Staunton spectator. [volume] (Staunton, Va.) 1849-1896, 1857-10-07
A IIistory of Bank suspensions.


the war with Great Britain, and was immediate
! ly produced by the measures of the government
necessary to prosecute that war with advantage
! This suspension, by depreciating the exchanges
| BILE yaluo of bank notes, caused specie to disap
pear rapidly, as individuals invariably hoarG
| that which is the most valuable. There follow.
ed Immediately most pestiferous crop of ire
deenable paper, issued by private bankers and
! by individuals, and commonly known as ''shin.
plasters." As there was no check upon the is
sue, of course this kind of paper increased to an
almost unlimited extent, until its credit was en-
tirely broken down. The losses to the commu-
nifty were very large, for probably not one-hal
of it was ever redeemed. The notes of the
banks suffered, during the entire period, de.
probation of nearly one-tifth of their nominal
value. ni uoc ai.
Contraction being forced upon the banks, of.
ter much suffering in the business community
and numerous failures, specie payments were re-
sumed in 1917 but the process of liquidating in
debtedness continued for several years thereaf,
ter, without much alienation, and business suf-
fered immensely from this general unsettement
| of prices. The community finally got to the
bottom of the evil Means were gradually call
ed in, debts paid of, and business was re-estab.
lished Labor properly applied restored feel
ing of security, aud with security came the ten
| dency to launch out again into speculations and
| hazardous enterprises. Bank credit was again
the means for the bold and enterprisiug to car
ry out their plans of profit by speculative prof
| ects, and the abuse of these means ended in the
same disasters which twenty years before at-
hicted the country. sH
| The indications of the coming crisis preceded
the storm year or two, and the general gov
erhment, to check the excess and abuse ofcred'
it, issued its famous 'specie circular" requiring
coin to he paid for public lands. This excellent
measure did not, however, avert the storm, the
evil had been so long accumulating. A loan o1
debt had to be wiped off, and in the process the
banks were obliged to suspend. Suspension
commenced with the New York banks on the
10th of May, 1887, and was announced as fol-
lows: ua
cat a meeting of all the banks of this city,
except three, it was resolved, that, under ex-
listing circumstances, it is expedient and neces-
sary to suspend specie payments. In the mean,
time the notes of oil the banks will be received
at the different banks as usual in payment Of
debts and on deposit and as the indebtedness OF
the community to the banks exceeds three times
the amount of their liabilities to the public, it is
hoped and expected that the notes OF the differ
ent banks will pass current as usual, and that
the state of the times will soon be such as to
render the resumption of specie payments prac-
ticable"
This suspension. which was speedily followed
by all the banks of the country, was attributed
at the time, in the party papers, to the schemes
of politicians and bank advocates, to get the
Government to re-establish the United States
Bank, which Congress had refused to re-charter.
Whatever may have been the party schemes
and wishes at the time, the real cause of the
suspension was the abuse of credit. The ia
nous Bankrupt Law which followed during the
subsequent period of disaster, Casting four or
FIVE years before the banks recovered fully from
its effects,) wiped out four hundred millions OF
debt, as was estimated at that time, so deeply
had the business of the country been involved
by the speculations of the day created by the
previous bank infations. Various measures
were adopted to alleviate the distresses of the
people into which these foies causing suspen-
sion had plunged them. Every municipal cor
poration issued its promises to pay to supply
currency in the absence of gold, which the a.
bundance of this paper caused to keep hid
den. Loan companies were established to 1ur-
nsh the people with printed pieces of paper,
promising to pay sums from five dollars, down
to five cents, which promises, it is needless to
say, were never redeemed. The measures OF
relief resorted to only aggravated the difficulties
The issues of the loan companies being based
upon nothing, soon lost public confidence, and
the last holders never realized one cent in the
way of redemption. Congress was called upon
for aid, but it refused to repeal the specie clrcu
lar; President Van Buren, at that time recon-
a. ~ G,h la w
divorced the Government from the banks and
keeps it above the vicissitudes OF their hnctua-
tons.
In August, 1888, the banks made premature
effort to resume, but broke down in October,
1889, by the q. S. Bank suddenly stopping pay
ment. The Legislature required the banks to
resume in January, 1841, but in three weeks
time the Bank of the United States again sus'
pended, and ultimately proved insolvent. The
other banks partially suspended, when the Leg
islature came to their aid and authorized the
sRelief' measures, which released the banks
from the penalties of suspension, and author
lied them to loan the State s., 1000, issuing
in payment of the loan their own notes, for less
denominations thon FIVE dollars, to which last
named amount they had previously been re-
stricted. The Relief issue continued to be the
currency for some years after, but gradually they
went out of circulation, and as the banks
strengthened themselves general resumption
of specie payments was as gradually effected,
though not without another breaking down in
ls42, begun by the Girard Bank and the Bank
of Pennsylvania, and not without Legislative
act recurring the banks to resume forthwith
which those who did not accept the Relief
law complied with.
Since that time we have been sailing on, sub
iect to occasional fluctuations, but ending in the
excessive initiation which has produced the pres
ent explosion. se