The western Democrat. [volume] (Charlotte, N.C.) 1852-1870, 1857-10-06


The. first general Suspension of the banks
of this country (says the Philadelphia Led
ger) was in 1914, during the period of the
war with Great Britain, and was inlme-
diately produced by the measures of gov
ernment necessary 70 prosecute that war
with advantage. This suspension, by de-
preciating the exehangeable value of bank
notes, caused specie TO disappear rapidly,
as individuals invariably hoard that which
is the most valuable. There followed i'm
mcdiately most pestiferous crop of ire
deemable paper. issued by private bankers
and individuals, and commonly known as
''shin- plasters-' AS there was no check
upon the Issue, of course this kind of paper
increased to an unlimited extent, until its
credit was entirely borken down. The
losses to the community were very large,
for probably ret onehalf of it was ever re-
deemed. The notes of the banks suffered,
during the entire period, a depreciation of
nearly onefifth of their nominal value.
Contraction being forced upon the banks,
after much suffering in the business commu-
nifty and numerous failures, specie pay
ments were rcsumed-in 1917, but the pro-
cess Of fquidating Indebtedness continued
for several years afterwards, without much
alienation, and business suffered immense
ly by this general unsettlement Of prices.
The community finally got to the bottom
of the evil. Means were gradually called
in, debts paid off, and business was re-
established. Labor properly applied re-
stored a feeling of security, and with Sc
again into speculatiens and hazardous en-
terprises. Bank credit was again the means
for the bold and enterprising to carry ont
their plans of profit by speculative projects.
same disasters which twenty years be-
fore afflicted the country. ...,.
The indications of the coming crisis pre-
cceded the storm year or two, and the
general government, to check the excess
and abuse of credit, issued its famous
"specie circular" requiring coin to be paid
for public lands. This excellent measure
did not, however, avert the storm, the evil
had been too long accommodating. A loan of
debt had to be wiped off, and in the pro-
cess the banks were obliged to suspend.
Suspension commenced with the New York
banks on the 10th of May, 1887, and was
announced as follows: -. ....-
AT meeting of all the banks of this
city, except three. it was resolved, that. I'M
der existing circumstances. it is expedient
and necessary to suspend specie payments.
In the meantime the notes of all 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 tho
different banks will pass current as usual,
and that the state of the times willt soon be
such as to render the resumption of specie
payments practicable"
This suspension, which was speedily fol-
lowed by all the banks of the country, was
attributed at the time, in the party papers.
to the schemes Of politicians and bank ad-
vocates, to get the Government to re-es-
tablish the United States Bank, which Con-
gross 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
famous Bankrupt Law which followed dur
ing the subsequent period of disaster, (last-
ing four or five years before the banks re-
covered fully from its cfects) wiped out
four hundred millions of debt, as was esti-
mated at that time, SO deeply lad the bust
ness of the country been involved by the
speculations of the day created by the pre-
vious bank mutations. Various measures
were adopted to alleviate the distresses of
the people into which these fPllies causing
suspension had plunged them. Every
municipal corporation issued its promises
to pay to supply a currency in the alb
sence of gold" which the abundance of this
paper caused to keep gold hidden. Loan
companise were established to furnish the
people with printed pieces of paper, promis
ing to pay sums from FIVE dollars down to
FIVE cents, which promises It IS needless to
say, were never redeemed. The measures
of relief resortcd to only aggravated the
difficulties. The issues of the loan compa
MES being based upon nothing. soon lost
public confidence, and tho last holders
never realized the first cent in the way of
redemption. Congress was called upon
for aid, but it refused to repeal the specie
circular: President Van Buren, recommend
ed at that time the present Sub-Treasury
law, which divorced the Government from
the banks and keeps it above the vicissitudes
of their fluctuations.
In August, 1888. the banks made pre-
mature effort to resume. but broke down in
October, 1889, by the U. S. Bank suddenly
stopping payment. The Legislature re-
oured the banks to resume in January,
l54l, but in three weeks time the Bank of
the United States again suspended, and
ultimately proved insolvent. The other
banks partially suspended. when the Legis-
lature came to their aid and authorized the
"Relief' measures, which relea sed the banks
from the penalties of a suspension, and au-
thorized them to loan the State S3,1OO,O00,
issuing in payment of the loan their own