..AS above

f to* reduction, but 1
coffee and tea put
I on Free List and
187a {whiskey and tobacco taxes reLduced.
ioj{ reduction)
above repealed. J

1857

1846. .2,289,476
1847. .4,382,496
1848. .2,119,393
1849. .2,108,013
1850. .1,385,448
1851. 2,202,335
1852. •2,799.339
I853. .2,920,918
1854. .4,022,386
1855. .1,204,540
1856. .3,510.626
1857. 3.712,053
1858. .3,512,169
1859. .2,431,824

1864

i860. .2,611,596 15,448,507
I86l. .4,323.756 24,645,849

1848

1862. .4,882,033
1863. .4,390,055
1864. • 3,557,347
1865. .2,641,298
1866. .2,183,050
1867. .1,300,106
1868. .2,076,423
1869. 2,431,873
1870. .3.463,333
1873

•3.653,841
.2,514,535
1873. .2,562,086
1874. .4,094,094
1875. •3,973,128
1876. .3,935,512
1877. • 3,343.665
1878. 3,947,333
1879. 5,629,714
1880. .6,011,419
1881. .7,945.786
1882. .5,915,686

11,668,669
26,133,811
13,194,109
11,280,582
7,098,570
10,524,331
11,869,143
14.783,394
27,701,444
10,896,908
29,275,148
25,882,316
19,328,884
14.433,591

27,534,677
28,366,069
25,588,249
27,507,084
18,396,686
12,803,775
20,887,798
18,813,865
21,169,593
24,093,184
17,955,684
19,381,664
29,258,094
23,712,440
24,433,470
21,663,947
25,095,721
29,567,713
35,333,197
45.047,257
36,375.055

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Introduction.

reduction of loans and discounts, following
a panic and extending until new enterprises are very scarce, till prices are very
low, till there is wide-spread idleness
among workmen, a decrease in salaries and
in interest rates, when the public is wary
and speculation dead, and expenditures
are cut down as far as possible, may be
taken to mean a rapid and continued resumption of every prosperous business: but
if the above process is only partially performed, renewed trouble must result;—in
other words, liquidation to really be helpful
(to congested business) must be thorough.
A study of the first of the following
tables, " National Banks of the United
States," illustrates the above generalization. It is unnecessary to mention that
1873, 1884, and 1890 have been the
Duties
really'
raised on class of
goods most used,
but
apparently
lowered the tariff,
for it considerably
reduced rates on
many little used
classes of goods.
McKinley Bill)
1890 average of 60* >
duty.
j

1884

189O

1883.. 9,205,664
1884. .9,152,260
1885.10,648,145
1886. .8,179,241
1887.11,518,449
1888.11,963,574
1889. .9,374,803
l89O.I2,23I,7II
I89I.II,344,3O4

54,824,459
51,139,695
52,146,336
38,442,955
51,950,082
54,777,710
45,296,485
57,036,168
54,705,616

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1892 . . 15,196,769
.16,620,339
16,859,533
.15,268,892
.14,620,864
14,569,545
15,349,943
.18,485,690
1900. .18,699,194
1901. .18,650,979
1902. 17,759,203
1903. .19,716,484
1904. •16,699,432
1905. • 8,826,335
1906. 13,919,048
1907. 15,584,667
1908. 13,937,247
1909. ,10,521,161
9,040,987
1910.
1911. .10,129,435
1912. .11,006,487

f Free silver and ^
( sudden ill-distrib*
180
X-A •} u t e d a n d drastic I
893 4
1 tariff reductions f Tftrt
j and insufficient I l°9
1897

1903

1907

1913

Tariff disturbance to higher
rates. The prop a g a n d a for
keener regulation
of business.

Tariff reductions to produce 1913
a revenue; not on 1914
a protective basis.
The further reTh
g u l a t i n g of
gu
business.
The M W o r l d
War.'*

75»362,283
75*494,347
69,271,770
51,651,928
52,025,217
55.914,347
69,263,718
73,093,870
67,760,886
69,459,296
65,661,974
6818941836
40,176,136
59,106,869
62,175,397
64,170,508
51,157,366
47,621,467
49,386,946
50,999,797

11,394,805 53,171,537
12,768,073 62,391,503

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LOAMS AND

DISCOUNTS.

"'
Capital.
Undivided
Profits and
Surplus, etc.
Deposits.

JJ S
:;::;;::::;::;:;::;;:;:::::=

Excess of Capital (Surplus, Undivided Profits,
and Deposits) over
Loans and
Discounts.
Percentage " Working
Capital exceed I<oan>
and Discounu.

xi <^>b b\u» H w On i * On

1111111111111111111111111

n
: ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ;

r ;

•uotpnpoxpij

Diff«
Deposits and
Loansand
Discounts.
Percentage of Difference
(over or under) between
Deposits and Loans
and Discounts.

TABLE NO. i.—NATIONAL BANKS OF THE UNITED STATES.—Continued.
WORKING CAPITAL."
00

•si!

o
o

eg
FT

1897
1898
1899
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
191s

Mch. 6
Feby. 28
Mch. 5
Feby. 2!
Mch. 9
Peby.;i8
Feby. 4
Feby. 13
Feby.

In Millions.
688 348 I7SI
678 332 I586
662 329 1667
653 334 I648
642 333 1669
628 334 1982
608 3J2 2232
248I
613
2753
2082
&
3IS9
73X
33OO
3612
4088
562 4115
90s 589 4*05
927 635 4699
960 689 5I9O
1007 742 5"3
1031 772 5630
1048 818 598s
1057 884 6072
1066 927 7148
958
991

3
3
HI

™
l?y 5
Feby.

Jany. 31
Jany. 7
Feby. 20
Feby. 4
any. 13
6499

2787 Millions
2596
2658
6
"
8644
2944
3173
34 7

378s
4097
4406

im 7004
7588
7091
8120
9226

627 Millions 22.6
254
29.
27.
27.6
28.3
257
237
24.
251
251
26.5
21.3
23-3
24.4
25.
22.9
23-5
23-4
23.9
29-6

— 408 Millions 23.3 under
18.
— 286
;;
— 318
— 229
—170
— 67

±61

— 146

—n

—348
—317
— 180
— 140
— 103

+ 649

17.8
19.2
136
8.5

"
••

«
<4

2.2
4.9
5.6
51
3-2
.41 over
8.4 under
7-7
2.9

3.1
2.3
1-7
9.9 over

TABLE No. 2.
UNITED STATES TABLE OF BALANCE SHEETS.
MILLIONS OF DOLLARS.
CIRCU
LATION

DISSPECIE
I N O I - NUMBER
COUNTS
OF
VIOUAL
ON
ANO
LOANS DEPOSITS BANKS
HAND

811
815 •
816 •
819
820 *
830
834
835
836
837
838
839
840
841
842
843
844
845
846
847

8849
48*
850
851
854
855
856
857 *
858
859
860
861
862
863*

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TABLE No. 3.
UNITED STATES TABLE OF BALANCE SHEETS OF THE NATIONAL
BANKS—QUARTERLY STATEMENT.
MILLIONS OF DOLLARS.

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TABLE No. 4 (No. 3 continued),
MILLIONS OP DOLLARS.

oogle

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TABLE No. 5 (No. 3 continued).
MILLIONS OF DOLLARS.

YEAR

SURPLUS
DISCIRCU- SPECIE
AND
COUNTS I N D I - NUMBER
LAON
LEGAL
AND VIDUAL
or CAPITAL UNDIVIDED
PROFITS
TION
HAND TENDERS LOANS OEPOSI75 BANKS

MAX. MIN.MAX. MIN MAX. MIN. MAX. MIN.MAX. M I N MAX. M I N . MAX. MIN MAX. MIN.

1892

2 QUAR

3*0 «
4 ™ »%
1893 ^
vtflO

ATH

ml\ 209, 113 /

/45.I

£5/

1894
|ST
«
2N0

\ 119

\ 218
\

|ST
2 NO

3«">
4TM

«tt

gND

ATH

1898
|«T
It
2ND

3 no
A™

1 ST
£ NO

tt
tt

3"°

1900

j 187

\lS6
use

1
1

2t0l

\I96

3728

662

3699

653

//e

1
\

1982

\
\

1669 3634

\ 107 2T00

252 /
I

I
642

I9t6

341 \

\
tfftt

j 27/

\ no Z2/4

J
199

626

2225

116 \

\ \u±

2522

3602

2706

2623

3942

632

403

1 151 3038

2964

429

665

448

\7£Z. 3303

3209

4666

7/4-

5/t

5118

1/0/ 2496

1339

20k

342\ 1

IMS.

202\

OKI

340 \

/687\
\
\

/
/
1110

/
/

2059

363

1/22

309

\ 369
1902
^1 TH

965

352 /

•

1901 M

3*D

678

2007

1899

,ST
2N0

3777

1897
jST
It

3 no

1872

.1V

220 \
185

! ~

688

t*4*

sssf

353

3830

3«© »«

1ST

I75l\

2161
•

3784

l is
8 5:
2
1896

2/7/

1,
11

309

,11

1903 ^
2 NO

iTM

335

j378

\l42 3481

3200

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TABLE No. 6 (No. 3 continued).
MILLIONS OF DOLLARS.

YEAR

DISI SURPLUS I
CIRCU- SPECIE
COUNTS I N D I - NUMBER!
ANO
LEGAL
LAOF |CAP1TAL|
AND VIDUAL
ON
TION
HAND TENOERS LOANS DEPOSITS BANKS
MAX. MIN. MAX. MIN.

1904

I«TQUAR.
!"
:

|TH

MIN. MAX. MIN. MAX MIN.

t69l

3772

Mil

S477

77S

5833

1808

631

6/99

\847

687

1905
,ST

495

6
1906
I ST

Z ND

157

\460

498 492

4016

3689

175

Jr- «

152 4366

1907
|ST
9M0

II
•»

3«O

»
«

4.TM

531

4678

4319

662S

\90/

749

4840

4720

6865

\9£/

779

694

176 5/48

5/Bp

7006

953

825

67Z

i/49 5467

72.04-

1004

894

73Z8

/O£6

930

1908
|$T

„

I9&

T99 680

1909
|«T

M
II
II

i/5

1910
|«T

r«:

667

1911
680

761

/as

704 769

/as

1912
1ST

5663

1913
|*T

7/7

740

6058

5944

74&0

1046

969

6Z6O

60SI

7S09

1059

/007

6557

61/1

7493

/057

7581

1065

7599

1066

169

£TM

1914
7£0
m

1915

648
{746

746
734

f£8
1/27 6499

AMA

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Introduction.

last three panic years. But it is very
necessary in studying this table, to bear in
mind that its figures are taken from the
standing of the banks at the first of the
year, while the panics generally occurred
later in the year: the last two, for instance
in the second and fourth quarter, respectively. The third and fourth tables will
give more exact figures in this connection.
Table Two, dealing with State Banks, is
given merely to round out our banking
history as told in figures.
The increase or diminution of deposits
of course reflects a confident and successful, or a panicky and impoverishing, state
of general business.
The adage " buy cheap and sell dear,"
or its practical equivalent—so scary and
imitative are investors—Buy during the
last of a selling movement and sell dwring
the last of a buying movement, resolves itself, we venture to repeat, into: Buy when
the decline caused by a panic has produced
such liquidation that discounts and loans,
after steady and long-continued diminution, either become stationary for a period.

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Introduction.

or else increase progressively coincident
with a steady increase in available funds ;
and sell for converse reasons.
These conclusions are also reached by
our author through analyses of the Financial History of England, France, Prussia,
Austria, etc. These I omit as unnecessarily
wearisome to the reader since I give that
of our own country. However, I will here
quote the following: " What must be noted
is the reiteration and sequence of the same
points (faits) under varying circumstances,
at all times, in all countries and under all
governments," and also this table showing
all the panics and their practical coincidence
in the past eighty-five years, in
France
1804
1810
1813-14
1818
X825
X83O
1836-39
X847
1857
1864

1803
1810
1815
1818
1825
1830
1836-39
184T
1857
1864-66
1873
1882
^ 1890-91
2? 1894

1882
18897*0
1894

England

3 1897

1907
191s

•1 1907

g 1903

8 1913

and the United States.
1814
1818
1826
I829-3I
4 1848

lioi
X873
1884
1890-91
1893-94
I897
X903
X907
X9X3

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Introduction.

Truly these thirteen panics in the three
countries have been practically simultaneous and one common cause must have originated them. The only cause common to
all was overtrading to such an extent that
neither credit nor money were to be had,
so that a forced liquidation or panic inevitably ensued.
The above table effectually does away
with the theory that new tariffs are directly
productive of panics. For most certainly
new tariffs did not occur in England, France,
and the United States just before or during
all the panic years enumerated, and yet,
practically simultaneously in free-trade England, high-protection France, and sometimes
low-tariff, sometimes high-protection United
States have panics occurred for eighty years.
But, as I have shown in a note attached
to this Introduction, a new tariff or a general change of duties is apt to precipitate a
panic, on account of the unsettling of business, and that the consequent shaking of
credit adds its quota to the forces finally
culminating in a panic cannot be doubted.
As a matter of history with us, substan-

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Introduction.

tially new tariffs have always happened to
be the immediate forerunners of a panic,
and this I believe to be true in the case of
other countries.
Why is this ? Is it not because the people instinctively turn to tinkering at and
changing their chief tax—the tariff—whenever they as a whole need financial relief;
and have we not shown that such relief is
needed almost every ten years, when the
overtrading, inseparable from the development of all thriving communities has made
the call for credit impossible to grant ?
A new tariff may defer, or hurry, or,
occurring simultaneously, will intensify a
panic, but it may not hope to avert one
when due: yet if its changes be very gradual,fixedand long predicted, and of a nature
to bring about or confirm a judicious tariff
for revenue only, they will materially help
to put business on so firm and sound a
basis that recovery from the inevitable, and
approximately decennial panics, will be
wonderfully expedited. Thus a new tariff
is a quite accurate forewarning of a panic,
and is also to no inconsiderable extent a

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Introduction.

contributory cause. (See foot-note on page
5, seq., Interrelations of Pa/rdcs, Tariffs,
and the Condition of Agriculture, etc.;
and especially what is said of the panic of
1848, on page 10.)
M. Juglar has fully analyzed the three
phases of our business life into Prosperity,
Panic, and Liquidation, which three constitute themselves into the business cycle,
that for forty years past (that is, since
the present Bank of England Act, and practically since that of the Law governing the
Bank of Prance, both of which then increased the required specie reserve) has
been of about ten years. These ten years
may be apportioned roughly as follows:
say, Prosperity for five to seven years;
Panic a few months to a few years,1 and
Liquidation about a few years.
I have already pointed out the signs of
prosperity, of panic, and of liquidation, but
in view of existing conditions perhaps it
1

The panic after 1873 is the only one I know extending to
anything like the length it attained. This may be ascribed
to the immense development and consequent speculation, and
to the inflation of the currency coming after the period about
the Civil War.

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Introduction,

may be well to restate here the quite familiar fact that the completion of liquidation
that precedes the beginning of another
period of prosperity is characterized by
lack of business, steady prices, and a
marked growth in available banking funds.
[The various tables spread through this
pamphlet are fully explained by their headings and the text]
In conclusion I wish to express my thanks
for the courtesy M. Juglar has extended
me, and to state my appreciation of the motives, painstaking patience, and undoubted
originality he has shown in explaining and
executing so faithfully and with such genius
a most laborious and yet spirited work. It
is only justice that such an achievement
should have been awarded a prize by the
French Institute (Academy of Moral and
Political Sciences) and have gained for M.
Juglar the Vice-Presidency of the " Society
for the Study of Political Economy."
DECOUBCT W. THOM.
WAKEFIELD MANOR.

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A HISTORY OF PANICS IN THE
UNITED STATES CONSIDERED
WITH SPECIAL REFERENCE
TO AMERICAN BANKS.
THE English Colonies soon after their
settlement issued paper money. The first
was Massachusetts, which issued it even
before her independence, in 1690, to obtain
funds in order to besiege Quebec.
This example was followed to such an
extent that it caused a marked speculation
in favor of hard money, varying according
to the quantity of notes in circulation. In
1745, after a successful campaign against
Louisburg and the taking of that fortress,
two million pounds of paper money were
issued, which step decreased its value.
When liquidation occurred these paper
pounds were not worth 10 per cent, of
their face value.
The War of Independence obliged Congress to issue three million of paper dollars.
35

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A Brief History of

This amount increased to $160,000,000, so
that Congress declared, in 1779, that it
would not issue more than $200,000,000.
Notwithstanding this guaranty, notwithstanding the forced and legal rating conferred by this enactment, notwithstanding
the war spirit, it depreciated; and in 1779
it was necessary to decree that, disregarding its normal value, it should be taken at
its face. In 1780 it was no longer taken
for customs dues. In 1781 it had no rating
and was not even taken at 1 per cent, of
its face value.
Between 1776 and 1780 the issue of
paper money increased to $359,000,000.
Bank of North America.—In 1781 Mr.
Morris, Treasurer, persuaded Congress to
form a bank (the Bank of North America)
with a capital of $10,000,000, of which
$400,000 should be turned over to help
the national finances. The capital was too
insignificant and the course of politics too
unpropitious to accomplish this end. However, the example encouraged the States to
take up their paper money. Upon the
adoption of the United States Constitution

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Panics in the United States.

the issuing of paper money ceased, and
gold and silver were the only means of
circulation. Thence arose great embarrassment for the Bank of North America,
which, hampered by its loans to the Goverment, increased its note circulation to an
enormous proportion. The ebb of paper
through every channel finally aroused the
public fears, and people refused the notes.
Every one struggled to obtain metallic
money, hence it became impossible to borrow, and bankruptcy followed. Such was
the excitement that the Philadelphians as
a body demanded and obtained from the
Assembly of Representatives a withdrawal
of the charter; but the Bank, relying
upon Congress, continued until March 17,
1787; succeeded even in extending its
charter fourteen years; and later obtained
a second extension, limited, however, to
Pennsylvania.
The difficulty experienced in the manufacture of money led Mr. Hamilton, Secretary of the Treasury, to propose to Congress in 1790 the founding of a National
Bank. After some doubts as to the power

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A Brief History of

of Congress, it was authorized. It began
operations in 1794, under the title of
" Bank of the United States," with a capital
of ten millions, eight millions being subscribed by private individuals, and two
millions by the Government. Two millions
of the first sum were to be paid in metallic
money, and six millions in 6 percent. State
bonds; the charter was to run till March
4, 1811. It seemed to be a good thing for
the public and the stockholders, for during
twenty-one years it paid an average of 8
per cent, dividends. In 1819 the question
of renewing its privileges came up, the
situation being as follows:
ASSETS.

6 per cent.
P a p e r . . . . $ 2,230,000

LIABILITIES.

Capital
Stock

$10,000,000

Loans and
Discounts. 15,000,000 Deposits
8,500,000
Cash
10,000,000 Circulation... 4,500,000

The profits from the Bank, the prosperous state of the country, and the increase of productions led people to think
that the issuing of paper money caused it
all; seduced by this alluring theory the

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Panics in the United States.

" Farmers' Bank " was founded in Lancaster
in 1810, with a capital of $300,000. Others
followed; such was the mania that the
Pennsylvania Legislature was forced to
forbid every corporation to issue notes.
Despite this preventive message the excitement rose so high that companies, formed
to build harbors and canals, also put notes
into circulation; in this way the law was
eluded.
From 1782 to 1812 the capital of the
banks rose to $77,258,000; upon the 1st
of January, 1811, there were already eightyeight banks in existence. Until the declaration of war (June, 1812),the issuing of notes
was always made with the intention of
redeeming them, but the over-issue soon
became general, and depreciation followed.
The periodical demands for dollar-pieces
for the East Indian and Chinese trade were
warnings of the over-speculations on the
part of those companies whose members
were not personally liable. Traders, who
through their notes or their deposits had
a right to credit with the banks, did
not hesitate to ask for $100,000, where-

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A Brief History of

as, formerly they would have hesitated to
ask for $1,000. . The war put a stop to the
exportation of precious metals, which,- in
the ordinary course of things, limits the
issue and circulation of paper. The upshot
of this was to redouble the note issue,
each one believing its only duty was to get
the largest amount into circulation. Loans,
and enormous sums of money, were distributed above all reason among individuals
and among the States. The increase of
dividends and the ease of obtaining them
extended the spirit of speculation in certain
districts, and especially among those who
owned land. The remarkable results shown
by the Bank of Lancaster, the " Farmers'
Bank," which,by means of an extraordinary
issue of notes, had yielded as much as 12
per cent, and piled up in capital twice the
amount of its stock, caused it to be no
longer thought of as a bank intended to
assist trade with available capital, but as a
mint destined to coin money for all owning
nothing at all. Led by this error, laborers,
shopkeepers, manufacturers, and merchants
betook themselves to quitting active oc-

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Panics in the United States.

cupations to indulge in golden dreams.
Fear alone restrained some stockholders
connected with the non-authorized companies, and led them to seek for a legal
incorporation.
In Pennsylvania, during the session of
1812, an act was passed authorizing twentyfive banks, with a capital of $9,000,000.
The Executive nevertheless refused to
ratify it, and returned it with some very
well-deserved comments. In a second debate the first resolution was rescinded by a
vote of 40 to 38. In the following session
the proposition was renewed with more
vigor, and forty-one banks with a capital
of $17,000,000 were authorized by a large
majority; the representations of the Executive proved useless, and they immediately
entered upon their duties with an insufficient capital.
To discount their own stock was a soondiscovered method. They thus increased
the amount of notes, which depreciated in
comparison with hard money, and dissipated on all hands the hope of exchanging
with i t

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A Brief History of

In the absence of a demand from abroad
for hard money, the demand came from
within our own borders.
The laws of New England, which were
very severe upon the banks, had placed a
penalty of 12 per cent, upon the annual
interest payments of those persons who did
not pay their notes. The natural result
was a difference of value between New
England and Pennsylvania, which measured the depreciation caused by paper in
the latter district. As remittances on New
England could only be made in hard
money, the equilibrium of the banks was
disturbed; they were not able to respond
to the demands for redemption, and a suspension of payments by the banks of the
United States, except those of New England, took place in August and September,
1814.
The Panic of 1814.—An agreement took
place at Philadelphia between the bank
and the chief houses allied with it to resume payments at the end of the war.
Unhappily, the public did not demand
the accomplishment of this promise at the

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Panics in the United States.

time fixed, and the banks, led on by the
thirst of gain, issued an unprecedented
amount of bank notes. The general approbation brought about a still further increase in their number: the bank notes of
the Bank of Philadelphia were at a discount of 80 per cent.; the others at 75 per
cent, and 50 per cent., and metallic money
disappeared to such an extent that paper
had to be used to replace copper coin. The
depreciation of fiat money raised the price
of everything; this superficial occurrence
was looked upon as a real increase, and
gave rise to all the consequences that a
general inflation of value could produce.
This mistake on the subject of artificial
wealth made landed proprietors desire unusual proceeds. The villager, deceived by
a demand surpassing his ordinary profits,
extended his credit and filled his stores
with the highest-priced goods; and importations, having no other proportion to the
real needs than the wishes of the retailers,
soon glutted the market. Every one wished
to speculate, and every one eagerly ran up
debts. Such was the abundance of paper

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A Brief History of

money that the banks were alarmed lest
they could not always find an investment
for what they manufactured. It thus happened that it was proposed to lend money
on collateral, while the greatest efforts to
bring about its redemption were being made.
This state of things lasted till the end of
1815, when it was recognized that the paper
circulation had not enriched the community, but that metallic money had enhanced.
The intelligent portion of the nation
comprehended that even where the estimated value of property had been highest,
the true welfare of society had diminished.
They learned too late the baleful effects of
this circulation of paper money; the greater
part of the States and cities had nothing to
show for it.
A new class of speculators then appeared, trying to pass these worthless bank
notes: forgers of paper money became
more active. In the midst of this disorder
a National Bank, which should afford a
solid basis for the paper circulation, was
considered. Influenced by these difficulties, and in hopes of remedying them, the

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Panics in the United States.

Secretary of the Treasury proposed to
Congress, in September, 1814, a few days
after suspension, to found a national bank,
in order to re-establish metallic circulation,
an end which the State banks had failed
to accomplish.
This project, which lent the national
credit to the capital of the bank, was an*
tagonized by a good many members who
exaggerated its consequences; at the same
time that they took more or less important
sums in bank notes, or borrowed from the
banks upon the nation's guaranty, in order
to re-establish the public credit and to obtain means for prolonging the war.
Causes of the Panic of 1814.—The bank
directors laid the blame upon the blockade
of the ports, which, interfering with, indeed
even preventing, the export of products,
occasioned the outflow of the metals. The
national loans to carry on the war also had
their influence. Prom the beginning of hostilities until 1814 they increased to $52,848,000, distributed as follows: , Eastern
States, $13,920,000; New York, Pennsylvania, Maryland, and District of Columbia,

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$27,792,000; Southern and Western States,
$11,136,000.
Nearly all of this was advanced by the
cities of New York, Philadelphia, and Baltimore. The banks made advances beyond
their resources, augmenting their circulation in consequence.1
Prom the 1st of January, 1811, to the
1st of January, 1815, one hundred and
1

The cause of the crisis, according to the Committee of the
Senate, was the abuse of the banking system ; the great number and bad administration of the banks; and their speculations
designed to advance their stock, and to distribute usurious
dividends. When the Bank of the United States saw the
danger that menaced it, it reduced its discounts and circulation. The circulation of the country banks fell from $5,000,000 to $1,300,000, and the total circulation from $10,000,000
to $3,000,000.
Increase and Decrease Circulation in Pennsylvania.
City Banks.
Country.
Total.
1814
$3,300,000
$1,900,000
$5,200,000
1815
4,800,000
5,300,000
10,100,000
1816
3,400,000
4,700,000
8,100,000
1817
2,300,000
3,800,000
6,100,000
1818
1,900,000
3,000,000
4,900,000
1819
1,600,000
1,300,000
2,900,000

1811
1815
1816

Number
of Banks. Capital.
88 $52,00000
208
82,00000
246
89,000 00

Circulation.
$28,00000
45,00000
68,000 00

Specie.
$15,00000
17,00000
19,000 00

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twenty new banks were registered, thus
raising their capital to more than $80,000,000; this increase took place during a war
that entirely did away with foreign trade.
The expenses of the war declared against
Great Britain in June, 1812, were defrayed
by notes issued by the banks of the various
States. Six million dollars were obtained
from them in 1812, in the following year,
1813, twenty million, and thenfifteenmillion in exchange for twelve million of
Federal stock, issued at the price of $125
face for every $100 paid in. Until January 1, 1814, in order to avoid taxation,
Treasury bonds were issued in addition to
what was contributed by the banks.
In 1812

$3,000,000

" 1813
" 1814

6,000,000
8,000,000

Up to this time no account of their
administration had been rendered, but now
Mr. Bland, a Maryland representative,
called attention to the fact that all their
operations seemed veiled from the public.
Unfortunately we have been unable to find
a statement of the discounts.

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The suspension of specie payments differed with the corresponding state of affairs
in England, inasmuch as it was not general,
and, since each State was independent, the
depreciation varied. It became very difficult to circulate paper, and the Government
was again obliged to issue Treasury bonds,
bearing 6 per cent, interest. In February,
1815, peace having been proclaimed, it was
hoped that the banks would resume specie
payments. There was no sign of it. The
re-establishment of peace merely made
some of the legal regulations seem less
pressing upon the banks.
In the middle of May, 1815, the first
English vessel arrived, and business became
very active again. In May, June, and July
it might have been said "This is the golden
age of commerce." Discounts of unsecured
paper were easy, and it was not an unusual
occurrence to have notes of $60,000 offered.
The banks had authorized a suspension
of specie payment in order to force the
issue of bank notes, and to stimulate trade,
although Mr. Carey pretends that no overtrading had taken place. He blames them

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for having restricted their loans in October
and November, thus producing a decline in
prices; and the necessity of cutting down
credits came about, according to him, from
the speculations in National securities.
Six Philadelphia banks with a capital of
$10,000,000 held $3,000,000 in Government stock.
On the 15th of February, 1815, when
scarcely through with all this confusion, an
effort was made to re-establish for the second
time a United States Bank It was authorized on the 10th of April, 1816, the Act
permitting the formation of a Company,
with a capital of $35,000,000, divided into
350,000 shares of $100 each, of which the
Government took 70,000 shares and the
public 180,000 shares. These last were
payable in $7,000,000 of gold or silver, of
the United States of North America, and
$21,000,000 in like money, or, in the funded
debt of the United States either in the 6
per cent. Consolidated Debt at par, the 3
per cent, at 65, or the 7 per cent, at 106£
per cent.; upon subscription $30 was payable, of which at least $5 had to be in gold

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or silver; in six months after, $35, of which
$10 had to be in metal, and twelve months
after the same amount was to be paid in the
same manner. The directors were authorized to sell shares every year to the amount
of $2,000,000, after having offered them at
the current price to the Secretary of the
Treasury for fourteen days. The Government reserved the right to redeem the debt
at the subscription price.
The charter, made out in the name of
the president, ran until March 3, 1836.
There were twenty-five directors of the concern, five of whom were appointed by the
President of the United States with the
consent of the Senate, and not more than
three by the State; the stockholders chose
the others.
The corporation could not accept any
inconvertible property, or any farm-mortgage, unless for its immediate use, either as
security for an existing debt, or to wipe
out a credit.
It had no right to contract any debt
greater than $35,000,000, more than its deposits, unless by special act; the directors

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were made responsible for every violation,
and could be sued by each creditor. They
could only deal in gold and silver exchange,
and not in other country securities which
could not be realized upon at once. The
Bank could purchase no public debt noi
exceed 6 per cent, interest on its discounts
and loans. It could lend no more than
$500,000, to the United States, $50,000, to
each State, and nothing to foreigners. It
could give no bill of exchange greater than
$5,000; bank notes less than $100 were to
be payable on demand, and greater sums
were not allowed to run longer than sixty
days. Two settlements were to take place
every year.
Branches were to be established upon
demand of legislative authorities, wherever
2,000 shares of stock were subscribed for.
There were to be no bank notes less than
$5.00, and every bill of exchange, or bill
payable at sight, was to be receivable by
the public Treasury.
The duty of the Bank was especially to
pay out and receive the public money,
without profit or loss. It was to serve as

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agent for every State contracting a loan;
the cash belonging to the United States
was to be deposited at the Bank whenever
the Secretary of the Treasury did not dispose of it otherwise, in which case he was
to notify Congress.
Neither the Directory nor Congress could
suspend payment of the bank notes, discounts, or deposits: such refusal carried a
right to 12 per cent, interest. In exchange
for this charter the Bank was to give
$1,000,000, to the Government in three
instalments.
The charter was exclusive during its life,
excepting in the District of Columbia,
where banks might be authorized, provided
their capital did not exceed $6,000,000.
The Bank did not open at once, for it
sent an agent to Europe to look up bullion.
Between July, 1817, and December, 1818,
it thus procured $7,311,750, at an expense
of $525,000. On the 20th of February,
1817, it was decided that, excepting
gold and silver and Treasury notes, no
notes would be received at the Government
Treasuries, save such as were payable to the

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banks in hard money. Notwithstanding
this discrimination the banks decided not to
resume specie payment until the 1st of
July, 1817.
In the meantime an immense speculation
had taken place in its stock, which was
compromising for the Bank and for the
credit of its Directory, because several of
its Directors appointed by the Government
took part in it. For example, it became
customary to loan a very large amount of
money on the Bank's own stock, as much
as $125 on each share of $100. Thus
more than the purchase price was loaned
upon them: in furnishing the means of
paying for them by credit, speculation
was aroused, and on the 1st of September,
1817,the market price advanced to $156.50,
at which rate it continued until December,
1818, when it fell to $110.
At last the public perceived that the
excessive issue depreciated the bank-note
circulation, and that a greater shrinkage
was imminent.
An office for the payment of bank dividends was opened in Europe, so as to

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increase the price of the stock and the
speculation in it through this facility,
rather than for the permanent benefit of
the institution. Let us note here the shortsightedness of the Directors, who thought
they would stem the depreciation of their
means of payment by persuading all the
banks to declare what was not true, that
the bank notes were worth par.
On the 21st of February, still aiming at
the same end, they announced the resumption of specie payment. The State Banks,
remembering the embarrassment of the
public, which for two years had paid an
exchange of 6 per cent., persuaded themselves that few people would dare to ask
for large sums. They hoped to come to an
understanding and to cause the acceptance
of a promise to pay upon a designated day.
We say " a promise to pay," for this was
not a serious proposition, inasmuch as
foreign money and that of the United
States had enjoyed a higher market value
for a long time.
The depreciation of the bank notes might
result just as well, from the fear of the

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public's enforcing its rights, as from a
refusal of the banks to make good their
promises. This understanding was not,
properly speaking, a resumption of specie
payment, but rather a kind of humbug.
In January the banks of New York,
Philadelphia, Baltimore, Richmond, and
Norfolk decided to resume specie payment
on the 20th of February, provided the
balance showing against them was not demanded by the Bank of the United States
before discounts became $2,000,000, at
New York, as much in Philadelphia, and
$1,500,000 in Baltimore; and these conditions were accepted.
The discount line of the Bank of the
United States was thus greatly increased;
it grew from $3,000,000 on the 27th of
February to $20,000,000 on the 30th of
April; to $25,000,000 on July 29th, and
to $33,000,000 on the 31st of October.
The Bank imported much metallic money,
redeemed its notes and those of its branches
without distinction; the notes of its Eastern and Southern branches were returned
as soon as those of the North had paid

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them, and they were newly issued; consequently eighteen months after this practice began the cash boxes of the North
were drained of their capital, the length of
discount was reduced, and 5 per cent,
was charged for sixty days. On April 1,
1819, only $126,000, cash remained on
hand, on the 12th only $71,000, remained,
$196,000, was owed to the city banks.
Scarcely had the Directors of the National Bank succeeded in replacing the
paper issued but not redeemed by their
bank-note circulation, being fully aware
from their own experience that the circulation could only reach a limited amount,
than they inundated the market with it,
and in a few months all reductions vanished. In this way the market price
shortly resumed its former quotation, and
all the difficulties reappeared. This imprudent management necessarily threw one
portion of the public into debt, from which
it had saved itself; and the other portion
into the vortex which it had avoided. The
critical moment was delayed somewhat,
but the day of reckoning was near.

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The Panic of 1818.—The Bank at last discovered that it had passed the bounds of
safety through its issues, and that it was
at the mercy of its creditors. It saw firstly,
October 21, 1818, the payment of part
of the State of Louisiana's foreign debt
withdraw large sums, and then Chinese,
Indian, and other goods reach fancy prices
because of the depreciation of the circulating medium. AH these influences produced
a demand for specie payment which the
Bank as a public one was obliged to meet,
under penalty of 12 per cent, interest, and
without power to avail itself of the same
accounts as the State banks.
From this moment it thought fixedly of
its safety and of how to reduce its notes;
this reduction obliged the other banks to
imitate it, and a new crisis shook trade in
the end of October, 1818. During one
year the National Bank furnished from its
cash boxes more than $7,000,000, and the
others more than $3,000,000^
The State banks naturally followed the
same policy in their connection, and their
circulation became reduced as follows:

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On November i, 1816, to

$4,756,000

"
"

1817, "
1818, "

3,782,000
3,011,000

1819, "

1,318,000

It will give a faint idea of the excessive
issue to state that the only difficulty was
the impossibility of examination by the
President and Cashier, and of their jointly
signing the notes, which was made obligatory by the regulations; hence they asked
power from Congress to grant this right to
the Presidents and Cashiers of the Branch
Banks. This facility was refused, but
Congress granted a Vice-President and a
Vice-Cashier to sign. With these issues
and a simple capital of $2,000,000, the Bank
discounted as much as $43,000,000, during
one year, in addition to $11,000,000, to
$12,000,000, loaned upon public securities.
In order to carry on its operations, it exchanged in Europe a portion of its funded
debt for gold and silver, and bought specie
in the West Indies. From July, 1817, to
July, 1818, it imported $6,000,000, of specie,
at an expense of $500,000, but the excessive issue of paper drained away the cash
more rapidly than the Bank could import

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it. In the face of this hopeless struggle,
in July, 1818, it entirely changed its course
and reduced its discounts, and 10 per cent,
premium was then paid for cash, and the
reduction of nearly $5,000,000, in the discount line in three months only had a disastrous effect, while at the same time they
would only receive for redemption the
notes issued by each Branch Bank: hence
general embarrassment arose, and/as the
Bank of the United States was withdrawing cash from the local banks, Congress
wished to forbid the exportation of gold
and silver. The committee appointed on
the 30th of November, 1818, to examine
the affairs of the Bank concluded that it
had violated its charter: I
1. In buying $2,000,000, of the Public
Debt.
2. In not requiring from the purchasers
of its stock the payment of the second and
third instalments in cash, and in the Public
Debt of the United States.
3. In paying dividends to purchasers
of its stock who had not entirely paid
up.

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4. In allowing voting by proxy to a
greater extent than the charter permitted.
Upon receipt of the report the Governor
fled, and the shares fell to $93. In 1818
the speculation was so wild that no one
failed on account of a smaller sum than
$100,000. A drawing-room that had cost
$40,000, and a bankrupt's wine-cellar estimated to have cost $7,000, were cited as
instances of the general prodigality.
The Senatorial Committee of Inquiry declared that the panic imposed ruinous losses
upon landed property, which had fallen
from a quarter to even a half of its value.
In consequence forced sales, bankruptcies,
scarcity of money, and a stoppage of work
occurred. House-rents fell from $1,200, to
$450; the Federal stock alone held its own
at 103 to 104.
/ On the 13th of December, 1819, a Committee of the House of Representatives reported that the panic extended from the
, greatest to the smallest capitalists. It
concluded by demanding the intervention
of the legislative power to restrain the corporation, which, spreading its branches

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throughout the Union had • inundated it
with nearly $100,000,000, of new circulating medium. Those who unfortunately
owed money lost all the fruit of long work,
and skilled laborers were obliged to exchange the shelter of their old homes for
the inhospitable western forests. Forced
sales of provisions, merchandise, and implements were made, greatly below their purchase price. Many families were obliged to
limit their most necessary wants. Money
and credit were so scarce that it became
impossible to obtain a loan upon lands with
the securest titles; work ceased with its
pay, and the most skilful workman was
brought to misery; trade restricted itself
to the narrowest wants of life; machinery
and manufactories lay idle; the debtor's
prison overflowed; the courts of justice
were not able to look after their cases, and
the wealthiest families could hardly obtain
enough money for their daily wants.
The Committee appointed by the Senate
of Pennsylvania reported on the 29th of
January, 1820, that, to prevent a bad administration of the banks, it was necessary:

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1. To forbid them to issue more than
half of their capital in notes. .
2. To divide with the State all dividends in excess of 6 per cent.
3. Excepting the president, that no
director should be re-appointed until after
an interval of three years.
4. To submit to the State's inspection
the bank's business and book^
From this period excessive profits and
losses ceased on the part of the American
banks. The change of directory of the
National Bank, called forth by the unfortunate experience of 1818, was the beginning of a very fortunate epoch. As was
always the case, business affairs resumed
their usual course when liquidation ceased.
Among the various causes assigned for the
panic, the increase of import duties had to
be pointed out, and the decrease of the
Public Debt which was reduced between
1817 and 1818 more than $80,000,000.
It was impossible to turn any portion of
the public deposits in proper time either
into Federal stock or such other forms of
value as its creditors might demand, with-

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out shaking or breaking down any respectable institution whatever. But these seem
to be only secondary causes.
Panic of 1825 to 1826.—In 1824 in Pennsylvania there was a new rage for banks,
and in 1825 there was a repetition of the
marvellous days of 1815. American banking bubbles have always been exactly
similar to the English South Sea bubble,
and to Law's bank in France. In July,
after an advance dating from 1819, there
was a reaction, a panic, and liquidation.
Here we cannot point out any of the causes
which we have indicated above; the growth
of trade and the exaggeration of discount
sufficiently explain the difficulties of the
situation.
In Pennsylvania in 1824 a bill was
passed re-establishing the charters of all
the banks which had failed in 1814. In
New York they thought of banks alone;
companies with a capital of $52,000,000
were formed. Ready money had never
been so abundant, if we can judge of it by
the amount of subscriptions and the great
speculations in stocks.

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Three millions were subscribed to the
" New Jersey Protection Company " in one
day. But in July, when the decline on
the London market was reported, the want
of hard money forced itself into notice.
Exchange on England rose from 5 per cent,
to 10 per cent.; the discount on New Orleans notes, from 3 per cent became 50 per
cent., and on the 4th of December it had
fallen back to 4 per cent. What fluctuation ! What disasters!
Mr. Biddle, the President of the United
States Stock Bank, said that the crisis of
1825 was the most severe that England had
ever experienced, superinduced as it was
by the wild American speculation in cottons
and mines. Cotton cloth fell from 18 to
13 cents per yard ; and out of 4,000 weavers employed in Philadelphia in 1825 not
more than 1,000 remained. The reaction
of liquidation was experienced in 1826, and
from 1827 money was abundant.
Embarrassment of the Local Banks in
1828 to 1829.—Is it necessary to mention
these embarrassments ? The trouble of 1828
affected only the local banks and not at

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all those of the United States. The chief
cause was the Bank of the United States'
increase of circulation from August, 1822,
to August, 1828. From $5,400,000 it had
become $13,000,000 without adding anything to the circulation, merely displacing
an equal amount of local bank notes through
drafts of branches that it put into circulation. These branch banks' drafts were in
form of bank notes, signed by the chief
employees of the branches, drawn, it might
be, on each other or on the main bank. A
great issue of paper was thus brought
about; without this roundabout method
it would have been impossible to have
forced the issue of the notes from the mere
physical inability of the president and
cashier to sign so large a number. Congress had always refused to delegate this
power to any other persons; in consequence
of this practice the inevitable result oc*
curred in 1828, as might have been foreseen,
and a conflict between notes of the Bank
of the United States and that of the local
banks occurred.
These drafts circulated everywhere; the

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branch banks received them on deposit,
but did not redeem them: hence it was
necessary to guard against panic by keeping hold of cash. This course increased
the issue of the Bank of the United States,
and of the local banks which discounted
the paper of the central bank as if it were
so much cash. The local banks, then, whose
paper did not widely circulate, exchanged
their bank notes for drafts, thus reducing
the amount of circulation of the first, increasing that of the central bank, and
hence that of the total issue of its bank
notes; the local banks continued to exchange their paper with its narrow and
limited circulation for drafts of this latter,
which passed everywhere.
There occurred, then, in 1828 and 1829
an accidental and very brief scarcity of
cash, whose cause we have just indicated;
but since the second half of the year
difficulties arising from metallic circulation
had disappeared.
Panic of 1831.—The course of business,
having scarcely suffered a stoppage, continued until 1831, and not till then did

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embarrassment occur (Oct. 8, 1831).
Until then business operations were very
active and money easy; the revolution in
Europe rendered capital available in
America, whilst the cholera and the revolution restrained the importation of foreign
goods. Discounts at the central bank rose
from $24,000,000 in 1826 to $44,000,000
in 1831, and the circulation from $9,000,000 to $22,000,000. The same increase
was observable in the banks of the different States.
In March, 1830, the Bank of the United
States had in its vaults $8,000,000, which
was more than it had ever had before.
In 1829 the Bank of New York claimed
to have so much money that it did not
know what to do with it. In 1829, 1830,
1831, the banks extended their operations,
and a rise in prices accompanied the ease
of getting credit; but in November, 1831,
very urgent demands for money were
heard.
The branch drafts, exchanged with the
local banks, allowed them to increase their
circulation and consequently their dis-

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counts. American writers boasted greatly
about the assistance the Bank of the
United States yielded both to business and
the nation. Nevertheless, in 1829, President Jackson declared the conduct of the
Bank to be such that its usefulness bad
been justly doubted by many citizens, and
that the end desired, a uniform and regular
circulation, had not been reached. The
Senate and the House of Representatives
appointed a commission that expressed an
opinion contrary to that of the President.
Panic of 1837 to 1839.—In the midst of
all these troubles the Secretary of the
Treasury informed the President of the
Bank in 1832 that the Government intended, wherever it had representatives, to
redeem half of the 3 per cent, stocks by
paying each holder for half of his certificates. The President answered that at
that time (March 29th) this redemption from
the European creditors would very greatly
embarrass home business, and that therefore
delay was necessary. He requested a delay of
three months, because trade circles of New
York had already received large advances.

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The Bank, being the agent of the
Treasury and having $11,600,000 on deposit,
would have been forced to become a borrower in order to pay out the $2,700,000
demanded from it. However, its request
was granted.
Jackson soon learned with surprise that,
business being more impeded than ever,
the President had despatched an agent to
England to contract with the Barings a
loan of $6,000,000. Seeing the Bank to
be insolvent he resolved not to renew its
charter. The Bank tried to hide its
insolvency by the most foolish land speculations, which had already caused such
great disaster in 1818 and 1820. The issue
of bank notes had given fresh spirit to
speculation.
These bank notes were
received by the National Treasury and
returned to the Bank on deposit, which
again loaned them to pay for land upon
security of the land sold, with the result
that the credit granted the Nation was
merely fictitious.
In 1832, Congress having voted for the
extension of the Bank's charter, President

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Jackson refused to ratify it on account
especially of certain changes it sought to
introduce. "Why," said he, "grant a
capital of $35,000,000 when the first company only had $11,000,000 ?"
But though the Bank's charter could not
be arranged, the law of July 10, 1832,
dealing with the regulation of banks, prescribed that "a report" upon their exact
condition should be submitted to Congress
every year.
In 1833 General Jackson ordered the
withdrawal of the Government deposits
from the Bank. The law required that
the reasons for the withdrawal of the
deposits should be given, and the secretary, Mr. Duane, refused to give them,
saying the Bank was not insolvent. He
was dismissed and replaced by a more
amenable secretary. The deposits were
withdrawn and placed in different State
Banks. The Bank of the United States
was obliged to limit its discounts and
loans, thus causing trouble: however, the
President wished at any loss to establish
a metallic circulation.

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Congress was busy through the whole
session of 1833-1834 upon the withdrawal
of the deposits from the Bank. The Senate
sided with the Bank and condemned the
President's resolution: the House of Representatives, on the contrary, approved his
conduct. The Bank stopped its dealings
with the Government in 1836: the President, Mr. Biddle, whom the stockholders
had complimented by presenting him a
silver service, obtained through a gift of
$10,000,000, whose distribution was entirely shrouded in mystery, the especial
charter of the Bank of Pennsylvania. He
was unwilling to render any account to Congress, notwithstanding reiterated demands.
His charter terminated in 1836, and two
years after he no longer had the right to
transact any business.
When they had obtained the extension
of the charter of the Bank of Pennsylvania, the Directors apparently gave no
attention to paying their obligations to
the Government ($16,000,000).
They
had turned over books, papers, notes,
and engagements to the new corpora-

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tion, which opened as a successor to the
former one.
They had already put bank notes in circulation, despite a notification to redeem
them, and to destroy those which remained
in their hands.
President Jackson and his successor, Van
Buren, considered the excessive issue of
paper money as the principal cause of the
panic, as well as of the overdoing of every
branch of trade, of the boundless speculations, the increase of foreign debts, of
imprudent land speculations, and of the
alarming increase of a luxury fatal to
the springs of industry and to the morality of the people. President Van Buren
said that the $30,000,000 entrusted to
the Bank had fostered lawless specular
tions. He strained every effort to reestablish metallic circulation: the banks
whose notes were below $5 were no
longer recognized by the National Treasury.
Until the 3d of March, 1837, it was allowable to make payments with $10 notes,
after that time with $20, and finally the
banks were only to accept notes whose
exchange was at par.

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President Adams favored small paper
notes of 25 to 10 cents, to the extent of
$1,000,000. Prom 1831 to 1837, $3,400,000 twenty-five cent notes, $5,187,000 tencent notes, and $9,771,000 five-cent notes
were issued. To prevent an abuse of this
it was necessary to resume a metallic
circulation immediately.
In 1833 the
amount of small notes issued had already
reached $37,000,000; in 1837 it became
$73,000,000; it even exceeded these figures ; it was this circulation of small paper
notes that had to be made smaller than
$120,000,000.
Notwithstanding these frequent panics
the national prosperity and the increase of
wealth were unquestionable and astonished
all observers.
From 1817 to 1834 the national expenses
diminished from $39,000,000 to $24,000,000, decreasing even to $14,000,000 in 1835,
while the income grew to $37,000,000.
From 1826 to 1836 the condition of
business, despite the panic of 1831, grew
easier. Industries, agriculture, and commerce were prosperous and every enterprise was successful. Both in New Orleans

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and in New York there was much building,
and more than 1508 houses were erected
between January 1 and September 1,
1836. This general prosperity carried
with it the seeds of trouble.
The rapid increase of the National revenue gave birth to the belief that capital
had increased in the same proportion.
This superabundance of income produced
temporarily by the inflation in business
was recklessly thrown away. People speculated in land, projected a hundred railroads, canals, mines, and every sort of
scheme, which would have absorbed $300,000,000 if carried out.
The national capital being insufficient,
loans were made in England and Holland,
where the rate of interest being more moderate stimulated the passion for enterprises.
Finally, in order to stop the flow of English capital to America, the Bank of England raised the rate of interest; this brought
people to their senses. They saw the impossibility of caiTying out a third of their
schemes. Cotton fell, and panic seized the
public.

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65.

Since 1818 a period of flow and ebb in
trade had been seen every five or six years,
but this stoppage was much more serious.
The lack of ready money and capital destroyed confidence. Money was not to be
had upon any collateral; and the banks
stopped discounting. The people lacked
bread, the streets were deserted, the theatres empty; social observances were in
abeyance, there were no more concerts, and
the whole social round was stopped.
The Bank of the United States used
various expedients to temporarily moderate
the crisis until the very moment that it
burst all the more violently in 1839, and
brought about a new and radical reform.
From the time that the separation of the
Bank of the United States from the Government and the cessation of its operations
as the National Bank was brought about, the
quotation on bank notes considerably decreased, as well for those payable at sight
as for the deferred notes payable in twelve
months. The President sent an agent to
London to raise money upon the bank
shares.

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Fearing that General Jackson would not
establish a new bank, and by way of counterpoise, one hundred banks were created
with a capital of more than $125,000,000;
issues of bank stock were not to exceed
three times the amount of the capital, but
this provision was not observed; the issue
was without regulation and without limits,
and during an inflation in prices of the
necessaries of life which had doubled in
value, and which had turned the people's
attention to agriculture. The price of land
had for some time advanced tenfold, and
the advance in cotton caused the Southern
planters to abandon indigo and rice.
Imports in 1836 exceeded the exports
by $50,000,000, which had to be paid in
gold or silver. This outflow of metal
created a great void.
The advance in the discount rate in the
Bank of England under such circumstances
came like a thunder-clap, and the distended
bladder burst. Banks suspended payment,
and bank notes lost from 10 to 20 per cent.
Exchange on France and England rose to
22 per cent., all metal disappeared from

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circulation, and a thousand failures took
place. The English export houses lost
from £5,000,000 to £6,000,000 sterling;
values fell from maximum to minimum.
The losses in America were even greater;
cotton fell to nothing. At the worst of
the panic people turned to the Bank of
the United States, and its President, being
examined as to the means of remedying
the trouble, stated that it was above all
necessary to maintain the credit of the
Bank of England in stead and in place of
private credit, which had disappeared. He
proposed to pay everything in bank paper
on Paris, London, and Amsterdam.
When the panic came the Bank was very
much shaken. At the beginning of April,
1837, the New York banks suspended payments because demands for hard money for
export played the chief r61e; the other
banks suspended in their turn, promising
to resume with them.
The Bank of the United States suspended also, Mr. Biddle, the President, asserting that it would have continued to
pay were it not for the injury done by New

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York. This was false, for the New York
banks shortly after resumed payment, hoping they would be imitated, but the other
banks refused to do so. Mr. Biddle wished,
in the first place, to await the result of the
harvest. To uphold the Bank, he tried to
bring about exchanges, both with banks
and general business, not only in America
but in Europe, in order to establish a unity
of interests which would sustain him and
conceal his real condition. In this he was
successful to a certain degree, for in 1840
in his balance sheet $53,000,000 of paper
of the different States was shown up. He
wished above all to secure the monopoly
of the sale of cotton: a senseless speculation hitherto unexampled,1 the like of
which may never be seen again.
Whilst the Bank came to the relief of
New York business through its exchange
and its deferred notes, Biddle posed as
the great cotton agent, on condition that
the Bank's agents should be consigned to
at Havre and Liverpool. In their embar1
A similar episode has occurred in our time in the speculation in metals by the " Comptoir d'Escompte."

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rassment this proposition was accepted by
the planters. Cotton was thus accumulated in those two places. This monopoly
advanced the price, and vast sums were
realized, which enabled him to enlarge the
scope of his business. In 1837 he was enabled by this means to draw on London
for £3,000,000 sterling; the difference between 5 to 6 per cent, interest and discount at 2 per cent, produced a very
handsome profit. The cotton merchants
prospered as well as the exchange agent,
and Mr, Biddle paid the planters in bank
notes which the Bank could furnish without limit, while he received in Europe
hard money for the cotton; this aroused
opposition.
In the second half of 1837 he established
in Missouri, Arkansas, Alabama, Georgia,
and Louisiana a number of new banks, to
make advances to the planters, and to sell
their products for them in Europe. They
started with very slight capital, they observed no rules in issuing paper, their
bank notes fell 30 per cent, in 183& and
the planters would not take them.

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The Bank of the United States, fearing
lest foreign capitalists should take advantage of the difficulties of the planters by
buying this cotton, cheapened on account
of the encumbrances upon the district producing it, resolved to come to the rescue of
the Southern banks, and to join them in
their operations by purchasing their shares
and their long-time paper, having two
years to run. It thus put $100,000,000
into the business, and in 1838 it had loaned
them upon their cotton crops not less than
$20,000,000 at 7 per cent., payable in three
years.
It had bought the bank shares at 28 per
cent, below par; through its help they
had risen again to par; and then it threw
them upon the London market, which absorbed them. In order to explain the immense credit enjoyed in Europe by the
United States and their banks, we must
observe that the extinguishment of the
National obligations through surplus crops
threw a false light upon the credit of the
States, as well as particularly upon that of
the corporation. For many years Amer-

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ican investments had been sought for
above all others in London, and as nothing
happened during the first year to destroy
that confidence, the amount thus employed
increased from $150,000,000 to $200,000,000 in 1840. In Pennsylvania $16,000,000
of European money was used in the Bank
of the United States, and $40,000,000 in
those of the different States, all of which
was payable in two or three years.
Mr. Biddle had succeeded in sustaining
the different States with the National credit. He knew how to utilize the credit of
American goods in Europe, and drew from
the London market an immense sum
against exchange long-time paper and
paper payable in America. The Bank's
paper fell from 4 to 6 per cent., and it was
in such demand that the Bank of England
took it at 2 to 3 per cent, discount. But
finally the market had all that it could
take. The attention of merchants was attracted to Mr. Biddle's gigantic speculations, who paid paper in America and collected hard money in London. Business
interests complained about the contraction

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in the market. The Bank's stock of cotton increased steadily, and between June
and July it rose from fifty-eight to ninety
million bales.
This speculation had already yielded
$15,000,000 profit, but the market was
overloaded, and quotations could not keep
up. The planters had made a great deal
by the advance in cotton, but the paper
money remitted them lost from 15 to
25 per cent. A panic was approaching. The cotton crop, amounting to
400,000 bales, was one fifth less than was
expected; they awaited an advance in
price, but the contrary occurred. The high
prices had brought out all the stored cotton ; the factories had reduced their work.
Nevertheless bale after bale was forwarded
to Liverpool and to Havre. The sale in
this last port in February and March, 1839,
having produced a loss, they continued to
store it. As soon as Mr. Biddle was aware
of this stoppage he sought to hide the difficulty by extending his business. He proposed to start a new bank in New York
(the other had headquarters in Philadel-

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phia) with a capital of $50,000,000. He
once more issued long-time paper, and
bought with American paper canals, railroads, and shares which he threw upon the
English market This lasted until the
long-time paper lost 18 per cent, in
America, and until American exchange and
investments were no longer received on the
Continent.
The Parisian house of Hottinguer like
its other agents, sold little until the first of
July, and when it saw that the effort to
monopolize cotton could not succeed, fearing to continue this gigantic operation, it
declared that it employed too much capital.
In the midst of all this, some new bills of
exchange reached Paris without consignment of corresponding value; and the house
of Hottinguer protested.
Hope of Amsterdam discontinued his
connection. The London agent called upon
the Bank of England for help, which was
granted upon the guaranty of certain firms
of that place and a deposit of good American paper.
Rothschild accepted the refused bills of

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exchange, after having found out that a
sum of £400,000 would suffice for Mr. Biddie's agent; these £400,000 offered as a
guaranty consisted of Government stock,
and of shares in railroads, canals, and banks.
This agreement was not given out freely,
which still further increased the feeling of
distrust. A crisis in which $150,000,000
of European capital were destined to be
engulfed was rapidly approaching.
Breaking out of the Panic of 1839.—The
English papers had already warned the
people to be distrustful. The Times said
it was impossible to have any confidence in
the Bank as long as it would not resume
specie payments. Mr. Biddle defended
himself through papers paid for the purpose, finally in the Augsburg Gazette,
while he waited for the soap bubble to
burst. His retained defenders claimed that
the 150,000 bales of cotton sent to Europe
had not been sold, but received on commission. Advances in paper had been
made which in the month of August, 1839,
were to be paid in notes by the Southern
banks, for a new grant made to the Bank

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by the State of Pennsylvania permitted it
to buy the shares of other banks, and by
this means to gain their' management;
their notes lost 20 to 50 per cent, as compared with the Northern banks.
Through his profit upon the difference of
the notes, and through the payment for the
cotton in paper, and through the sale of
bullion exchange, Mr. Biddle had made five
to six million dollars, which lay at his con*
mand in London.
The protection of his bills of exchange
made a great impression in England; the
rebound was felt in America, where the
panic, moderated in 1837 through the intervention of the Bank, burst forth with
renewed fury in 1839, and brought about
the complete liquidation of that establishment.
At the same time the English market
was very much pressed, for, according taa
notice of the Chamber of Commerce, the
number of that year's bankruptcies was
greater than usual. From June 11, 1838
to June, 1839, there were 306 bankruptcies
in London, and 781 in the "provinces,"—in

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all, 1,087. At Manchester there were 82, at
Birmingham 54, at Liverpool 44, at Leeds
33. The London Exchange was flooded
with unsalable paper, an occurrence which
had also taken place on a smaller scale in
1837.
Such was the interruption of business
that interest for money rose to 20 per cent,
and the discount rate for the best paper to
15 or 18 per cent.
The various States in the Union had
contracted debts with inconceivable ease,
and interest payments were provided for
by new loans. President Jackson declared it. necessary to make a loan in order
to pay interest moneys. It was deemed
inexpedient to impose new taxes to provide for the cost of the public works.
Great was the embarrassment in America,
and as no more money came from England,
it was necessary for the Americans to look
for it in their own country.
Business circles were flooded with longtime paper running at a discount of one
half of 1 per cent, a month. Discount
rose to 25 per cent. The panic was so

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great that all confidence was destroyed.
The Bank of the United States, in order
to maintain its credit, paid its depreciated
long-time paper.
The struggle between the Bank and its
opponents, led by President Van Buren,
re-commenced. These last declared that
the Bank had erred in circulating the
$4,000,000 of notes of the old bank, which
should have been retired coincidently with
the charter; and the Senate forbade their
circulation.
The Government claimed large sums
from the Bank, the statement of which
showed close to $4,000,000; and, as it
could not secure this amount in money, it
was decided to issue $10,000,000 of Treasury bonds. The Bank party wished to
push the Government into bankruptcy, in
order to induce it to turn to them for help,
and, through the issue of " circular specie,"
oblige it to adopt a system of paper money.
A bill was brought forward with this
view. Biddle, who wished to increase the
circulation, said he could resume specie
payments, and thus forced his shares to

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rise; but the rejoicing of the Bank party
was soon disturbed by the fact that collectors of taxes were forbidden to receive
any bank note for less than $20, which
was not redeemable in hard money.
After a struggle of eight years the separation became complete, and the administration of Nationalfinanceswas withdrawn
from the Bank.
In 1836, a law was passed providing
that upon the expiration of its charter, the
National funds should be again deposited
with it, as soon as the Bank resumed specie
payment. Upon the suspension in 1837,
the Government was forced to abate the
law, in order to protect the specie, and imposed on its financial and postal agents
some of the duties of the Treasury. In
1840, the management of the public Treasury constituted a separate and distinct department. Such was the liquidation following the panic, that Congress granted
the Bank three months in which it must
either resume specie payment or liquidate.
To conform to this decree the State of
Pennsylvania fixed the resumption of

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specie payments by its banks, for January
15,1841. The shares of the Bank, which
had yielded no dividend in 1839, and
offered a similar outlook for the first half
of 1840, fell to $61. They had been
quoted as high as $1,500. General liquidation and a loss of 50 per cent, was inevitable. This occurred in 1841. Thus
ceased for a time the bank mania in the
United States.
We will recall here Buchanan's opinion
about the Bank: "If the Bank of the
United States, after ceasing to be a
national bank, and obtaining a new
charter in Pennsylvania, had restrained
itself to legitimate banking, had used its
resources to regulate the rate of home exchange, and had done everything to hasten
the resumption of specie payments, it
would have resurrected the National Bank.
" But this is no longer possible; it has
defied Congress, violated the laws, and is
mixed up in politics. The people have
recognized the viciousness of its administration ; the President, Mr. Biddle, has
concluded the work Jackson began."

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Tables indicating the banks which suspended during the panic: In 1814, 90; in
1830, 165 ; in 1837, 618 ; in 1839, 959.
The last panic, from 1837 to 1839, produced, according to some pretty accurate
reports of 1841, 33,000 failures, involving
a loss of $440,000,000.
Panic of 1848.—The entire discounts,
which had risen to $525,000,000 in 1837,
fell to $485,000,000 in 1838, only to rise
again to $492,000,000 in 1839, and the
real liquidation of the panic occurred only
then. Discounts fell at once to $462,000,000, then $386,000,000; the abundance of
capital, and the low price at which it was
offered, cleared out bank paper until it
was reduced from $525,000,000 to $254,000,000 in 1843.1
The metallic reserve increased from
$37,000,000 to $49,000,000 (1844); the
circulation was reduced from $149,000,000
to $58,000,000.
The number of banks in 1840, from 901
fell to 691 in 1843, and the capital itself
1

We have not the outside figures, the maximum or mini-

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from $350,000,000 in 1840 was reduced to
$200,000,000 in 1845 and to even $196,000,000 in 1846.
All these figures clearly indicate liquidation. The market, freed from its exchange,
was enabled to permit affairs to resume
their ordinary course.
In fact an upward movement was taking
place. Discounts rose from $264,000,000
to $344,000,000 in 1848.
Banks increased from 691 in 1843 to
751 in 1848, and their capital grew from
$196,000,000 in 1846 to $207,000,000.
The paper circulation rose from $58,000,000 to $128,000,000 in 1848. Deposits
from $62,000,000 reached $103,000,000 in
1848. The metallic reserve alone fell from
$49,000,000 in 1844 to $35,000,000 in

1848?
I The consequences of the European panic
were felt in America, but without causing
much trouble. The liquidation of the
panic of 1839 was barely over, and was
still too recent to have permitted sufficient
extension of business
Embarrassments were slight and brief;
6

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discounts, nevertheless, fell from $344,000,000 to $332,000,000.
The store of bullion, in spite of the surplus and the favorable balance produced
by the export of grain to Europe, fell from
$49,000,000 to $35,000,000; with the following year the forward movement recommenced.
Panic in 1857.—The stoppage in 1848
was very brief. Discounts rose regularly
from $332,000,000 to $364,000,000, $413,000,000, $557,000,000, $576,000,000, $634,000,000, and finally $684,000,000 in 1857.
The progression was irresistible. The circulation rose from $114,000,000 to $214,000,000. The banks increased at such a
rate that, from 707 in 1846,'with a capital
of $196,000,000, there were in 1857/1416,
whose capital had risen to $370,000,000,—
a very inferior figure, in comparison to the
number of banks, to that of 1840, when
901 banks only had a capital of $358,000,000.
The metallic reserve, from $35,000,000
in 1847, easily reached $59,000,000 in
1856: but it was in proportion neither

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with the number of the banks nor their
discounts and circulation; and, after all,
this is only a moderate sum. We have
not the extreme maximum or minimum,
and the suspension of specie payments
took place notwithstanding the amount of
cash on hand, which was greater in 1857
than in 1856.
Deposits accumulated from $91,000,000
to $230,000,000; they rose to their greatest
height in the very year of the crisis; nevertheless, they could not be drawn out.
During the Eastern war the prosperity
of the United States had been so great
that the clearing-houses established in New
York in 1853, and in Boston in 1855,
offered only' a slight opposition to the
excessive issue : at least, in 1837 the Congressional report stated the cash on hand
was $6,500,000—that is to say, $1.00 in
metal to each $6.00 in paper.
In 1857 cash on hand was $14,300,000, or
$1.00 in hard money for each $8.00 in paper.
The banks had attracted deposits by
high interest, and loaned the money to
wild speculators. On the 22d of August,

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1857, the amount of loans had become almost $12,000,000, counting together metal,
notes, and deposits.
From December, 1856, to June, 1857,
they had shown great strength. Discounts
had risen from $183,000,000 to $190,000,000 in June; cash on hand had risen from
$11,000,000 to $14,000,000. The only evidence of weakness, so to speak, was that
the withdrawal of deposits had risen from
$94,000,000 to $104,000,000, while the circulation diminished $1,000,000.
In June " the position of the Bank ought
not to have caused any fear, to the most
far-sighted," says the report of the Committee of Inquiry.
Foreign exchange was favorable, and it
is known that is the bankers' guide. June,
July, and August were tranquil, except for
a slight disturbance in business experienced by the country bankers through t5e
constantly increasing amount of notes presented for redemption, and among the city
bankers by requests for discount.
The collapse of the " Ohio Life," which
had the best New York connection, was

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the first- muttering of the storm, and
was soon followed by the suspension of
the Mechanics' Banking Association, one
of the oldest banks in the country. The
suspension of the Pennsylvania and Maryland banks followed. Public confidence
remained unshaken—it relied upon the
circulating medium.
Only one bank went to protest, and that
on September 4th, on a $250 demand. Another protest followed on the 12th, a third
on the 15th, both for insignificant amounts.
Demands in the way of withdrawal
amounted to almost nothing, and there
was nothing like a panic.
The deposits at the savings banks were
a little less, but this did not continue.
Only at the close of September was the
demand by the country banks for payment
upon the Metropolitan American Exchange
Rank for payment greater than it had ever
been.
On the 13th of October, with exchange
at par, an abundant harvest, with a premium of £ to } per cent, on metal, the
banks suspended specie payment, but

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resumed it on the 11th of December. The
most critical period lasted about a month.
The first step towards resumption of payments was made after the resolution
adopted by the Committee of Liquidation to call upon the country banks to redeem the notes of the Metropolitan Bank,
paying an allowance of \ of 1 per cent, interest, running from the 20th of November.
At this time the city bankers held, in
bills issued and in signed parcels of $5,000
each, about $7,000,000 due by the country
banks. They were thus enabled to accomplish the payment of their notes at the
rate of 20 per cent, a month by the 1st of
January, 1858. The same favor of repaying their notes at the rate of 6 per cent,
was granted to the city banks.
We need not inquire if, having granted
this delay, the banks proved their liberality. The abundant harvest also assisted
liquidation.
From 1853 to 1857 the metallic reserve
fell to $7,000,000, deposits rose to $99,000,000, and discounts and loans to $122,000,000.

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BANKS OF NEW YORK.
Metallic Reserve.

1854

$15,000,000

1855.... 9,900,000
1856.... 10,000,000

I857....

7,000,000

Deposits.

Discounts,
. Advances.

$ 58,000,000 $ 80,000,000
85,000,000
100,000,000

101,000,000
112,000,000

99,000,000

122,000,000

serve to
Deposits,
26 %
11 %
10 %

The reduction of the metallic reserve,
increase of deposits and of discounts and
of advances, are here clearly indicated.
From 1853 to 1857 the bank circulation
hardly varied $100,000, indicating that the
demand for hard money came from abroad
and from the interior. The circulation was
not the cause of the suspension,—at least
such was the opinion expressed by the
superintendent of the New York banks in
his report.
In 1856 twenty-five companies were
started, and three bankers opened business
with a capital of $7,500,000, of which
$7,200,000, was paid in.
In 1857 there were only five of these
banks and three bankers having a capital
of $6,000,000, of which only $4,000,000
were paid in. The collateral deposited by
the banks represented $2,500,000 in 1856,

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/
on which credit of $2,000,000 in notes was
granted.
In 1857 the same collateral did not exceed $560,000 estimated value, on which
a credit of $383,000 in paper was granted.
At the height of the crisis failures were
so numerous that a general suspension of
payments, and, in consequence, a stoppage
of business was dreaded. This suspension,
in place of being general, turned out to be
merely partial; it occurred at a juncture
when it might well be feared that
it would lead on to the very greatest
disasters, but, far from harming, it helped
the market. The banks had suspended
payment upon a common understanding
among themselves and with business circles.
The critical moment having passed, tranquillity reappeared as soon as the course
determined on was known.
If suspension of payment hurts the credit
of a bank, it does not necessarily lead to
the depreciation of its bank notes.
There are a good many proofs of this: in
1796, when the Bank of England suspended,
its bank notes did not depreciate; and if

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this state of things did not last, the blame
must be laid upon the excessive issue.
And in France, in 1848 as well as in 1871,
the Bank of France suspended without the
depreciation of its bank notes becoming
very noticeable. So, in New York, bank
notes passed at 2 or 3 per cent, loss at this
crisis.
The crisis disappeared with the end of
the year, and resumption of payments took
place between New York and Hamburg,
with the return of specie and a rate of 4
per cent.
It was the same in France and England.
A more serious panic and a more rapid
recovery had never been seen. The rigidness and not the severity of the pressure
that had to be exercised shows the condition of business. There had been most
blamable practices employed; but the
market as a whole was sound, and had
faced the storm.
Only four banks had suspended, three
of which were shaky before the panic, and
the fourth had already resumed payments.
At no other period could one have ob-

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tained such an amount of credit upon a
simple paper circulation; fictitious paper
was the source of all the wrecks. To get
it into circulation the most varied contrivances were resorted to, and fraud itself
was not wanting; the signatures even became fictitious, their owners could not be
found. Shams and discriminations under
all forms, designed to permit speculation
without capital, without exchange of goods,
without real transactions between the
drawer and the acceptor of the bill of
exchange, were rife.
In his message, President Buchanan
ascribed the crisis to the vicious system of
the fiduciary circulation, and to the extravagant credits granted by the banks,
although he was aware that Congress had
no power to curb these excesses. When
there is too much paper, when the public
has created an endless chain of bank notes,
representing no real value, it is enough that
the first ring break for the whole gear, thus
no longer held together, to fall to pieces.
If we mark the situation of the New
York banks before and during the panic—

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that is to say, in 1852 and in 1857, we will
ascertain as follows:
June, x85».
June, 1856.
June, 1857.
Capital
% 59,700,000 $ 92,300,000 $107,500,000
Circulation
27,900,000
30,700,000
27,100,000
Deposits
65,600,000
96,200,000
84,500,000
Paper discounted 127,000,000
174,100,000
170,800,000
Cash on hand...
13,300,000
18,500,000
14,300,000

This table demonstrates that two items
show a great increase: capital increased
$47,000,000 and paper discounted $43,000000; while, in face of an increase of
$1,000,000 of specie on hand, the note circulation decreased $800,000.
Far from finding a mistake, we find a
proof of the Directors' prudence. If there
was an error in the issuing of paper, it was
not on the side of the banks; it was the
public itself that was chiefly in fault.
We find the causes of the panic in the
issues of railway obligations and shares,
which had chiefly been placed in European
markets, and whose gross amount was
estimated at £1,000,000. The speculation
in land and railroads had been carried on
either with borrowed money or by open
credits, and by accommodation notes, back
of which there was no second party.

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The mistake of the banks was in trying
to conduct their whole business by their
note circulation and to concentrate their
capital in the bank offices, and meanwhile,
as they refused to loan to the stockholders
of the banks, discounts in New York fell
off $10,000,000. Finally the capital could
not be entrusted to the disposal of the
banks and it was necessary to compel them
to make a deposit of $100,000 for each association, and $50,000 for each banker.
Such were the final advices given by the
inspector-general of the banks of New
York at the close of his report, dealing with
how to prevent the recurrence of panics.
To have confidence in their efficacy, it was
necessary to forget the past and its
lessons.
The reforms already made and those still
asked for in the bank system could yield
no remedy for those abuses lying beyond
legislative action. The American newspapers did not hesitate to demand them,
well aware that they would produce no
effect; however, they congratulated themselves with having drawn away from effete

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Europe one million sterling now realized
upon the soil of the United States without
any equivalent given for it to the foreign
lenders.
Panic of 1864.—The crisis of 1864 was
mixed up in the United States with the
War of Secession ; it was a political crisis,
and is not properly to be considered here.
Panic of 1873.—During the last two months
of 1872 the American market had been very
much embarrassed; the lowest rate of dis- v
count was 7 per cent., and in December
it was quoted at even -^ of 1 per cent, or
a quarter of 1 per cent, a day!
The year 1873 was anxiously awaited in
hope of better times. In the middle of
January, 1873, the rate of interest declined
a little to 6 or 7 per cent., but soon
the rate of ^ of 1 per cent, per day reappeared and continued until the month
of May.
In the first days of April the market was
in full panic; it grew steadier in the first
week of May, and in the month following.
It relapsed on September 1st, and requests
for accommodation redoubled until the

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sharpest moment of the panic. On that day
there were no quoted rates; money could
not be had at any price: some few loans
were made at \\ per cent, per day.
This panic broke forth on September
18th, through the failure of Jay Cooke,
after a miserable year, during which money
was constantly sought for and was held at
very high prices in all branches of business.
As to the loans for building railroads, they
followed one another so rapidly that, from
the month of October, 1871, to the month
of May, 1873, they could not be placed at
a lower rate than 7 per cent. Bankers
succumbed beneath the burden of their unsalable issues. This was a grave misfortune for the railroads. In the single year
1873 there were constructed 4,190 miles of
railroad in the United States, which, at
$29,000 per mile, represented the enormous
sum of $121,000,000, and in the last five
years $1,700,000,000.
The commercial situation was not so
bad, and the number of failures did not
reach the proportion that might have been
feared.

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After the failure of Jay Cooke came
those of Piske & Hatch, of the Union Trust
Company, of the National Trust Company,
and of the National Bank of the Commonwealth. On the 20th of September, for
the first time, the Stock Exchange in New
York City was closed for ten days, during
which legal-tender notes were at a premium of J per cent, to 3 per cent, above
certified cheques.
On the 18th there was a run on the
deposits. Withdrawals continued on the
19th and 20th, especially by the country
banks, and the banks' correspondents. No
security could be realized upon; and in
order to relieve the situation the Secretary
of the Treasury bought $13,500,000 of
National 5-20 bonds, stating that he could
do no more.
The New York Stock Exchange was
reopened September 30th, without any
notable occurrence; but everything was very
low. Several other suspensions occurred—
for instance, that of Sprague, Claflin, & Co.
The rate of discount being 9 per cent.,
a panic was feared in London. The banks

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passed the most critical period on October
14th; out of $32,278,000 legal-tender dollars at the beginning of the panic, only
$5,800,000 remained on hand. Not until
the middle of November did the decline
stop and a slight advance take place.
Throughout the panic the bank reserves
J were much below the legal requirement of
25 per cent.; from the 13th to the 20th of
September they fell to 24.44 and 23.55 per
cent.
The New York Clearing House in September adopted a measure which permitted
dealings to continue. It authorized the
banks to deposit the bills on hand, or the
other securities they had accepted, in exchange for which they issued certificates of
deposit bearing 7 per cent, in notes of
$5,000 to $10,000 to the extent of 70 per
cent, of the security deposited. Thus $26,565,000 of them were put into circulation.
Furthermore, they made a common fund
of the legal tenders belonging to the Associated Banks for mutual aid and protection.
The suspension of payment took place
first in New York and then extended to the

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large cities of the Union; it lasted forty
day8, until the 1st of November; this
measure was looked upon as having prevented the greatest disasters.
The table setting forth the situation,
compared with the balance sheets of the
Associated Banks of New York on January
1st, April 1st, July 1st, September 1st, and
October 1st of the years 1870, 1871, 1872,
and 1873, shows us the following changes:
discounts hadfluctuatedfrom $250,000,000
in January, 1870, to $309,000,000 in September, 1871; they had become reduced to
$278,000,000 in September, 1873, on the
eve of the panic, and from the month of
September, liquidation of the panic having
begun, they were reduced to $250,000,000.
Deposits from $179,000,000 in January,
1870, rose to $248,000,000 in July, 1871,
with $296,000,000 of bills discounted, and
once more reached $198,000,000 in September, 1873, with $278,000,000 of discounts
and $195,000,000 in December.
Even at the most critical moment of the
panic they continued larger than the usual
average of the preceding years.

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The metallic reserves played too feeble a
role to have caused failure; they had varied
from $34,000,000 in June, 1870, to $9,000,000 in September, 1871, $18,000,000 in
September, 1873, and $23,000,000 in December, 1873.
The circulation varied still less: from
$34,000,000 in January, 1876, it decreased
to $27,000,000 in July, 1872, and remained
at the same figure during the year 1873, if
we can judge of this by the balance sheet
rendered on the first day of each quarter.
In each case there is no opportunity for us
to charge an excessive issue.
According to the statement of the Comptroller of the Currency, paper discounted
decreased between the 12 th of September
and the 1st of Novemberfrom $199,000,000
to $169,000,000.
To sum up, the circulation had fluctuated
very little; deposits from $99,000,000 had
increased to $167,000,000 between the 12th
and 20th of September, at the most critical
period; and when suspension was universal,
they had declined to $89,000,000. After
the breaking out on the 18th of October,

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and since then from the 22d of November,
they had risen to $138,000,000,
The metallic reserve, after a brief revival
from $14,000,000 to $18,000,000 between
the 12th and 20th of September, had fallen
back to $10,000,000, only to rise to $14,000,000 in November.
In the midst of these difficulties, the
securities of the various States held up.
Since the first months of 1873, the demands
of the English market caused an upward
movement in them; in September it was
impossible to make a loan, without using
them as collateral. In order to help the
market somewhat, the Treasury bought
about $13,000,000 of National securities
on the Stock Exchange, but, lacking resources, that was the only effort it could
make. The German Government invested
quite a large sum in the new five per cents,
so that the advance in public securities
lasted through the whole year: the market
rateior 5-20's advanced from 91 per cent,
in April to 96 per cent, in October, in the
midst of the market's panic.
The $15,000,000 of indemnity awarded by

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the Geneva Court of Arbitration, and paid
by England for having admitted privateers
into her ports, was put into 5-20's. Apart
from this strength in the public securities,
/the railway obligations, especially those
upon new roads, were very much depressed;
they could no longer be placed, ninety new
companies having stopped paying their
coupons, whilst those of the old lines held
their quotations.
Great speculators, Vanderbilt at the
head, formed syndicates, embracing several
companies, and made prices as suited their
plans. The death of Mr. Clarke in June
dealt thefirstblow to this combination, and
the failure of George Bird Grinnell brought
about its dissolution.
The liquidation of this tremendous concern kept down prices for a long time.
The price of gold, still quoted at 112£
per cent, in January, 1873, rose to 119£ per
cent, in April, superinduced by speculation,
for at the height of the panic it declined to
106 on the 6th of November. It is true
that at that time all doubtful accounts were
liquidated, and demands for gold had dis-

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101

appeared; if we were to rely upon the export figures only, we would find them less
than in the preceding years.
Exchange rates were much more depressed ; from 109.45, representing par, they
fell to 107.25 for the best 60-day paper.
This paper was much sought after by speculators, who, when discounting it, procured
bonds authorizing them to transfer the
titles unless payment was made promptly
at maturity. Prices fell so low that it was
often impossible to negotiate paper at any
price. The activity reigning at the beginning of the year showed itself in the Exchange movement; the excess of imports
over exports rose in the first months to
$100,000,000, whilst in the preceding year
it did not exceed $62,000,000; prices ruling
in the American market attracted goods
from all quarters.
Panic of 1884.—The panic which burst
upon the United States in 1884 was
the last thunder-clap of the commercial
tempest which had reigned since the month
of January, 1882. Public opinion already
recalled the decennial period which sepa-

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A Brief History of

rated the existing panic from that of 1873.
The acute period was of short duration;
the crash occurred on May 14th, and the
decline of values had touched bottom by
the end of June. From the 9th of June
the people began to steady up, they felt
the ground firmer under their feet. The
situation gave evidence of great strength;
and, notwithstanding the dearness of money,
and an enormous fall in prices, there were
only a few failures, and at the close of the
year equilibrium was re-established, although the liability of the losses had risen
to $240,000,000. These losses, it is true,
were almost entirely borne byfinanciersand
speculators, rather than by manufacturers
and traders.
The month of May, 1884, concludes the
prosperous period which followed the crisis of 1873. During this period the most
gigantic speculations in railroads occurred;
the zenith of the movement was in 1880,
and as early as 1881 a retrograde movement began, only to end in the disasters in
question. The decline in prices had been
steady for three years; they had sunk

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103

little by little under the influence of a ruinous competition, caused by the number of
new lines and the lowering of rates, but
above all through the manipulations by
the managers on a scale unexampled until
now. In connection with the disasters of
May, 1884, the names of certain speculators
who misused other people's money, such as
Ward, of Grant & Ward; Fish, President
of the Marine Bank; and John C. Eno, of
the Second National Bank, will long be remembered. General Grant, who was a silent
partner in Ward's concern, was an innocent
sufferer, both in fortune and reputation.
The Marine Bank suspended on the 5th
of May, and in the following week the
Metropolitan drew down in its train a large
number of bankers and houses of the second order. The confusion was then at its
height. Owing to the very delicate mechanism of the credit circulation, the banks
and the clearing house were the first
attacked and the most shaken, but they
immediately formed themselves into a syndicate to resist the storm which was upsetting all about them. As cheques were no

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longer paid, settlements no longer took
place, and the credit circulation was suspended ; this stoppage was liable to induce the greatest consequences, hence it
was necessary to be very circumspect.
Here it was not possible to suspend the
law, as in England the Act of 1844 was
suspended, permitting an excess of the
official limit for the note issue, but the
banks could have been empowered to demand authority to change the proportion
enacted by the law creating National
Banks. They had no recourse to any of
these violations of the Statutes, which prove
only too often under such circumstances
that regulation by law is impossible; they
satisfied themselves, without having the
public powers intervene, with issuing
clearing-house certificates, that is to say,
promises, which they were bound to accept
as cheques in settling up the operations of
each day. It was through this help that
the Metropolitan Bank was enabled to resume payments on the 15 th of May, the
evening of the day following its suspension. The Second National Bank was a

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105

loser through the acts of its President, Mr.
John C. Eno, but his father and the Directors
hastened to make good the deficit. At
this moment the excitement was intense,
deposits were withdrawn, and 1 per cent,
a day was paid, and even more, to obtain
ready money or credit; under the influence
of numerous sales of securities, exchange
fell rapidly, metallic money was secured in
London even, to be hurried to New York
Never could purchases be made under better auspices. Above all is this true when
we observe that the condition of companies
was much better known than in 1873.
The year 1883 had been disturbed by
numerous failures. There had been no
crash, but prices, far from advancing, had
held their own with difficulty. On the eve
of the breaking out of the panic there was
complaint about the accumulation of goods
in the warehouses, and of the difficulty of
making exports. No scheme worked out,
despite a very high protective tariff, and
people were asking themselves what was
its effect under the influence of unfavorable
exchanges. Gold flowed away from the

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A Brief History of

country, and cash on hand decreased each
day.
On the 1st of January, 1884, the New
York & New England Railroad was placed
in the hands of a receiver by order of the
court. The same thing happened on the
12th of January to the North River Company. In February, March, and April
many houses exhibited their balance sheets.
The fall in prices grew accentuated not
only on the Stock Exchange, but in all
markets. The discomfort increased until
the 6th of May, the day on which occurred
the failure of the National Marine Bank,
whose President was associated with the
house of Grant and Ward, which went
down shortly afterwards with a liability of
$17,000,000. This financial disaster made
a great stir. Anxiety spread everywhere,
when on the 13th of May the President of
the Second National Bank of New York
was also forced to suspend payment with a
liability of $3,000,000; this was the final
blow to credit. Every operation was suspended, all exchange became impossible;
not securities but money was lacking. At

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107

one time the panic was such that the rate of
discount and loans rose to 4 per cent, a day!
Although the panic was general, it was
rather a panic of securities in the chief
places of the United States, especially in
New York.
One no longer knew on whom to count
to provide ready money. Offerings were
made on the Stock Exchange where there
were no bidders, and the market disappeared in the midst of a panic which paralyzed every one.
This melancholy state of things was still
further aggravated on the 14th of May by
the failure of Donnel, Lawson, & Simpson
and Hatch & Foote. On May 15th it was
the turn of the Savings Banks of New
York, of Fiske & Hatch, and of many
others. It was impossible to obtain any
credit from the banks, and all securities
were unsalable, unless at ruinous rates.
Seduced to such an extremity, it was
necessary to adopt some course to help the
market and avoid suspension of payments.
The certified checks issued by the banks
did not answer, and it was necessary to

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have recourse to a new means of settlement.
The members of the clearing house emerged
from their usual passive role to intervene
and to do a novel thing: they issued certificates that they accepted in the name of
the most embarrassed institutions whose
fall they wished to avert, in order to prevent the failure of others. Then, as everybody was making default, the Secretary of
the Treasury in his turn wished to aid the
common effort to sustain the credit of the
situation, and, in order to accomplish this
by the most regular methods, he pledged
himself to prepay the debt> whose term
was close at hand.
Despite these last helps it was easily seen
how great must be the disorder, to induce
recourse to such methods. Never had they
been employed until now, which is proof
enough of the enormity of the situation,
whose equilibrium had been disturbed
since 1887, the year in which high prices
in everything had been reached on the
Stock Exchange.
To still further increase the joint responsibility of the members of the clearing

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109

house, it was agreed that a committee
should be charged with receiving as collateral bills and securities in exchange for
which certificates of deposit bearing 3 per
cent, were issued at the rate of 75 per cent,
of the amounts deposited. This agreement being adopted, a way to re-open the
National Metropolitan Bank was sought.
A selection made from its collection of
bills showed the securities it could pledge
for clearing-house certificates; and, its circulation being thus re-established, it was
enabled on May 15th to take part in settlements.
Upon the announcement of a syndicate
composed of the banks and the clearing
house, things settled down; the general
distrust diminished; there was the necessity
and wish to realize, but funds were lacking.
The rise in the discount rate attracted
foreign capital little by little, and exchange
grew easier. With the help of the syndicate the credit circulation became re-established, and the rate of discount declined to
5 per cent. For commercial needs money

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was always to be had at 4£ per cent, and
at 5 per cent, when at the Stock Exchange
it was necessary to pay 4 per cent, per
day!
The panic was terrible from the 3d to
the 10th of May; for two days no one
wished to part with his money; it was impossible to borrow on any collateral, at
any price whatever. Hence came a decline
in the public securities, which fell below
the low prices of 1873.
The public complained that it could not
have foreseen the panic, because the loss of
gold had been concealed by the oft-repeated
assurance that there was a reserve of $600,000,000 in Washington.
Similar situations in 1857 and in 1873
were recalled, and it was remarked that
like troubles had not occurred until after a
long period of high prices, when capital
was scarce and the rate of interest high,
whereas this was far from being the case
at this period.
It was nevertheless notorious that the
decline in prices began two years back, that
the advance in prices had been stopped by

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111

the breaking out of the panic of 1882 in
Europe, at Paris, and that since that
moment prices had begun to decline, less
rapidly, however, than in Europe, because
the shock had then merely disturbed a
market which had not yet recovered from
the panic of 1873, from which, in consequence of the Franco-Prussian war, France
had escaped. The mine not being sufficiently charged in the United States the
explosion had not recurred. Speculation,
unable to restore a new impulse to the rise
in prices, was nevertheless able to hold its
own, until May, 1884, when the delayed
explosion finally occurred, covering the
market with ruins and bringing about a
liquidation with its accustomed train, a
great and lengthy decline of prices.
We may here note similar delays in the
breaking out of panics, in the period of
1837, 1839, 1864-1866 in France and in
England. Even an involved state of affairs
may be hidden by certain conditions, and
the situation, although itself exposed to the
same excessive speculation, may witness
the breaking out of the panic which has

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been delayed for a certain time, only to
occur simultaneously with the beginning of
a decline of prices, and when it is thought
that danger has been escaped.
As in Brussels and in the United States
in 1837-1839 and in England in 1864-1866,
large houses and powerful institutions of
credit had maintained a whole scaffolding
of speculation which was already out of
plumb, but still able to stand upright
through the general effect of the parts
which connected them, and in this unstable
equilibrium it sufficed for a single one to
detach itself in order to overthrow the
whole edifice at a juncture at which it was
hoped it would continue to stand and even
grow stronger. Does not this prove that
after these epochs of expansion and activity
characterizing prosperous periods (and there
is no prosperous period without a rise in
prices) a stoppage is necessary, a panic
allowing a period of rest to permit the
liquidation of transactions employed in
helping to make a series of exchanges at
high prices, and to allow the capital and
savings of countries which bad been too

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113

rapidly scattered and exhausted to reconstruct themselves during these years of
tranquillity and of slackening business ?
Confidence had already returned in New
York despite the steady demands of the
country bankers upon their correspondents,
which pulled down the reserve below the
legal limit; nevertheless in the midst of all
the failures there was no suspension of
specie payments.
The crisis of 1884, according to the
Comptroller of the Currency, had been less
foreseen than the crisis of 1873, and this
notwithstanding it was sufficient to observe
the number of enterprises and schemes
flung as a prey to speculation, in order to
foresee that financial troubles and disasters
to the country must result.
The continuation of payments in gold,
the low prices, and the outlook for a fine
harvest gave courage, preserved the remaining confidence, and already allowed a
speedy resumption of business to be anticipated.
The panic, although spreading over the
whole Union, raged especially in New York.

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Without wishing to expatiate upon its primary causes, the Comptroller of the Treasury could not help remarking that it had
shown itself under the same circumstances
as recently as in 1873; above all there were
issues for new enterprises; the speculation
had rushed to take them up at a premium,
and people now asked their true value.
At this juncture railroad earnings, instead of increasing, showed weakness, and
suffered a slight reaction; the solvency of
houses interested began to be doubted; new
loans were refused them, and immediately
the artificially constructed edifice gave way.
To advance prices on the Stock Exchange,
the banks had made immense loans on the
shares and obligations of the new railway
issues, and as soon as quotations, artificially
maintained at the rates to which they had
been carried, began to drop, everything became unsalable. Until this occurrence, led
on and fascinated by the rise in prices,
every one had bought; hardly was the advance arrested when every one reversed
their operations at the same time. The
bankers had loaned not only their capital

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115

but in addition a part of their clients' deposits ; brokers had encouraged a speculation which brought them business; and thus
it was that all hands had flung themselves
upon a path that could only lead to ruin.
The Comptroller of the Currency remarks
with pride that, in the midst of the general
upheaval and numerous failures of honorable houses, only two National Banks were
involved: one of them failed, the other
suspended payment.
The amount of liability of the banks and
bankers of New York who succumbed
during the month of May was estimated at
$32,000,000, whereas that of the only National Bank which shared their fate did
not exceed $4,000,000, the bank which
suspended not having occasioned any loss.
Unhappily the year did not pass without
its being necessary to mention new misfortunes : eleven National Banks failed, and it
is a fact that among the banks and private
bankers more than a hundred were counted
in the list.
Despite the close watch bestowed upon
the banks it was surprising to uncover all

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the tricks to which the National Marine Bank
of New York was given over, and which
until now had escaped the official examiners.
It suspended payment on May 6th, and
the same day it was debited with $555,000;
the books had been erased and overcharged
for the benefit of one client alone to the
amount of $766,000. He was a debtor to
the amount of $2,400,000, six times the
Bank's capital, and a portion of this debt
was under a good many names of subordinate clerks. This same client had three
open accounts, one as administrator, then a
general account, and a special account. The
whole thing was fictitious; the schemers
sought to conceal irregularities, and had
thus imposed on the examiners and on the
Directors themselves.
The certificates issued by the clearing
house, when credit had entirely disappeared,
rendered a great service and sustained a
great number of houses in equilibrium,
which without this assistance must have
succumbed. They were granted especially
to the banks belonging to the Association,
in order to make their daily settlements.

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During the crisis of 1873 the same means
had been resorted to, but too late; the
panic was already at its height and the
commotion general, so that nothing could
re-establish confidence. This was not the
case in 1884: the rapidity and decision
with which the Associated Banks took
steps gradually re-established confidence
throughout the country. The maximum
of issue did not exceed $24,900,000, of
which $7,000,000 were for the National
Metropolitan Bank; from the 10th of June
balances at the clearing house were paid in
legal money. Commercial paper, which for
the most part was the collateral for these
certificates, had already been redeemed.
The Metropolitan National Bank alone
requested time to liquidate.
The issue of these certificates was very
rapid: $3,800,000 on the 15th day of May,
$6,800,000 on the 16th, $6,700,000 on the
17th, or more than $17,000,000 in these
first three days; then on the 19th, 20th,
and 22d, $1,500,000, and that was all.
The remainder of the amount was given in
driblets. Payments, although slower, were

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made from the 1st of July to the 1st of
August.
Let us now run over these occurrences:
in 1873 instead of $24,900,000 in certificates $26,565,000 had been issued; $22,000,000, had been issued between the 22d
and the 29th of September, the redemptions took place from the 3d of November
to the 31st of December.
In both cases the same amount, so to
speak, had been sufficient to answer for all
needs. If so small a difference sufficed to
save a disordered market, people could not
understand why panics could not be provided against. It was necessary to remember that this assistance was only felt when
the decline of prices had already re-established an exchange of goods, bringing about the
liquidation of houses unfortunately involved.
From the month of June, owing to the
bank balances or the rate of exchange, the
tranquillity and steadiness which had become re-established grew daily; after the
storm of the first few days no new disasters had occurred except the failures of
Mathew and of Morgan.

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The position of the market grew firmer
and the clearing house reduced its loan
certificates, which now replaced the former
excessive issues of bank notes. From $24,000,000 they had already decreased to
$18,000,000; of this amount $6,000,000
were taken by banks as a last resource, and
there then remained only $12,000,000 in
circulation. These $6,000,000 had served
to sustain the shaken banks, and it is
pleasant to state that outside of these requirements the amount needed was no
larger.
Failures had ceased in the great centres,
but they continued in the interior of the
country; the shock, like a great wave, took
a certain time to overrun the various
States.
Succession of Panics in the United States
Studied through the Balances of the Banks.
—Following the historical summary of
panics in the United States it will be useful to have a general table, so as to glance
at the very rare documents which permit
us to follow the working of the Banks
through their balance sheets. We know

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their organization, and we take upon ourselves to state results flowing from it.
It strikes us at once that abuses and
panics have constantly occurred. Can we
note a difference in the frequency and
gravity of the casualties, according to
whether we observe them working under
the former or the new (the National Bank)
system, inaugurated during the War of the
Secession in 1864, when the machinery for
the issue of bank notes was insufficient for
the new requirements ?
Without lingering over the regulations
before and after 1864, let us consider the
differences we may ascertain by examining
the balance sheets. Unfortunately, the
exactness of our observation is lessened on
account of the very diversity of the field
it covers.
In the case of the banks of the United
States we have had to content ourselves
with the returns that the Comptroller of
the Currency gives in his annual report on
a stated day during the months of February, May, June, October, and December,
beginning with the year 1865. Before

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that period we had only the yearly situation of the banks of the different States
upon one given day; we are better informed on the second period; however,
basing our conclusions upon the few balance sheets we possess, we ascertain the
same series of development and increase.
Although there are lapses, still, from
another point of view, the table will
be more complete, because it embraces
all the banks of the United States. On
such an extended field, it is true, we risk
seeing great discrepancies disappear and
lose themselves in the magnitude of the
amounts whose movements we follow. In
order better to grasp them, we have put
before us the returns of the banks of the
United States, together with those of the
Associated Banks of New York City; we
may thus recognize and follow the share
played by each of them.
During the first period of the State
Banks (1811-1864), the increase in the
number of the banks was continuous, except
for two stoppages, in 1841 and in 1862;
in 1841, during the liquidation of the

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panic of 1839, and in 1862 at the beginning of the War of Secession; the crisis of
1857 did not interrupt the movement.
The capital of the banks had followed
the same changes. From $52,000,000 in
1811 to $358,000,000 in 1840, a reduction
to $196,000,000 in 1846, and finally the
last maximum reached in 1861, $429,000,000, at the breaking out of the war. In
1864 a new organization of the banks
under the name of "National Banks"
presented to the State Banks, without
suppressing them, a state of affairs destined to cause their liquidation, which, in
fact, practically occurred.
As in England and France, the amount
of discounts, as the balance sheets give it
to us, rose each year during the prosperous period.
Thus from 1830 to 1839 it reached
$492,000,000 from $200,000,000, to decline
again to $254,000,000 at the end of the
liquidation in 1843.
In the following period the same rising
movement from $254,000,000 to $344,000,000 was reproduced in 1848. The panic

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in Europe burst forth in 1847; it resounded very slightly in the United States
in 1848, as its subsequent liquidation in
1849 indicates, which only reduced the
local discounts to $332,000,000.
A new period of prosperity followed the
preceding events; the growing movement
re-appeared, and from $332,000,000 carried
the amount of the discounts to $684,000,000 between 1849 and 1857. The panic
broke out simultaneously throughout the
whole world; but notwithstanding the
wrecks it caused, such was the saving already, so healthy was the general situation
of business, that, after having thrown out
a little scum, the current of affairs resumed
its course until 1861, and discounts had already reached the amount of $696,000,000.
This amount is greater than that we have
noted in 1857, but at that time (whilst the
movement continued in Europe up to
1864), despite the shock it received by the
declaration of war here, there was complete stoppage until the end of the struggle ; we have here come across a political
panic, not a business one. Peace re-estab-

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lished, the movement resumed its course
under new conditions and with a reorganization of the banks under the name of
"National Banks." A change was due,
but, as everything was made ready, it
was speedy. The first balance sheet of
the National Banks dates from 1864.
The amount of discounts had already
exceeded the sum of $100,000,000 in
1865, and grew to $500,000,000 in 1866.
Once started the movement took its own
course:
1865
1866
1867
1868
1869

$166,000,000
500,000,000
609,000,000
657,000,000
686,000,000

1870
1871
1872
1873

$725,000,000
831,000,000
885,000,000
944,000,000

The yearly progression was interrupted
as in Europe, and the explosion occurred
at the same time. The rise in prices
stopped, and incipient liquidation became
apparent at the end of the year, and reduced the amount of paper on hand to
$846,000,000, but, instead of lasting, as in
Europe, a movement of revival, analogous
to that which had followed the panic of
1864 in England, occurred. The amount of

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discounts rose from $856,000,000 to $984,000,000 in 1875, and then, and then only,
the real retrograde movement showed itself
as in Europe, and reduced the amount of
the discounts to $814,000,000 in 1879,
simultaneously with the movement in
France and in England, when prices had
reached the lowest quotations, and when a
resumption of business was about to occur.
In a word, affairs resumed their course;
from the end of the year the amount of
paper discounted rose to $933,000,000, and
the steady advance as set forth in table
No. 3 continued each year, until it reached
$1,300,000,000 in 1884. The panic had
burst forth in Europe in 1882, and the
agitation, so lively was its impulse, lasted
during eighteen months; but, as we have
stated, the rise in prices ceased in 1882.
Starting from this time, a reaction appeared. The paper on hand lowered to
$1,200,000,000 in 1885. This liquidation
was scarcely noticeable, because we cover
the whole Union, and there is always an
upward movement in the new portions of
it which have not yet taken part in busi-

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ness movements. If we note what occurred
in the Associated Banks of New York, the
very place where the greatest amount of
business is carried on, the depression of
the amount of paper on hand is most
noticeable after the inflation observed at
the height of the panic, while the decrease
that we point out showed itself more
slowly with the slackening of business.
Thus, in the last period, the greatest amount
of paper appears on hand—at the close
o£ 1881, $350,000,000, and the minimum
in December, 1884, the very year the panic
had burst forth, and when, during the first
months, the sum of $351,000,000 reappeared
once more; except for a million, exactly the
same amount there was in 1881.
This maximum amount was only an
accident, under the influence of pressing
needs at the time of the difficulty, for since
1881 the yearly reduction of the maximum
and minimum amounts ensued. This tendency had occurred suddenly, and disappeared likewise; the resumption dating
from 1885, a year sooner than in Europe.
The discounts of the New York Banks,

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which had been reduced to $287,000,000,
rose immediately upon the opening of the
new period of prosperity, and a growing
activity carried them to $408,000,000 in
1889 ; after a few more fortunate years we
come to the end of the period of prosperity
and high prices.
We gather the following about discounts
from the balance sheets of the Associated
Banks of New York. If we cast our eyes
over the balance sheets of the National
Banks of the Union, we must note a falling
off of $100,000,000 in the paper discounted,
that is, from $1,300,000,000 to $1,200,000,000 (1884-1885). After this short period
of stoppage, clearly indicating the necessity for liquidation, discounts resumed their
steady expansion, and rose to $1,470,000,000 in 1886, to $1,587,000,000 in 1887, and
finally to $1,684,000,000 in 1888, when we
were in the midst of a period of development and consequently of high prices and
of prosperity; and the same is true in
France and England.
The study of a single section of the
balance sheets, that of discounts and loans,

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has allowed us to follow the periods of
prosperity, of panic, and of liquidation.
When we next consider the other sections,
we find the confirmation of our anticipations. Among these sections, in the order
of importance, we notice first, public deposits in the form of running accounts;
they constitute the reverse of the loans and
discounts, whose total is immediately
credited to the banks' clients, and the increase of paper on hand also follows.
From 1865 to 1873 the steady increase
was uninterrupted, viz., from $183,000,000
to $656,000,000 ; the maximum amount
shows itself in the first quarter of 1873,
eight months before the maximum of
discounts and loans; in 1888 they ran
down to $622,000,000 ; there is, say, a
difference of $300,000,000 between the
two totals, and this difference is the same,
we observe, as that between the highest
and the lowest of the two sections, as
we notice it in the same year, during
the liquidation of the panic of 1873.1
1
See table of balance sheets of the Banks of the United
States.

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In the last period the progression is the
same; from $598,000,000 the amount of
deposits advanced to $1,350,000,000, whilst
discounts and loans reached $1,684,000,000;
that is to say, there was still a difference
of $334,000,000. The relationship of the
two sections was much more marked than
in France and in England, where the
amounts carried in accounts current vary
more.
In the United States we then experienced a market based on credit, which,
through discounts or loans by the banks,
had reached the amount of the accounts
current, and was about to call the clearing
house into action to settle debts every*
where.
The office of the circulation of bank
notes, subsequent to the severe regulations
enacted in 1863 for the organization of
National Banks, had varied in the last two
periods that we are studying. From 1863
tt> 1873, after the war troubles, in proportion as greenbacks were withdrawn, the
bank notes issued by the National Banks
not only took their place, but replaced

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those of the State Banks, whose position
the National Banks had taken.
We observe them rise firstly from $66,000,000 to $341,000,000 (1865-1873) at
the sharpest period of the panic. We might
even charge them with causing it, if the
disproportion alone of the two sums, $341,000,000 bank notes compared with $944,000,000 of bills discounted, did not at once
repel this theory. It is only necessary to
glance at this idea to see its falsity.
The maximum circulation of bank notes
has here coincided with the panic, a thing
which had not happened either in France
or in England for a long time, and instead
of presenting its highest figure during the
liquidation of the panic of 1873, it shows
us its lowest figure, $290,000,000 in 1877.
Far indeed from increasing at this time as
happened in Europe, the amount of bank
notes in circulation decreased by means of
the ebbs of metallic cash into the coffers of
the banks: in reality the cause was lacking
here; the ebb of specie was hardly felt at alL
With $4,000,000 in 1865, the reserve
was poorly provided, increasing to $48,-

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000,000 in 1870. At the end of the bursting forth of the panic of 1873 it became
reduced to $10,000,000, at the worst of the
panic to $16,000,000; then, under the influence of a slight whir], it rose to $33,000,000 in 1874, without reaching the
highest figure of the preceding period, but
soon the flow reappeared and reduced this
metallic reserve to $8,000,000 in 1875. It
was not until after this depression that the
true ebb reappeared, when the circulation
of bank notes was at its lowest figure
($290,000,000).
Whilst the $8,000,000 specie reserve
grew successively to $54,000,000, $79,000,000, $109,000,000, and finally to $128,000,000 in 1878,1879,1880, and 1881; that is
to say, upon the approach of the panic, the
circulation also expanded from $290,000,000 to its highest figure $323,000,000 in
1882, the year of the European crash and
of the stoppage of the rise of prices in the
United States. As to the minimum amount
of the specie reserve, it is to be noted in
1883, between the critical years 1882 and
1884.

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Metallic reserves are too small in the
United States for their fluctuations to exhibit the same regular course they offer us
in Europe; the least need exhausts them,
and the smallest paymentsfillthem to overflowing. The panic soon brought about a
default in payment and a need of metallic
money to re-establish equilibrium, but this
remedy, if it does precede panics, sometimes
precedes them by a year, as we have observed in 1883, and the same irregularity
is apparent whether we observe the banks
of the whole United States, or the Associated Banks of the City of New York.
After the panic of 1882-1884, the ebb of
specie into the coffers df the National
Banks of the United States and of the
Associated Banks of New York resumed
its usual course, and raised its level in the
case of the National Banks from $97,000,000 to $177,000,000 between 1883 and
1885, and even to $181,000,000 in 1888.
This ebb occurred both in England and
France at the same time, proving that cash
reserves do not increase to the detriment of
each other; it is a flood of specie or of bar-

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gold rendered easily available, through the
conclusion of the decline of prices and the
slackening of business, extending to the
whole world, and in which ea,ch one partakes in proportion to its wealth, and above
all in proportion to its credit circulation,
and of the perfection of the settlements by
means of clearing houses.
This regular course in the metallic reserves is no longer to be noted in the circulation of bank notes; instead of increasing and of entering its exchanges during
the return of specie into the coffers of the
banks, they again took part in the papermoney reserves. Prom $323,000,000 in
1882 we see the circulation of bank
notes decrease each year little by little
until it is reduced to $151,000,000 in 1888;
and this remarkable fact confronts us in
the face of an unheard of expansion of
business, almost 50 per cent, greater than
in 1873; and of a twofold simultaneous
reappearance of $84,000,000 specie and of
$172,000,000 bank notes. What then is
the role of specie and of bank notes in the
course of business in the United States ?

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Much inferior to that which it plays in
Europe in the absence of the machinery of
a clearing house embracing the whole
country, instead of being limited to some
large cities.
The multiplicity of banks has strikingly
helped the economic progress of the
United States. From 1,500 National Banks
in 1865 with a capital of $393,000,000, the
number rapidly rose to 2,089 in 1876.
The panic of 1873 did not hinder the
movement; however, during its liquidation, the number shrank to 2,048, only to
rapidly advance to 2,500 by the close of
1882, and 2,664 in 1884, and this movement did not even suffer a slackening as in
1873 during the liquidation of its crisis; it
continued steadily, and we enumerate 3,120
banks in 1888.
The increase is a third more than in
1876, but it is far from being thus in the
case of the capital, which only rose from
$504,000,000 to $588,000,000—that is, only
16 per cent. The small banks in the new
centres of population are the factor, then,
which annually increases the number.

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The Condition of Business in 1888-92.1—
The year 1888 was fairly prosperous despite a Presidential election, but securities
were heavy, depression was general, and
some few stocks shrank amazingly. Excessive issue of new railroad securities and
disastrous competition between certain of
the Southwestern roads were without
prudence. Money was easy, bank-note
circulation continued to decrease till it was
only $151,000,000, and legal tenders to
$81,000,000, but specie reserve rose to
$181,000,000, the banking capital to $592,000,000 plus, the exports to $1,350,000,000, and discounts and loans rose to
$1,684,000,000.
The sharp speculations in wheat and the
formation of the French copper corner
caused a certain fluctuation in general business. Large crops, excepting wheat; a
flourishing cotton manufacture, a decline
in production of petroleum by agreement,
a 6 per cent, decline in pig-iron production,
a very heavy one in Bessemer iron, and a
1
The facts I state in this risumd are based upon statistics
printed in the Commercial and Financial Chronicle.—DxC.

THOM.

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very small export trade as compared with
imports occurred. But in the year 1889,
the export movement, consisting largely of
cotton, was very great, being the greatest
since 1880, and near the maximum, and
compared favorably with the immense
imports induced by the new tariff of 1890.
In fact, the year 1889 surpassed all its
predecessors in the volume of trade movements; the bank clearings showing an
increase of 13 per cent, over 1888. The
cotton, com, and oats crops were the largest
ever raised, and the wheat crop was almost
the largest. But cotton brought fair prices,
and cotton manufactures and production
of iron were also considerably ahead of
any previous year, while petroleum played
an important part at good prices. Railroad
earnings showed a wonderful recovery
from 1888, and many reports gave the
largest figures ever recorded.
During this year many consolidations
and a number of foreclosures occurred.
Railroad building fell to 5,000 miles compared to 7,000 in 1888. In general business, manufacturing and trade were ex-

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tremely active, yielding plenty of work,
good wages, and fair profits.
But the wool crop and its manufacture,
a decline in the anthracite coal production,
farm-mortgage pressure in the middle
West, and low rates for corn and oats
were untoward circumstances. Speculation on the general exchange was small,
indicating a growing congestion, as was
proved by the low bank reserves, especially
in the last quarter of the year; but there
was a heavy absorption of investment
securities.
Gold, to the amount of $37,000,000, was
exported in the first six months. A small
amount of it returned before 1890.
Failures exceeded those of 1888 by 203
in number and about 20 percent, in money.
The woollen trade contributed much of this
showing.
Importations surpassed all previous years,
while exports exceeded them by nearly
$20,000,000, and the net export of gold
amounted to nearly $40,000,000. Money
was easy during the first quarter, and then
for a week a 10 per cent, rate occurred.

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Thereafter, excepting the usual July 1st
hardening, easy rates prevailed till August
Stiffening and fluctuating rates ensued till
30 to 40 per cent, in exceptional cases had
been reached in December.
During the year, bank circulation declined to $126,000,000. Specie reserve
sank to $164,000,000 and rose to $171,000,000 with the ending of the year; legal
tenders to $84,000,000, and the number of
banks rose to 3,326; their capital to
$617,000,000; their deposits to $1,436,000,000, and their discounts and loans ta
$1,817,000,000, and surplus and undivided
profits to $269,000,000.
Unused deposits, capital, surplus, and undivided profits were growing very small in
comparison with loans and discounts at the
end of the year.
The banks had to work closely, and the
demands of the South and West for currency were severely felt.
Panic of 1890.—In this condition the
year 1890 opened, and, with ever growing
pressurefor bank accommodation, displayed
great activity throughout all departments

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of trade and transportation, with an unequalled volume of transactions.
But it was as impossible to grant to the
overtrading the money needed,—though the
Secretary of the Treasury, in seventy days,
threw a million a day into the market by
buying Government Bonds,—as it had been
for the "Gentleman's Agreement" of 1888
—that of the chief railroad presidents—to
maintain rates, to permanently sustain
prices of railroad securities against an oversupply of them; however, both delayed
the inevitable.
The debates on the silver question in
Congress, leading to hopes of cheap money,
and the higher prices due to this temporary
and delusive stimulus; the large gross
railroad earnings, demand for structural
iron; the Buenos Ayres crisis, leading
London to ship us large amounts of our
securities; our small wheat, oats, and corn
crops, and large cotton crop; the tariff discussion, ending with the McKinley Bill on
October 6th, and the low bank reserves and
money pressure beginning in August and
lasting pretty steadily till December, and

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an immense shrinking of securities, were
the chief features of the year; and failures
beginning with that of Decker, Howell, &
Co., in New York, on November 11th, and
reaching a climax with the embarrassment
of Baring Brothers * in mid-November,
which failure itself greatly accelerated the
panic, were the chief events of the year.
Railroad building had increased to 6,081
miles, and the consequent new securities
were poorly absorbed. Manufactures were
generally prosperous.
The huge imports to take advantage of
1

Meanwhile Messrs. Charles M. Whitney & Co., David
Richmond, J. C. Walcott & Co., Mills, Roberson, & Smith,
Randall & Wierum, Gregory &Ballou, P. Gallaudet&Co., had
failed in New York, the North River Bank of that city had
been thrown into a receivership, and in Philadelphia the failure
of Messrs. Barker Brothers, had been followed by a number of
others. This was all bad enough, but sinks into insignificance
when we recall the financial terror inspired by the great and
historic house of Baring Brothers proving unable to meet its
engagements, amounting to about £28,000.000. The Bank of
England received notice of its difficulties on September 7th,
and by the 15th had secured from a syndicate, composed of the
great London houses, a guaranty that it would be protected
from loss to the amount of £4,000,000 if it would liquidate
the Barings' business, and from the British Government the
right to issue £7,000,000 of notes provided that sum was used
to loan the Barings, and it therefore assumed on that date the
task of paying the Barings' acceptances of £21,000,000 and

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old tariff rates absorbed much money,
while the Baring liquidation and that of
other houses identified with South American enterprises, and the distrust bred by
our Silver Bill caused a return of our securities, necessitating such a curtailment
of credit that our panic took place. From
July through December 31st, money ruled
high and fluctuating.
The year shows a decline in circulation
to $123,000,000, a decline of specie reserve
ta $178,000,000 with a subsequent rise to
$190,000,000, a decline in legal tenders to
$82,000,000, and of deposits to $1,485,£7* 500,000 of other liabilities. Thus was averted what would
probably have been the greatest panic in the world's history.
That which occurred was a mere bagatelle to what was threatened. It is difficult to bestow too much credit upon Mr.
William Lidderdale, Governor of the Bank of England, for
conceiving and managing this plan. He has saved hundreds of
thousands of homes and interests from misery. Under his
able administration it is expected to extinguish the Barings'
liabilities without calling on the Government, and it is believed something will be saved for the Barings from their
former assets in business. This is deeply to be wished, for
though the Barings have continued business under form of a
stock concern with a million pounds capital, they are wonderfully restricted as compared with their former state. They
have performed in banking too many helpful actions in furtherance of civilization to be eclipsed without sincere regret

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000,000, while the banks increased to 3,573
with a capital of $657,000,000, and a surplus and reserve of $316,000,000, and discounts and loans rose to $1,932,000,000.
The year 1891 has exhibited the usual incidents succeeding a time of reorganizations
after panics and, after a period of selling
and settlement, a rehabilitation of affairs
and the consequent advance in prices of
securities. The unprecedented abundance
of our crops as a whole, coupled with the
almost universal shortage in European
countries, largely aided the rehabilitation.
Bank balances reflected this startlingly.
On February 26,1891, loans and discounts
and over-drafts amounted to $1,927,654,559.80. On May 4, 1891, loans and discounts and over-drafts amounted to $1,969,$46,379.67. On the former date capital,
deposits, surplus, and undivided profits
amounted to $2,462,456,677.92, and on the
latter date to $2,567,288,143.45.
On July 9, 1891, discounts, loans, And
over-drafts amounted to $1,963,704,948.07,
and capital, deposits, surplus, and undivided
profits to $2,522,609,679.78.

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Confidence is restored and prices have
advanced, and should advance still further.
There seem to be only three things that
could check the advancing market, and of
those the two chief ones seem pretty surely
relegated to a fairly distant future. These
latter two are, in the order of importance:
(1) a free silver law, i.e., a law making, say,
67 cents' worth of silver pass for an equivalent of a 100-cent dollar; and (2) a very
radical and abrupt change in our tariff law.
The remaining and very minor influence is
the breaking out of a general European
war, which would at first induce a selling
of our securities, and so lower prices, but
which finally and shortly would benefit us
by a subsequent returning flood of money
exchanged for our various bread-stuffs, and
supplies, and even securities of different
sorts.
It would be better for our future if the
liquidation of the last panic had been more
radical in some cases, notably in land speculation. In this liquidation has not been
thorough, and, as far as these cases influence
the market, it has remained for a longtime

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^ Brief History of

unsound, and even now is not fully recovered.
The past twelve months have witnessed
a continued settling of old accounts, and
the undertaking of new business, in alimited
way, despite a somewhat uneasy feeling
about silver and the now accomplished
Presidential election. But the fact that an
analysis of the bank returns to the Comptroller of the Treasury shows that available
resources (capital, deposits, surplus, and
undivided profits), as compared with demands (loans and discounts), are good and
growing, considered in regard to the other
signs indicating prosperity (see Introduction), justifies the prediction of the steady
development of a prosperous period.

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Panic of 1893-4.—It was early in 1893
that I wrote the last page of A Brief
History of Panics in the United States.

Two of the three checks to business
prosperity to which I then referred,
virtually occurred very soon. The determined resolve of the "free silver" members
of Congress to continue the heavy monthly utterance of silver dollars redeemable
at par in gold kept many business men
most disquieted. They saw that the
free gold in the Treasury was sinking
greatly and steadily. They knew, also,
that there was semi-official assertion of
the right of the United States to redeem
its silver dollars in Government notes.
The Free-Coinage Bill had been passed
by the Senate in July. The House defeated it. The legal fights against certain
great railroad combinations and frequent
labor strikes put additional burdens on
the market.
In the United States and abroad the
doubt of our willingness and ability to
redeem our obligations at par in gold on
demand grew most rapidly. Accordingly,
zo

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exports of gold increased and hoarding
of it began at home. To all this was
added the expectation of a severe downward revision of our tariff laws if the
Democratic Party should succeed, as
was expected, in the Presidential election
in November.
Business was scared and slowing down
and, therefore, using less and less of its
working capital. The false ease of increasing loanable funds in the custody of the
banks lulled many into a specious
confidence. But gold was exported in increasing quantities. Should the Government issue bonds in exchange for gold
for the purposes of redemption? The
Philadelphia & Reading receivership occurred. Easy money led to many consolidations of transportation properties
and to very many large commitments.
Money tightened. In March, it loaned
at 60% per annum. Would President
Cleveland call an extra session of Congress in March to repeal the silver law
and to issue bonds in order to replenish
the free gold in the Treasury? The

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Stock Market showed a great decline in
quotations.
In April, 1894, Secretary of the Treasury Jno. G. Carlisle forbade the further
issuance of gold certificates for gold deposited in the Treasury under Act of July 12,
1882, whenever the gold in the Treasury
"reserved for the redemption of United
States notes falls below $100,600,000."
This further alarmed the business world,
which was not reassured when on the 20th
Carlisle announced that the Treasury
would pay gold for all Treasury notes so
long as he had "gold lawfully available
for that purpose." President Cleveland,
that stalwart man, uttered this high and
firm pronouncement on April 24th: "The
President and his Cabinet are absolutely
harmonious in the determination to exercise every power conferred upon them to
maintain the public credit, to keep the
public faith, and to preserve the parity
between gold and silver and between all
financial obligations of the Government."
Very good, thought business, but how
and when will you act accordingly?

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Lack of business confidence increased
greatly. Money rates advanced. Security values fell; imports greatly exceeded
exports. Silver certificates were at 83.
Something was about to snap in the
general business machine. National Cordage broke from 57 to 1 5 ^ on May 1st,
receivers were appointed, and the panic
of 1894 had declared itself and grew
worse on the 4th and 5th. Call money
rose to 40%. June witnessed great distress in business circles. On the 27th the
Government of India stopped the coinage
of silver for individuals and decreed the
exchange value of the rupee at 16 pence.
This lowered the exchange value of our
silver bullion certificates to 62. President
Cleveland helped matters somewhat by
announcing that Congress would be convened early in September. In early
July the panic increased somewhat despite the President's call for Congress to
assemble on August 7th. Time loans
were hardly obtainable. Conditions in
August grew worse. Business was almost
at a standstill, and failures were very

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frequent. From August 7th until the
affirmative action on the 28th by the
House of Representatives as to the repeal
of the Silver Act, there was great concern.
Then hope revived; but hoarding of
currency increased. Great banking interests in New York helped the situation
mightily by importing over $40,000,000
gold. September was an anxious but
more hopeful month as the prompt
adoption by the Senate of the Free-Silver
Bill was anticipated. However, the
weary debate dragged on in the Senate.
President Cleveland demanded the unconditional adoption of the House measure. Certain compromisers, led by
Senator Arthur P. Gorman of Maryland,
suggested that during each of the following fifteen months the Government purchase the minimum amount of 1,000,000
ounces of silver, and then stop all such
purchases against which silver certificates
had to be issued. This plan for speedy
action President Cleveland and the
Secretary of the Treasury opposed as
worthless unless concurrently there was

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an issue of $100,000,000 of Government
bonds to replenish the gold in the Treasury. They asserted that new legislation
must be had before any such bonds could
be validated. So the business world continued to suffer.
Let me here state the fact, that without
any fresh authorization, Secretary of the
Treasury Carlisle did in January, 1895,
issue $50,000,000 of Government bonds
to replenish the free gold in the Treasury,
and that an injunction suit against their
sale was dissolved by Judge Cox at
Washington on the 30th of that month.
Gorman had been right. The credit of
the country would not have suffered by
the additional issuance of some final
$60,000,000 (?) of silver certificates if the
gold in the Treasury had concurrently
been upbuilt to the extent of $50,000,000
to $100,000,000; but an immensity of
business loss would have been averted.
But to resume the orderly recital of
those times. October dragged along its
weary length, while the Senate debated
and business withered. Finally, on the

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30th, the Senate accepted unconditional
repeal of the Free-Silver Act. On
November 1st, it became a law. The
fear of repudiation thus escaped, though
with fearful loss, the country plunged
into 3II the unsettlement caused by a
too sudden and too extensive change in
the tariff. These changes were announced by the House Committee on
December 27th.
The conditions mentioned in the last
paragraph beginning on page 22 of the
introduction to this book, were at work.
Before the market had recovered from the
"Silver panic" of 1893-4, the terror
caused to the business world by the proposed very decided changes in the customs dues laid hold upon every trader in
the United States and reflectedly upon
every one of its citizens. It shook business throughout. Would not such a
plan as is set forth in the footnote below1
* " Mr. DeCourcy W. Thom expressed himself yesterday as
heartily indorsing the Democratic celebration to be held in
this city January 17 next, to which all the party leaders will
be invited and at which subjects of interest to the party will
be discussed.

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have virtually prevented all that? When
I sent that plan, which I had stated in an
interview in the Baltimore Sun of December 24, 1910, to the various members of
the Finance Committee of the United
" When asked to give his opinion on some of the questions
worthy of discussion at this gathering Mr. Thorn mentioned
the tariff and economy in the conduct of national affairs.
M
In the coming national Democratic celebration," he said,
•• I hope suggestions dealing with a rational reformation of
the tariff and the need for national economy of every kind
will be duly considered, and that on these two subjects alone,
to be treated thoroughly but temperately, will this national
Democratic gathering advise our party as to its best course to
pursue.
" In three successive Presidential canvasses since the Civil
War the Democratic party has received * majority vote of the
people of the United States, and in my opinion would have
gained three thereby, instead of the alternate two, elections to
the Presidency if the tariff issue, the major one of the two
great issues—namely, tariff and economy—on which they won,
had been so sought to be applied as not to threaten unduly to
affect general business."
PROTESTS AGAINST EXTRAVAGANCE

" All will agree with me that a reasonable economy, instead of the actual wild extravagance of government, is more
than ever a national need. Who will disagree with me, that
in addition to the contribution from internal revenue, the
tariff should be used merely to contribute towards the due
expenses of the Government economically administered, but
so applied as not to break down the standard of American
citizenship, as exemplified in the working people of our

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States Senate and to the Committee on
Ways and Means of the House of Representatives, very many of them wrote me
affirmatively on the subject.
To revert, however to the due order
country; and eked out, if it is possible, by contributions into
the national treasury of sound inheritance taxes ? "
URGES CUT ON NECESSARIES

" Is it not possible to apply that general plan as follows :
Divide, say, all of the articles now upon the tariff list into
three classes.
" (a) All such as are usually found in the typical American
homes—I mean the homes of those admirably called by Grover
Cleveland the * plain people,' who are just the same class,
I believe, as those indicated by Abraham Lincoln, when he
said, ' God must greatly love the common people, for he
made so many of them '—and put that list of articles on a free
list or a severely tariff-for-revenue-only list.
•* (£) Create a second division composed of all the articles
of luxury. Put upon them the very highest tariff they will
stand and yet come into the country, except in the case of
articles of antique art. These latter should be admitted free.
" ( 0 Keep upon all other articles now in the tariff list the
actual duties for the period of one year, but after that period
and the actual imposition of the proposed new tariff I am
discussing shall have begun, put all the articles involved in
Class e upon a tariff-for-revenue-only basis, so constructed as
not to break down the standard of the American workingman's
living."
YEAR TO MARKET STOCK

" This period of one year—say, would allow manufacturers
to market their stock on hand or already required to be pro-

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Brief History of *

of our tale. It was on January 17,
1895, that Secretary of the Treasury
John G. Carlisle, without any new legislative authority, offered to sell $50,000,000
Government bonds already mentioned.
duced on the basis of the market influenced by the quasi*
Government protection extended by the existing tax laws of
the nation.
"At the end of this period the manufacturer would be
obliged to produce at less cost in order to find a market in
competition with his foreign competitor, which competition
would result in lower prices that he and his foreign competitors
would have to offer to the working people and other citizens
of our country."
EFFECT ON WAGES

'* Those working people and other citizens would for a year
have been enjoying at lesser cost all of the articles used in
the typical American home I have referred to and could with*
out loss therefore well afford to submit to a reduction in wages
so long as that reduction in wages was contemporaneous with
affording them a proportionate or more than proportionate
reduction in cost of the articles for whose purchase those
wages were sought to be expended. At the same time, the
manufacturer at a proportionately lesser cost of production,
through this reduction in wage-paying, would be selling as
much or more of his old products at their old profit.
" Could we add to the income from the tariff and internal
revenue the sums derived from the sound national inheritance
tax I have mentioned above it is evident we would have supplied for the period of change from one tax system to another
an * adequate governor' to use a mechanical illustration, to
prevent undue oscillation of prices in the business world."

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If issued during the Silver-repeal fight
when Gorman proposed his compromise,
and if Carlisle had made it clear very
early that as many such issues for gold
would be made as were needed to keep
the trading public safeguarded against
any monetary-business cramping caused
by the governmental policy affecting the
tariff, a minimum rather than something
approaching a maximum of disturbance
would have followed. In better spirits
because of the issuance of the $50,000,000
Government bonds for gold, the business
BANK RESOURCES TO PREVENT STRAIN

" The further use of the existing financial agencies for cooperation of the banks in all sections to mass resources and
apply them to prevent undue local strain upon credit dispels
the fear of any necessary injury to the financial fabric in
effecting this change.
•' Grover Cleveland, whose character and principles I have
long revered, seemed to me in the application of his plan for
tariff reform to have endangered at once the success and the
permanence of his reform of the tariff—which you recall was
confessedly and very properly not a reformation to free t r a d e by failing to provide in it a method for avoiding or at least
minimizing and shortening any incident disturbance to the
business world. His plans, further, failed by not reasonably
insuring for the transition period from the old tariff to the
new one sufficient national income for national expenses/'

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world worked along. The House had
passed the Tariff Bill early in February
by a big majority. Business soon looked
up decidedly. But the Seigniorage Bill
was adopted in March. President Cleveland, that sturdy upholder of the Nation's credit, vetoed it. He knew that
any new moral obligation to keep at a
parity with gold dollars worth in themselves less than one hundred cents in
gold would materially shake domestic
and foreign credit.
The veto had a deservedly splendid
effect upon all our trading interests.
This was increased by the failure of the
House to override the President's veto
of the Seigniorage Bill. But the Senate
had not acted on the Tariff Bill. Business dwindled and there occurred strikes
and other widespread labor troubles,
especially in the bituminous coal trade.
In many parts of the country the militia,
and in Chicago United States troops, had
to be employed to maintain order. Call
money was a drug on the market. The
net gold in the Treasury was very low.

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The Tariff Bill dragged its weary length
along. President Cleveland and Chairman William L. Wilson of the Ways and
Means Committee of the House insisted
that the bill would produce sufficient
revenue for the expenses of the Government. Senator Gorman and others in
the United States Senate insisted to
the contrary and demanded that the
tariff on sugar should be kept at a high
figure. A bitter controversy ensued.
Finally, on August 13th, the House
accepted the Senate Tariff Bill. It was
time for some affirmative action, for
among other threatening conditions the
net gold in the Treasury had fallen to the
lowest figure since resumption of specie
payments in 1879.
Business began to revive. The issue of
$50,000,000 Government bonds for gold
to replenish the Treasury stock was a
very stimulating influence. The improvement dated virtually from the agreement
in February between the Government
and the Morgan-Belmont Syndicate to
prevent the export of gold. In June,

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1895, the Government gold was thus
brought up to a round $100,000,000 for
the first time since December, 1894. But
notwithstanding the fact that the business
outlook was decidedly better, the inevitable disturbances to business following
a general change in the tariff, unsettled
political conditions in Europe and the
selling of American securities owned
abroad, the shortage of the American
cotton crop, President Cleveland's Venezuela message, which many persons
thought might bring on war with England,
and another decline in the Treasury
free gold, again shook business confidence.
Improvement, however, was stimulated by a remarkable increase in the
supply of money in our balance of trade
and by the virtual settlement of the
Venezuelan question. The business situation was steadily clearing. The ills from
the panic of 1893-4 were well behind us.
The Spanish-American war proved to
be harmless to us financially, while it
tended to show that National neighborK-

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ness could be exercised in a splendidly
unselfish way. By our treaty of peace
with Spain on December 10, 1898, an
additional emphasis was given to the
revival of trade. During 1899 a great
rush to speculate brought the pinches
in money inevitable in those pre-Reserve
Bank days, but could not stop the general
broadening of business interests although
the industrial situation was unsatisfactory in spots. Indeed, the succeeding
year was to witness severe industrial
trouble destined to cause a general setback in business. The situation cleared
considerably when the November elections of 1900 showed the country to be
safe from the Bryan silver policy.
Big business interests took hold of
market conditions. Huge combinations
of trade interests became the order of
the day. The United States Steel trust
was the vastest and was the transcendent
achievement of J. Pierpont Morgan.
The Stock Exchange was wild with speculation. The collapse came there in the
famous decline of the 9th of May, 1901,

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precipitated by the Northern Pacific
corner. In a month the market was
tranquil again. The shooting of President
McKiniey produced great financial nervousness.
The over-trading abroad,
especially in Germany, was influencing
us and all the rest of the world, which
had not yet recovered from the vast
financial cost of the English Boer War.
The ever increasing closeness of business relations the world over—their
virtual solidarity, in fact—was being illustrated again with us. A chief example
was trouble in the copper groups following a slackened world demand for their
products.
Overtrading was doing its usual work.
This induced loss of business courage in
many quarters, or shall I say a realization
that nowhere in the American business
system was there any arrangement empowered so to marshal the competent
strength of financial America that large
and overwhelming disturbances should
become impossible in business generally.
Indeed, the Government forces seemed to

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tend contrariwise to big business practices. They took virtually their first step
in "trust-busting" when they tried to
break up the Northern Securities Company, which had been concocted to handle
the celebrated Northern Pacific case.
Labor troubles supervened. Many great
speculative stock campaigns collapsed.
The banks yielded to the imperative
need to reduce credits. The year 1902
had almost experienced a widespread
panic: but the marshaling of great private
resources had restored confidence temporarily, and it closed in peace.
Panic of 1903.—Then came the real
beginning of the protracted "trust busting" campaign. Business took fright,
for it believed it was to be bullied rather
than soundly regulated. Great failures
on the Stock Exchange were its sure
indications. Pear and distrust was upon
all the American business world. Industries languished. Money was easy because less and less employed in trade.
The great captains of industrial finance,
however, patched up troubles and differ11

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ences here and there and, availing themselves of the plentiful supply of money,
soon had a notable speculation at work.
Gradually the country took heart again
and business experienced a revival.
It was thought that President Roosevelt, elected in November, 1904, would
help bring about discrimination between
"good" trusts and "bad" trusts, and
whose "trust" is bad! But "trust busting" became an even more popular and
political pursuit. Indeed, the abuses practised by many of them had created a
situation regarding which the question
was becoming in the popular mind simply
this, "Shall trustdom rule the people or
the people rule the trusts?" The sound
control of both before the Constitution
of their country must be the happy
solution.
The Bill of May 9th of the House of
Representatives, giving the Interstate
Commerce Commission power to fix
railroad rates, was ominous, and little
noticed by the general business world; but
some noticed and acted. The Senate

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had not voted; nor did they realize what
rate-regulation implied to railroad balance
sheets and so to the Stock Exchange.
Some interest was selling securities. The
business public was awakening to the
fact that legislators, legislation, the people,
and the law were hot after the business
methods of many organizers. Fear,
founded on a tardy awakening to facts,
declared itself, but spasmodically, for
now and again the great captains of
finance and industry were trying to save
the situation. They successfully aided
whatever of momentum there was in
general business. But Congressional activity as to any combinations in restraint
of trade was unabated. It called upon
the President for such information as the
Interstate Commerce Commission might
have as to a combination in restraint of
trade between the Pennsylvania Railroad
and certain lines allied with it.
The battle between the old style and
the new style of managing great corporations was fairly on. Labor troubles
added to the existing disarrangement of

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business. San Francisco's vast earthquake and consuming fire sucked much
capital away from financial centres in
order to replace the $350,000,000 of
capital destroyed. The money market
was greatly restricted. The stock market showed signs of panic. The Secretary
of the Treasury continued to help the
situation a$ best he knew how. Notably,
he offered $30,000,000 Panama Canal
Bonds, and very successfully sold them.
That afforded an additional basis for
bank-note issuing. The stock market
responded with a fine upward swing.
Heavy dividends were declared by certain
leading railroad and other corporations.
Indeed many high records were made by
securities and so distracted attention
from that steady tide of keener inspection
and stricter regulation by the agents of
the people which was destined to unmoor
and toss and injure many a financial
craft. Railroads asserted that the country needed a great increase in railroad
trackage, but that the actual treatment
of the roads deterred extensions through

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frightening capital. So the year 1906
wore away after having sorely tried 'the
nerves of the whole business world which
it left in a most justly apprehensive state.
The Panic of 1907.—The panic of 1907
opened with great but feverish activity
in business. Driven by necessity the
railroads adopted the issuance of shorttime notes for new capital, as the market
would absorb no long-time obligations
except at forbidding interest rates. Any
signally untoward happening could
promptly precipitate a panic. The
United States Treasury withdrawal of
Government deposits from the banks,
and the collapse of the Knickerbocker
Trust Company in New York were such
happenings.
On March 14th, the panic declared
itself and pandemonium ruled on the
New York Stock Exchange,—that prominent barometer of business conditions.
In its coming it had exemplified again the
characteristic symptoms of a panic which
I have set forth on pages 7-16 of the
introduction to this book. After the

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spasm of March 14th and the business
cataclysm of the .following October,
the business world staggered along, but
with the strength merely that results from
courage and the exercise of reserve power
husbanding its resources and lightening
its load. The decrescendo movement of
another business cycle had begun.
Runs on financial institutions were prominent in our country. But throughout
all the western world resources were
strained. Money had been overused.
Money rates were extremely high. Failures were frequent everywhere. In our
own country painful disturbances, relaxation, and unrest were everywhere apparent. The radical doctrines of many
political leaders tended to further unrest.
The business of the country was halting
between the need sanely to regulate
"big business" and the fact that "big
business" had been obliged to fight for
prosperity in the welter of unallowable
but very often undeniable conditions.
The railroads justly claimed that they
were forbidden living rates. Their oppo-

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nents accused them of carelessness and
waste. The railroads and the Interstate Commerce Commission were the
protagonists respectively of the conservative and the radical thought of the
country, which is sorichin natural wealth
and is inhabited by so resourceful a
people that though by statutes they be
well managed or not, their National
wealth increases. So ran the business
world away, but with a very slow and
steady approach towards a rational rectification of disputed legislation as affecting
business. Meanwhile the courageous
"captains of industry" were leading in
business as best they could and were better
appreciating the temper and needs of the
American people.
Added to the difficulties resulting from
our languishing trade at home, we suffered
reflectedly from the constriction of business in Europe, which was acutely aware
that the disturbance in the Balkans
threatened to destroy the peace of Europe.
Conditions were not yet quite ready
there for a cataclysmic war. For ex-

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ample, statistics had not quite demonstrated to Germany that the physique
of her people and the rate of increase of
their families were declining while the
expenditures for superpreparedness for
war was demanding either retroaction in
that regard or else an expenditure from
the principal of their property. Germany did make in one year the sacrifice
of five per cent, of her principal for yet
fuller preparedness for war. Indeed since
late in 1908, it is fair to say that consciously or unconsciously the whole world
has been in travail. Whatever broad
measures statesmen anywhere have promulgated, have been subjected to the
unusual stress and strain of world-wide
unrest. Like the treacherous undertow
that wrenches those who venture in,
has been the world unrest upon all
phases, incidences, and predicates of business. Some of us have long realized
this; some have not.
With November, 1908, came the election of that great constitutionist, Taft,
to the American Presidency upon a

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platform less radical than that of his
opponent. This heartened the constructive forces of the country. But very
little upbuilding resulted. The coming
revision of the tariff was of itself sufficient
further to restrict business undertakings,
and to cause many great producers of
goods to arrange to unload at lowering
prices their actual and their future outputs. But the conserving of resources
since the panic had helped the superficial
situation, and the spasmodic stimulus
that so often follows a general heightening of the tariff showed itself after the
adoption of the tariff bill in August, 1909.
The illness and after a month or two
the death of the great business leader,
Harriman, caused in the securities market
a great decline. Fundamental conditions
were unsettled. The best that could be
expected was a see-saw movement until
some power should set our country and
the business world at large once more
securely on their respective bases. The
Anti-Trust Law, the Interstate Commerce
Law, and such like influences continued

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to disturb the United States, while Europe
was beneath the surface unendingly agitated.
General business marked time while
statesmen or pseudo-statesmen planned
and promised panaceas. President Taft
joined that populous group. The securities market, that barometer of business,
fell beneath such assurance of further
unsettlement. How can you continue
to trade unless reasonably sure that conditions will remain fairly constant! All
this militated against a normally quick
recovery from a great panic. Little
scares were frequently experienced. Influences matured and presented one great
political party split into two great
factions, while the other chief party
endured something of the same development.
A conservative handling of National
policies, or a radical one was the question
in each case. The November elections
indicated a popular revolt against the
party in power—the Republican. Unshaken, President Taft followed his con-

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victions and in his Presidential message,
of December, 1910, to Congress called
for a halt in legislating to regulate corporations, until the effect of the laws on
the statute books could be studied. The
stock, money, and industrial markets
were marking time. Not to go forward
in business or elsewhere is in itself to
retrograde. Thus opened the year 1911.
Under the influence of easy money,
better business on some of the western
railroads, better dividend declarations
here and there, a rosy prediction as
to the early future of the iron market,
and the belief that the Interstate Commerce Commission would grant better
rates to the railroads, general business
felt encouraged and prices advanced
somewhat. But in February the Interstate Commerce Commission forbade the
railroads any increase whatever in rates.
The roads were obliged to institute many
cramping economies which to them very
often meant the using up of their corpus
and to the business world of the United
States a permeating retrogressive influ-

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ence. Reductions in railroad dividends
were symptomatic of that. To add to
all this there developed additional business unrest predicated in the general tariff
change favored by the House of Representatives in April.
The United States Supreme Court
decision interpreting the Sherman AntiTrust t Law of 1890 as affecting the
Standard Oil Company case and the
American Tobacco Company case were
delivered late in May and were unexpectedly reassuring to business. This was
another evidence that the best thought
of the Nation everywhere was seeking
to rectify the looseness of the past without
killing business initiative and continued
endeavor. So matters see-sawed in the
business world. It was indeed in a state
of unstable equilibrum. Stocks declined
now abruptly; then, after some slight
recovery, gently; but the slant was
decidedly downward.
The Government felt that its duty
required it to push forward the investigation of industrial corporations; and that

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the Nation so demanded. And it was in
October that the chief of such corporations—the United States Steel T r u s t had a Government suit for dissolution
filed against it. The sturdy bell-wether
of the corporation flock was attacked by
the great United States Government.
What would happen to the humbler
members of the flock! Certain court
decisions were reassuring to corporations in November and business brightened for the time being and during much
of December in certain notable instances,
for in that month the Interstate Commerce Commission report appeared and
seemed less drastic in tone.
The year 1912 opened with an additional influence promising increased alarm
and marking of time. I mean that
candidates for the Presidential nomination began their canvasses, which, of
course, implied new plans for making new
laws to govern business conditions. Former President Roosevelt announced his
candidacy in February. President Taft
was already constructively in the field.

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Governor Harmon of Ohio was mentioned
in many quarters as a successful reformer
who wished soundly to guide but not
unwittingly injure business, while Underwood was similarly praised in addition to
his record on the recasting of the tariff
into a further revenue measure. Champ
Clark, Speaker of the House of Representatives, was a popular candidate.
And Woodrow Wilson loomed up as
though forecast by destiny. At first
arid in many important sections of the
country considerably more delegates to
the Republican National Presidential Convention were chosen for Mr. Taft than
for Mr. Roosevelt. This and brisker
business served to hearten conservative
interests, and the general market revived
despite the decidedly downward influence
in our country of the gigantic strike
among English coal operators, who thereby spread trouble throughout the British
Empire, and, through the solidarity of
the financial world to-day, affected every
financial centre.
The remainder of the year was domi-

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nated by the Presidential canvass. Taft,
called by many a "standpatter"; Roosevelt, "the insurgent," who proposed to
mend all the troubles of the political
public by his usual brusque methods;
and Woodrow Wilson, the "conservative
with a move on," made their appeals for
popular support. Until the verdict in
November a see-saw market took place
in the United States, while Europe and
reflectedly the remainder of the world
became alarmed lest the war declared in
October by the Balkan States against Turkey should produce world-wide trouble.
The November Presidential election
showed that Woodrow Wilson received
435 votes, Mr. Roosevelt 90, and Mr.
Taft 8. However, the popular vote for
Woodrow Wilson was more than 1,000,000
below that cast for Messrs. Roosevelt and
Taft jointly, and about 2,000,000 short of
a majority of all the votes cast for the
Presidential nominees—Socialist, Republican, Democratic, and so on. But the
vitally significant fact is that the popular
vote for the "stand-pat" candidate—

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A Brief History of

Mr. Taft—was very small in comparison
with the joint vote of the three candidates
whose platforms called for a drastic
handling of National policies,—Debs,
Roosevelt, and Wilson.
Drastic recasting of the rules of any
gameunsettlesplay. Themarketdropped.
But forttinately for the cotintry the ripe
and balanced and active intellect and
character of Woodrow Wilson, elected
President, lent much re-assurance against
the extensive political surgery he had been
chosen to perform. All knew that he
would be thorough and reasoning. All
the grievous handicaps that business
suffers from uncertainty of regulation,
it was thought would be overcome as
promptly as possible. But the pledged
great change of the tariff was enough
to induce retrenchment of business endeavor. With a major factor unusual
in any proposition, how can stability,
much less progress, be expected in any
interest?
The Panic of 1913.—Retrogression in
business began very early in 1913 and

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increased until mid-October, 1914. On
October 3, 1913, the new Tariff had
become a law; but other reforms still
jostled business. However, by mid-October, 1914, the Interstate Commerce Commission seemed to have become less
radical in its views, the Industrial Trade
Commission was at work apparently
studying the essentials of the industrial
situation, the United States Supreme
Court was delivering opinions in check
of indeterminate statutory meddling with
business and the splendid potential of
the Reserve Bank system was offering
for use.
It is hard not to overstate the vast
re-assurance offered to business by linking
together the banking power of the country
through the Reserve Bank system. Just
as an enormously large number of troops
skilfully thrown into an endangered—a
panicky—position will ensure success, so
can the vast resources of the Reserve
Bank system restorefinancialorder when
panic fear is declaring itself. During
the past two years of threatening from

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178

A Brief History of

the disturbances in Mexico, our country
has learned to forecast the benefit that
the Reserve Bank system predicates;
but our stay and confidence has been the
cool and far-seeing statesmanship of our
great President, Woodrow Wilson.
The breaking out of the "World War"
in August, 1914, had sofloodedour market
with securities held in Europe that the
Stock Exchange, following the continental example, closed from July 31st
till November 28th, when the New York
Stock Exchange and other American
stock exchanges opened for restricted
business in bonds and on December 15th
to unlimited trading in stocks and bonds.
Other kinds of exchanges acted much the
same. This checked business in every
direction, despite the great issuance of
temporary Clearing House certificates.
In two months the latter tendency was
changed in many quarters.
Then began the "war boom." Gradually it has spread, bringing such enormous
profits in all our lines of business supplying the needs of the "Great War," that

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the first twelve months of it showed more
than a billion dollars trade balance in our
favor, and that balance then began
increasing on a progressive scale. Money
is yet plentiful. All business is stimulated. Our crops are unexampled in
quantity and money value. Everything
points to great prosperity unchecked
until the ''Great War" ceases and withdraws the stimulating demand for our
supplies.
Then will come a readjustment of our
trade. Money will have become actually
or potentially scarce because of the
previous vast expansion of our business,
and all the banking power of our country
will be requisite to prevent a crashing
panic. The Reserve Banks will have
gotten fully to work by then, it is to be
hoped. They will be needed to lead in the
life-saving operations. Such first aid to
the injured will obviate such financial
sufferings as the old-time panics presented. They can hardly be expected
to reduce the casualties to the volume
of the slow panic in securities in the

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180

A Brief History of

year 1913, for the volume of business
involved at present is vastly more swollen
and the kind more circumscribed.
It is interesting to note that panics
have continued to appear about as regularly as usual, but less crushingly, since
1890, the date up to which the first and
second editions of this book had traced
them. Remedial or partially preventive
measures have been more and more
utilized by thefinancialpowers to control
them. Never will panics cease so long
as trade and fear are exemplified on this
earth, but just as modern medicine is
overcoming the dangers threatening the
physical man, so is modern finance
overcoming panic and the other dangers
which threatenfinancialstability. After
all, reserve power and only a rational use
of financial resources are the surest
preventive of panic. And that the American people have not been forced through
entrance into the "World War " to deplete
their reserve strength, especially in a
financial way, is due to the splendid
conduct of our great President. He is

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leading this country to unexampled prosperity. Instead of consenting that old
abuses in the business world should
continue until an over-indignant public
had grown riotously injurious, he has
guided the current of their wrath, initiated
or promulgated the methods for redressing their grievances, and has saved to the
country, to its people, and to general
business itself, the splendid and full
service of business enterprise freed from
the abuses and handicaps that unregulated conditions had forced it to employ
in the unrestrained struggles of the open
mart.
DECOURCY W. THOML

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INDEX
Adams, President, 63
Agriculturists, how affected by protective tariffs, 5, 6, 11;
how affected by low tariffs, io, 12
Alabama indemnity, 99
American Tobacco Co. case, effect of decision on, 172
Balkan States trouble, causes alarm, 167,175
Baltimore Sun, December 24, 1910, interview with Mr.
Thorn on the tariff, 151 seq.
Bank of England, extends help to America, in 1839, 73;
suspension of, in 1796, 88; averts panic in 1890, 140
Bank of France, suspension of, in 1848, and 1871, 89
Bank of Lancaster, 29, 30
Bank of New York, surplus of, 57
Bank of North America, formation of, 26; embarrassment
of, 27
Bank of Pennsylvania, charter obtained, 61
Bank of Philadelphia, 33
Bank of the United States, formation of, 28; reduces discounts and circulation, 36; re-establishment of, 39; terms
and conditions of charter of, 40 seq.; examination of, by
Congressional Committee, 49; violation of charter of, 49;
insolvency of, 59; withdrawal of Government deposits
from, 60; action of, in panic of 1838-39, 67; aids Southern banks, 7o; liquidation of, in 1839, 75; renewal of
struggle with United States Government, 77; endeavor
to force Government into bankruptcy, 77, 78; opinion
of Buchanan concerning, 79
Bankruptcies, in England in 1839, 75. 7 6
Bankruptcy, endeavor of United States Bank to force the
Government into, 77, 78
Banks, advances beyond resources as cause of panic, 36;
new, 1811-1815, 36-37; embarrassment of local, 1828Baring Brothers, failure of, 5, 140, 141
Barker Brothers, failure of, 140
Biddle, Mr., President of the U. S. Stock Bank, on crisis
of 1825 in England, 54; obtains charter of Bank of
Pennsylvania, 61; on action of Bank of U. S.t 67, 68;
183

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184

Index.

Biddle, Mr.—Continued
establishes new banks in the South, 69; utilizes National
credit for benefit of the States, 71; establishes new bank
in New York, 72; defends his actions, 74
Bland, Mr., Maryland representative, 37
Buchanan, President, opinion concerning United States
Bank, 79; on panic of 1857, 90
Buenos Ayres crisis, 139
Business conditions, 1888-92,135 seq.
Capital, panics of, 4
Carey, Mr., 38
Carlisle, John G., Secretary of the Treasury, forbids
issuance of gold certificates, 1894, 147; issues Government bonds, 1895, 150, 154
Causes of panics, 3 seq., 7, 21, 32 seq., 35, 52
Clark, Champ, 174
Clarke, Mr., effect of death of, 100
Cleveland, Grover, President, pronouncement of April 24,
fc 1894,147; calls Congress in August, 1894,148; and FreeSilver Bill, 149; effect of his tariff reform plans, 154; on
Tariff Bill, 157
Circulation, panics of, 3; of paper money, effects of, 34;
of country banks in 1814, 36
Commerce, "golden age" of, 38
Commercial and Financial Chronicle, 135
"Compromise Tariff," 9
Congress, issues paper money, 25, 26; votes to extend
charter of Bank of United States, 59
Cooke, Jay, failure of, 94
Cotton, monopoly in, 69; overproduction of, 72
Cox, Judge, 150
Credit,. panic
panics of, 4; extension of, by artificial demand, 33;
of the United States in Europe, immensity of, 70 seq.
Crisis of 1814, attributed by committee of Senate to the
abuse of the banking system, 36
Crisis or panic, definition of, 2, 3
Debs, 176
Decennial Panic, 5
Decker, Howell & Co., failure of, 140
Deposits, relation to business, 19
Discounts, and loans, relation to deposits, 13 seq.; resulting
from increased issue of bank notes, 33

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185

Donnel, Lawson & Simpson, failure of, 107
Duane, Mr., 60
Economic history of United States, sketch of, 5
Embargo of 1808, 7
England, large number of bankruptcies in 1839, 75, 76
English coal operators, strike of, 174
English export houses, losses of, 67
Eno, John C , 103
Expenses of War of 1812 defrayed by notes issued by banks,
37
Extravagance of Government, protests against, 152
Failures, total number of, during panic of 1838-39, 80;
in 1857, 88; in 1883,105
"Farmers' Bank," 29, 30
Fish, Mr., President of the Marine Bank, 103
Fiske & Hatch, failure of, 95, 107
France, table of panics of, 19
Free-Coinage Bill, see Free-Silver Bill
Free-Silver Act repealed, 151
Free-Silver Bill, distrust caused by, 141; passed by Senate,
145; passed by House, 149
Gallaudet & Co., P., failure of, 140
"Gentleman's Agreement," 139
German Government, invests in public securities, 1873, 99
Gold rises to 119M per cent, in 1873, 100; export of, 189394, 146; imported, 1894, 149; export of, prevented, 157
Gorman, Arthur P., Senator from Maryland, on Silver
question, 149, 155
Government bonds issued, 1895, 157
Grant, General U. S., 103
Grant & Ward, 103; failure of, 106
Gregory & Ballou, failure of, 140
Grinnell, George Bird, failure of, 100
Hamilton, Alexander, proposes a national bank, 27,35
Harmon, Governor of Ohio, 174
Harriman, effect of death of, 169
Hatch & Foote, failure of, 107
Hope, Mr., of Amsterdam, 73
Hottinguer et Cie., 73
House of Representatives, report of committee of, on
panic of 1818, 50

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Index.

Imports, great excess over exports in 1836, 66
Industrial corporations, Government investigation of, 172
seq.
Industrial Trade Commission, 177
Interest, laws of New England relating to, 32
Interstate Commerce Commission and railroads, 162, 167,
171, 177
Interstate Commerce Law, influence of, 169
Jackson, President, 66; on conduct of Bank of United
States, 58; refuses to ratify extension of charter of Bank
1
of United States, 60; on interest money, 76
Juglar, M., 2; analysis of business life, 23
Knickerbocker Trust Co., collapse of, 165
Labor troubles in 1895, 156; in 1903, 163
Lidderdale, William, Governor of the Bank of England, 141
London Times, attack on United States Bank, 74; defense
of Mr. Biddle, 74
McKinley, President, financial effect of the shooting of,
160

McKinley Bill, 8, 11
Marine Bank, suspension of, 103, 116
Maryland banks, suspension of, 85
Mechanics' Banking Association, suspension of, 85
Metallic reserves, fluctuations, 132
Metropolitan Bank, 103, 104, 109, 117
Mills, Roberson & Smith, 140
Morgan, J. Picrpont, 159 .
Morris, Mr., 26
National bank, consideration of, 34; antagonism to
establishment of, 35
National Bank of the Commonwealth, failure of, 95
National banks of the United States, tables of, 17, 18;
survey of balance sheets, 124, 127
National finances, administration of, withdrawn from
United States Bank, 78
National loans in 1814, 35
National prosperity in spite of panics, 63 "
National revenue, effect of increase in 1836,64
National Trust Co., failure of, 95
New England, laws of, relating to interest, 32

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N. Y. & N. E. Railroad Co., receiver appointed for, 106
New York, establishment of bank in, to avert panic in
1839, 72, 73; banks of, relation of metallic reserve to
deposits, 1854-57, 87; failures of, 115
New York Clearing House, action of, in 1873,96; action of,
during panic of 1884, 108, 109
New York Stock Exchange, suspension of business in 1873,
95; collapse in 1901, 159; failures in 1903, 161; panic in
1907,165; suspended business in 1914,178
Non-Intercourse Act of 1809, 7
North America, Bank of, 26
North River Bank, failure of, 140
North River Co., receiver appointed for, 106
"Ohio Life," collapse of, 84
Overend, Gurney & Co., failure of, 4
Panama Canal Bonds, 164
J>anjc, or crisis^ definition, 2, 3; causes, 3 seq.t 7, 32 seq., 35,
52; classes of, in United States, 3, 4; symptoms of approaching, 7 seq.; of 1814, 7, 32 seq,, 165; of 1818, 8, 47
seq.; table of panics in France, England, and United
States, 20-21; of 1825, 26, 53; of 1831, 56; of 1837-36,
58; of 1838-39, action of Bank of United States, 67;
outbreak of the crisis, 74 seq.; of liquidation of the Bank
of the United States, 75; of pressure of the English
market, 75; of renewal of struggle between Bank of the
United States and the Government, 77; failures, 80; of
1848, 80; of 1857, 11. 82; condition of New York banks,
1852-57, 87, 91; of 1864, not strictly a financial crisis,
93; of 1873, 23, 93; of 1884, 101-119; compared with
crisis of 1873, 113; unforeseen, n o seq.; succession of
crises in United States studied.through balances of banks
119 seq.; of 1890, 138; of 1893-^, 145; of 1903, 161; of
1907, 165; of 1913, 176; periodical occurrence, 180;
preventives of, 180
Paper money, issued by English Colonies, 25; issued by
Massachusetts, 25; issued by Congress, 25-26; illusions
concerning, 28-29; depreciation of, 29; used to replace
coin, 33; effects of circulation, 34; excessive issue of, 48;
considered as cause of panic, 62; small notes issued, 63
Pennsylvania, Legislature forbids issuing notes, 29; act
of 1812 authorizing banks, 31; unratined, 31; starting
of banks in 1813, 31; re-establishing banks which had
failed, 53

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Index.

Pennsylvania banks, table of increase and decrease in
circulation of, footnote, 36; suspension of, 85; re-established in 1824, 53
Pennsylvania Senate Committee, report on prevention of
bad administration of banks, 1820, 51 seq.
Presidential nominations, 1912, influence of, 173
Prices, relation to panics, 12 seq.
Prosperity signs of, 16, 23-24; in United States, 83
Protective tariffs, effect of, 5
Public securities, German Government invests in, 99
Railroads, loans for building, one of chief causes of panic
in 1873, 94; rates, 162,171
Randall & Wierum, failure of, 140
Reserve Bank svstem, 177 seq.
Richmond, David, failure of, 140
Roberson & Smith, failure of, 140
Roosevelt, President, 173, 175; and trusts, 162
Rothschild, Baron, 73, 74
Savings banks of New York, failure of, 107
Second National Bank, treatment of, by John C. Eno,
104-5; suspension of, 106
Seigniorage Bill, 156
Senatorial Committee of, inquiry on panic of 1818, report
of, 50
Sherman Anti-Trust Law of 1891, 169,172
"Silver Panic" of 1893-94, 151
Spanish-American War, financial effect of, 158
Specie, r61e of, 133-94 a .
Specie payments, suspended, 38
Sprague, Claflin & Co., suspension of, 95
Standard Oil Co. case, effect of decision on, 172
State Banks, reduced circulation of banknotes, 47-8
State debts, 76
Symptoms 01 approaching panics, 7 seq.
Taft, William Howard, President, effect of his election in
1908, 168, 170, 171; presidential candidate in 1912, 173,
Tariff, changes of, as cause of panic, 4 seq.t 10, 12, 21 seq.;
of 1846,4,9; effect of protective, 5; inter-relations of and
agriculture, 5 seq.; effects of new, 5, 22; and economy,
Mr. Thorn on, 1910, 152-55; on necessaries and luxuries, 153; effect on wages, 154; of 1913, 177

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Tariff Bill, 1895,156
"Trust-busting," 161, 162
Union Trust Company, failure of, 95
United States, classes of panics of, 3 seq.; immense credit of,
in Europe, 70 seq.; withdraws deposits from banks, 60
United States Steel Trust, 159; Government suit against,
173
United States Treasury, purchase of national securities
by, in 1873, 99; withdraws Government deposits from
banks, 60,165; bonds issued in 1812,1813, and 1814, 37,
issued in 1895, 150
Van Buren, President, opinion on paper money, 62
Vanderbilt, speculator, 100
Venezuelan question, effect of its settlement upon business,
158
Walcott & Co., J. C , failure of, 140
War of 1812, money to carry on war, obtained from banks,
37
Ward, Ferdinand, 103
Wheat-flour, tables of export, 13 seq.
Whitney & Co., Charles M., failure of, 140
Wilson, Woodrow, presidential candidate, 1912, 174;
election, 175; effect of election, 176 seq.; leadership, 178,
180,

181

EWorld War," first a check and then a boom to business,
178

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Full text of A Brief History of Panics and Their Periodical Occurrence in the United States

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