The Dallas weekly herald. [volume] (Dallas, Tex.) 1873-1885, 1873-09-27
Financial Lessons 90 The History .
Money pnnlcs In America.

The financial lessons Of the pas
should not he without interest at Tho
present juncture. WeprOp0sc to recit,
Il bit Of history. The first real impulse
to speculation In this country followed
the war of 1872 when The government
issued SlG,000,00O of Treasury notes,
md placed loans amounting to Sl09,-
600. 900 In 1916 there We're POS banks,
with capital of $50 ,C0OOOO. When
the peace of Utrecht was declared,
these began to fail, and in Il few
months S40,000,0OO was swept out OF
existence.
The New York Stock Exchange was
created in 1917, and in 1925 the coun-
try witnessed the first mad fever OF
speculation. People began to do busi-
ness on margins" even then, and
the temptation 10 purchase certificates
of shares with but small payment
! only intensified the disease.
4 water works company, torinstancc
/ was authorized to hold 81 2,OJO,OOO OF
capital; Sl0,O00UO0 We're subscribed,
| The Morris Canal and Banking Com
pany, whose capital was fixed at ST.
| COO, 900, had S2O, 900, 900 of subscriptions.
There were G2i new joint stock COM
paup4 organized in Great Britain
! between 1924 and 1928. They distribu-
| ted immense dividends and thus stimu-
lated speculation on our side OF the
Atlantic. Corporations in New York
and Philadelphia followed suit, paying
>, 10 and 10 ner cent, semi-annually.
| Then the railroad movement began
and was helped OIL by States until
Hsecuritiesu were counted by millions,
| T., "A, th.,pn ,ra hnnI -
| SBQ,0OO,O0O for banks, $4O,O0O,OOO for
railroads, $50, 200, ,0U0 for canals andS2o,-
600 600 representing miscellaneous ana
more local projects. These bonds
chiefly concentrated in the New York
stock exchange,
True, New York to-day does two
| hundred times more business than was
done then, but country ana capita!
have increased in proportion, iteAc-
tjon set in as early rs 1871. lhe
market became stringent during tha'
year, and bank loans rose from forty
seven TO sixty millions OF dollars.
Money continued to harden, l1anNS
and brokers failed right and left.
| Declarations came 10 sudden light, anu
| sleepy directors We're not unirequentiy,
| then rs now, amazed ut the discovery
of false entries on their books. Specu-
latiOn, however, continued to run riot
all over the country Monster sWin-
| dies showed their heads everywhere.
| Government agents sold StOVOO, ,ujJ Gi
| public lands in about year, deposited
the proceeds in local banks, and these
were loaned out to fresh buyers until
| the imitation of credit was for those
times something fearful,
Finally the crash came The harvest
of 1886 failed. The producer could not
pay the retailer; the retailer could not
Settle with the .jobheF, the jobher was
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 thin
air, and Il few months saw the West
insolvent. The Losses amounted to
hundreds of millions of dollars. The
conseouences extended everywhere.
Sixteen banks dropped out tofcNistencc,
sinking as they went down $l32,nup,a10
ana the creditors realized IN their SET
Elements about one cent on the dollar.
STAY laws followed, and the era Of pa
per currency and new State securities.
The resumption of specie payments by
the New York banks through loan OF
five million dollars made tG the Sank
! Of England Two years later, ana ,lle
| process Of recovery, are phases ol thc
| history with which We have not now
to deal.
We have simply recalled some of the
incidents that led up to the panic oi
1897 in order that the pupiit may
compare that period with the present.
| The events which eliminated i'll the
misfortune of 1857 began their inllu-
ences MS early as 1868 and 1901, ana
chiefly belong to the history OF railroad
speculation. The country was rich.
Trade was lively and there was sur
felt of gold and currency. Ne better
opportunity ever offered for successful
ventures. The New York Stock In
change was a power in the land. The
credit af brokers was great. They
could draw checks on accommodating
banks for ten times tho amount OF
their deposits, which was promptly
certified by paying tellers. Banks re-
laXcd their scrutiny OF securities i'll
their cagerncss for call loans, and the
weekly average of loans on promissory
notes and stocks was from ninety-tive
to hundred millions. The journals
of the day sang hallelujahs over the
credit of the country and its uuboundcd
prosperity, and not cloud could be
deserted.
Five and six per cent was current
interest in this city, while in London
capital could not command more than
one and half or two per cent per
annum. Hence England again became
a purchaser of American securities.
II hnn,,ht lnrurnlNr .f pni Il.
road bonds. taking the best. Hundreds
of houses at home likewise had their
capital in bonds. In short everybody
invested in bonds because they were
paying large interest Finally, how.
ever, there was sudden check to all
this mania. There were Tumors of war
on the continent. The English capi-
talists became timid and returned
their securities for realization. Bread
stufls advanced. Deposits decreased.
Heavy importations became due, and
little later the banks were absolutely
forced to the calling in of loans. Stocks
now fell rapidly.
To stem the wave was impossible,
and the money institutions were left
with q great load of stocks and bonds
that were daily diminishing in value.
Inc DfIl loca OlieIcu any NiilillS pub a
prospect of relief Great issues of
fraudulent stocks were discovered;
20, 900 illegal shares of a great railroad
running out of New York had been
sold at par bv one of its principal
officials $500, 600 worth of forged stock
of another company was OH the street;
there were minor breaches of trust hy
the score, and suspicion filled the air.
Several Western banks and a few in
this neighbarhood suspended. The
depression of prices was enormous. Re
action followed in 1855. Those who
dared TO buy at the low prices Of 1854
made fortluss. drops were good, the
elder railroads paid handsome divi-
dends, aud the bulls were jubilant.
New and competing lines now came
into the picture. Their bonds sold for
anything they would fetch, and thou
sands on both sides of the Atlantic
came forward as buyers.
The banks loaned money on these
securities in little emore ihans il months
{ fa tba anaoupr of O-Pr lNelltN million