New Orleans daily crescent. [volume] ([New Orleans, La.]) 1851-1866, 1857-10-26

Another Letter from Mr.. Appleton.
Eg'gT
From the Boston Daily Advertiser, Oct. Is.
No comments are necessary to introduce the SUBJ
Joined communication from Hon. Nathan Appleton to
the attention Of our readers. The explanation which
he gives of the origin Of the financial troubles which
Cypress the community, is both profound and perspic
uous 1t fixes the seat of the mischief in the true
spot, viz: the banks of the city of New York, and
points out the want of intelligent financial head to
control their movements, as the main cause of the
policy which has been attended by SO many disasters
The MONEY CRISIS AND THE NEW York Banks
Messrs. Editors: have for many years been with
drawn from active business. / have been merely
locker on but not unobseryant of the of trade
and especially of our banking operations.
Our system Of currency is a delicate one. It is
founded on bank credits, resting very moderate
basis of coin. When perfectly balanced, it works
very we'll but slight arrangement may produce
great deal of mischief The great disturbing cause is
o demand for specie for export which can only be
checked by contraction Of the bank credits. During
the present year. we have been going on very smoothly
sudden squa strikes u.s. which continues to increase
to terrific hurricane, threatening even to swamp the
ship itself. The question arises how comes all this
about what is the cause2
New York is the great central banking power. She
sets the keynote to the whole country. If she ex.
pand the whole country expands: II she contracts,
it is felt to the remotest extremtes 1t is tremen
power, LnuU OF INCREASING OF diminishing the
circulating medium of the whole country. Ii is
deep responsibility, and demands sound discretion
and much wisdom in its regulation. Unfortunately,
there appears to be no unity OF action no controlling
principle, in the management OF this power. 1t is
divided between fftyfiye banks each acting its own
separate part under the influence of different opinions
and different interests. Banks are public institutions
they are founded for the public good and the duty
OF consulting the good OF the community in the use
OF their great power as sacred as that of providing
for their own safety There is apparently no indi-
vdua of sufficient influence to bring this heterogene-
mass TO unity of action in crisis like the present.
as was Albert Gallatin whilst he lived
The circulating medium Of the city of New York
consists in the liabilities of her banks in the form of
counts increase or diminish these liabilities As these
liabilities are greater or less, is money plenty or
scarce. They constitute the fund out Of which all
operations must be performed.
Hunts Merchants Magazine contains tables of the
weekly returns of the banks of the city of New York
for the years 1856 and 1857 which furnish complete
view OF their operations They throw flood of
January s. 1851, shows lo4 millions Of liabilities,
with $1l 600 in specie.
This varied very little from the returns of the pre-
cedng six months and this state of things continued
with little change, but with slight tendency to in
creased expansion up to the 10Th August. The
greatest expansion was the I'd of May, when the
liabilities were los Millions with IL millions of SPECIE
The return Of 18th August shows lol millions Of liza
btes, and 100000 Of SPECIE From this rapid
contraction commenced, the liabilities being reduced
on the 5th September to SO Millions with 10 900
of specie Here the contraction ought to have ceased.
The object to stop the export of specie. That
had been done. Exchange on London had fallen be.
low the point at which specie could he shipped with
| out loss Can any mortal man give me reason or
an apology why contraction should continue day
after this point had been reached! The banks were
then stronger than they had been for two years. But
contraction did continue until, on the Sd October the
liabilities had been reduced to 7G milons-thus re-
ducing the circulating medium of New York city,
mi ar rls pf NOR
Tremendous! Was the like ever known in the his.
tory of banking? have no hesitation in saying, it
is this continued contraction of the New York banks
since the 9th of September, without the slightest
necessity which has brought about the present disas
trous crisis.
| There was no decided oyertrade. There was no
speculation, except by few houses in sugar. There
was no doubt an excess of imports, but no greater
than for several years. and the effect of these was
wholly cured on the 5th September by the rate of
exchange on London. Why continue contraction
further Was not IS millions with IOt millions of
specie, being liz per cent as safe proportion as
l04 millions in January with II millions of specie or
| IL per cent on their liabites2
| There is but one answer. The New York banks
have been acting under panic, and that panic they
have communicated to others, until there is almost
total loss Of confidence. The consequences are before
| us, in the paralysis Of all trade from Bangor to New
Orleans, the stoppage of banks through great part
OF the United States, the stoppage Of factories the
discharge of thousands of laborers the inability to
bring our large crops of produce to Market the ruin
Gus rate of two or three per cent. month on the
strongest paper, runous depreciation in the price of
all stocks, and even on exchange on London. In nv
whole experience have never known crisis so Sc
we're as the present, and, | must say, SO wholly un
called for
was Bank Director in 1874 when New York
and all the States South and West suspended specie
payments. Boston had ample means and stood firm,
whilst many croakers thought it madness for Boston
to hold on, when all the rest of the country sus-
pended She did SO, however, and all New England
with her, and thus saved them the losses which ac-
companed the resumption in other States in the
terrible revulsion of 1919.
In 1884 Mr.. Biddle was fagetiously endeavoring to
| force Congress to grant him charter through the
distress he had it in his power to nict the coun
try In March OF that year committee Of the mer-
chants and bankers of New York informed him that
| unless he changed his course and would agree to
their terms, which were that the United States Bank
should cease to call on the other banks for thirty
days. his course would be denounced at the adjourned
meeting ut the Exchange.
| Mr.. Biddle, at the last moment agreed to their
TERMS in consequence of which the country was i'm
medately relieved. But Mr.. Biddle was reckless
enough, when the thirty days expired without the
slightest necessity, to call for these balances and
give the screw another turn.
This produced an intense and unexpected pressure,
for it was the New York understanding that Mr. Bid
die should not again press them without some show
OF necessity. This pressure he continued until the adj
ournment OF Congress in July, when he gave up the
chase and soon after extended the loans Of the bank
from AZ to 63 millions 80
AHeie was uotnlHS III Llat pressure 10 be compared
IN severity to the present. 1t was wholly owing to
the unprincipled action of Mr.. Biddle.
the pressure of 1897 was wholly unlike the pre-
sent. During period of great overtrade few Lon
don houses imprudently created an American debt of
nifty or sixty millions Of dollars by giving out their
acceptances to be met by other equally fictitious bills
as they fell due. These houses fell into dscredt and
informed their correspondents in America that the
whole debt must be liquidated at once or they must
become bankrupt. This was in March, when no re-
mttances could be made except in SPECIE which the
banks were called on to furnish.
The New York banks went on for something over
month, when they found it impossible to continue.
They then suspended, and with them the whole
country There is nothing like it now as there is no
foreign demand for specie.
The question now arises, what is the remedy2
| What is to be done? Nothing can be palmer. The
New York banks must retrace their steps, and
speedily, or it will be too late They should at once
increase the circulating medium by expanding their
discounts ten or fifteen millions of dollars. No other
course will set the wheels in motion.
| NATHAN APPLETON.
| BosToN, Oct H. 1857.
| P. S-Snce the above was written we have the
returns Of the New York banks for another week,
| showing further contraction of four Millions The
further persistence in wrong course has produced
its natural result. 1t has frightened the community
until the banks are driven to the desperate remedy Of
suspension.
A NIGHT OF CRAE.--In Boston, on the night of