The weekly democratic statesman. [volume] (Austin, Tex.) 1871-1883, 1873-10-16
The History OF Money Panics IN
AmerIca.


t'son ne Ncv York HERALD
{ The fnancial lessons Of the past should
not be without interest at the present juno
turc. We propose to recite bit OF history
The first real impulse to speculate in this
country followed the war of 1Sl2 when the
government issued SIC, 600, 600 OF treasury
notes, aud placed loans amounting to $iUg,-
600, 000 In 1916, there were EOS banks,
peace Of Utrecht was declared, these began
to fail, and in few months $40, Oo0, 600
was swept out Of existence.
The New York Stock Exchange was
created in 1917, and an 1926 the country VIII
messed the frst mad fever of speculation.
People began TO do business on margins
even then, and the temptation to purchase
certificates OF shares with but a small pay
ment only intensified the disease. Awater-
works company. for instance, was author
lied to hold s., 600, 600 of capital; $40, 600, :
600 were subscribed. The Morris Canal
and Banking Company, whose capital was
fixed at 81, 600, 900, had $50, GOO, 600 Of sub
scriptions There were six hundred and
twenty-feur new joint companies Organized
in Great Britain between 1924 and 1926.
They distributed immense dividends, and
thus stimulated speculation on our side of
the Atlantic. Corporations in New York
and Philadelphia followed suit, paying FIVE,
ten and fifteen per cent, semi-annually.
Then the railroad movement began. and
was Helped on by States until 'securitiesr
were counted by millions. In the year 1888
thee were of bonds 500, 600. 600 FOR banks,
$4,000, 600 for railroads, $50, 600, 600 for
caIals, and $s5, 000,O 900 representing mis-
ceaaneOus and more local projects. i.s
q These bonds chiefly concentrated in the
Dew York Stock EXchange- True, New
fork to-day does two hundred times more
business than was done then, but country
and capital have increased in proportion.
Reaction set as early as 1884 The mar
ket became stringent during that year, and
bank loans rose from forty-seven to sixty
millions of dollars Money continued to
harden. Banker nd brokers failed right
and left. Declarations came to sudden
light, and sleepy directors were not unfre-
quently, then rs now, amazed at the discov-
cry of false entries on their books. Specu-
latien, however, eeRtinQed To run riot all
over the country. Monster swindles showed
their heads everywhere. Government agents.
sold $40, 900, 600 OF public lands in about a
year, deposited thelproceeds in local banks
and these were loaned ont to fresh BUYERS
until the in1afionT of cn6dit was forthose
times something fearful. Finally the crash.
came. The harvest OF 1886 failed. The
could not pay the retailer; the re-
taller could not settle with the iobber: the
iobber WINS Unable to meet his Obligations
with the importer, and every link in the
chain of trade was broken and out of
place. The real estate bubble dissolved in
hin air, and a few months saw tic West
nsolVent. The losses aniounted.tb hundreds
Of millions of dollars. The Consequences
extended everywhere Sixteen banks
dropped out of existence, sinking as they
went down $152,, 600, 600, and the creditors
realized in their settlement about one cent
On the dollar, Stay laws followed, and the
IRA Of paper eufrency and new State securi-
lies. The Assumptions of specie PAYMENTS
BY the New York banks through a loan. of
i've million dollars made by the Bank Of
England two years later, and the process of
are phases OF the history with
which we have not now to deal s4'f Z
: We have simply recalled some of the in
1idents that led up to the panic of 1897,
n order that the public may compare that
period with the present. The events
which eliminated in the misfortune of 1857
began their influences as early as 1868 and
1854, and chiefly belonged to the history of
'ailroad speculation The country was rich.
Trade was lively and there was surfeit of
gold and currency. No better opportunity
ever offered for successful ventures. The
New. York Stock Exchange was a power in
,he hnd. The credit of brokers was great.
They could draw checks on accommodating
banks for ten times the amount Of their de-
Iosits, which were promptly certified by
paying tellers. Banks relaxed their scTtl-
my of securities in their eagerness for call
oans and the weekly average Of loans on
,romissory notes and stocks was from
linety-iEe to a hundred millions The
0urnals Of the day sang hallelujahs over
he credit of the country and its unbounded
and not a cloud could be de-
crbed. Five and six per cent was cur
ent interest IN this city, while in London /
apital could not command more than one
nd q half or two per cent. per annnm.
Hence England again became purchaser of
securities. Her capitalists bought
argely Of railroad bonds, taking the best |
hundreds of houses at home likewise had
heir capital in bonds. In short everybody
invested in bonds because they were paying |
arge interests. Finally, however, there was
sudden check to all this mania. There |
we're rumors of war on the continent. The
English capitalists became timid and re-
urned their securities for realization,
advanced. Deposits decreased.
Ieavy iInportations became due, and little
ater the banks were absolutely forced 10
he calling in of loans. Stocks now fell
apidly. 10 stem the wave was impossible, |
nd the money institutions were left with
reat load of stocks and bonds that were |
ally diminishing in value llii 3f
The year 1854 offered anything but pros
ect of relief. Great issues of fraudulent
tocks were discovered 90, 600 illegal |
hares sof great railroad running out of /
lew York had been sold at par i1y one Of |
IS principal officials; $500, 600 worth of |
Orged stock of another company was on |
be street there were minor breaches Of I
rust by the score, and suspicion filed the |
ir. Several Western banks and few in |
his neighbOrhoOd suspended. The de- I
rcssion Of prices was enormous. Reaction
0llewed in 1855. Those who dared to buy I
{ the low prices of 1854 made fortunes. |
rops were good, the older roads paid hand /
ONE dividends, and he.bulls were iubi-
INT. New and competing lines now came
ltO the picture. Their bonds sold for any
hing they would fetch, and thousands on 4
9th sides Of the Atlantic came forward as
myers. The banks loaned money on these
ecurities in little more than six months to /
be amount Of over twenty million dollars. /
tocks moved gradually. downward, but /
anic seemed impossible, because It was be- 4
eyed that 1t could only originate inEondon.
he capitalists Of which were not likely to /
end back all Of their hundreds Of millions
t dollars to certain sacrifice. The juno
IRE again became critical. More ''irregu-
lrities'' were quoted. Heavy loads Of 4
locks were being carried in the hope Of a
isc, and the banks began to slowly con-
ract, though still generous in accoIhmOda-
ions to customers who desired aid in main
aiming their position. Suddenly came the /
iilure Of the Ohio Insurance. and Trust /
company. This was the feather that broke
be camel's back. Il had advanced large
lms on stocks and bonds
The loans were called IN, brokers could 4
OF comply, and the doors Of the institution /