PANIC OF 1837 TO 1839.
…The Parisian house of Hottinguer
like its other agents, sold little until the first of July, and when it saw
that the effort to monopolize cotton could not succeeded, fearing to continue
this gigantic operation, it declared that it employed too much capital. In the
midst of all this, some new bills of exchange reached Paris without consignment of corresponding
value; and the house of Hottinguer protested.
Hope of Amsterdam discontinued
his connection. The London
agent called upon the Bank of England for help, which was granted upon the
guaranty of certain firms of that place and a deposit of good American paper.
Rothschild accepted the refused
bills of exchange, after having found out that a sum of 400,000 pounds would
suffice for Mr. Biddle’s agent; these 400,000 pounds offered as a guaranty
consisted of Government stock, and of shares in railroads, canals and banks.
This agreement was not given out freely, which still further increased the
feeling of distrust. A crisis in which $150,000,000 of European capital were
destined to be engulfed was rapidly approaching.
BREAKING OUT OF THE PANIC OF
1839.
– The English papers had already
warned the people to be distrustful. The Times
said it was impossible to have any confidence in the Bank as long as it would
not resume specie payments. Mr. Biddle defended himself through papers paid for
the purpose, finally in the Augsburg
Gazzete, while he waited for the soap
bubble to burst. His retained defenders claimed that the 150,000 bales of
cotton sent to Europe had not been sold, but
received on commission. Advances in paper had been made which in the month of
August 1839, were to be paid in notes by Southern banks, for a new grant made
to the Bank by the State of Pennsylvania permitted it to buy shares of other
banks, and by this means, to gain their management; their notes lost 20 to 50
per cent. as compared with Northern banks.
Through his profit upon the
difference of the notes, and through the payment for the cotton in paper, and
through the sale of bullion exchange, Mr. Biddle had made five to six million
dollars, which lay at his command in London .
The protection of his bills of
exchange made a great impression in England ;
the rebound was felt in America ,
where the panic, moderated in 1837, through the intervention of the Bank, burst
forth with renewed fury in 1839, and brought about the complete liquidation of
that establishment.
At the same time, the English
market was very much pressed, for, according to a notice of Chamber of
commerce, the number of that year’s bankruptcies was greater than usual. From
June 11 1838, to June 1839, there were 306 bankruptcies in London , and 781 in the “provinces” – in all
1,087. At Manchester there were 82, at Birmingham 54, at Liverpool 44, at Leeds
33. The London Exchange was flooded with unsalable paper, an occurrence which
had also taken place on a smaller scale in 1837.
Such was the interruption of
business that interest for money rose to 20 per cent., and the discount rate
for the best paper to 15 or 18 per cent.
The various States in the Union had contracted debts with inconceivable ease, and
interest payments were provided for by new loans. President Jackson declared it
necessary to make a loan in order to pay interest moneys. It was deemed
inexpedient to impose new taxes to provide for the cost of public works. Great
was the embarrassment in America ,
and as no more money came from England ,
it was necessary for the Americans to look for it in their own country.
Business circles were flooded
with long-time paper running at a discount of one half to 1 per cent. a month.
Discount rose to 25 per cent. The panic was so great that all confidence was
destroyed. The Bank of the United
States in order to maintain its credit, paid
its depreciated long-time paper.
The struggle between the Bank and
its opponents, led by President Van Buren, re-commenced. These last
declared that the Bank had erred in circulating the $4,000,000 of notes of the
old bank, which should have been retired coincidentely with the charter; and the
Senate forbade their circulation.
The Government claimed large sums
from the Bank, the statement of which showed close to $4,000,000; and, as it
could not secure this amount in money, it was decided to issue $10,000,000 of
Treasury bonds. The Bank party wished to push Government into bankruptcy, in
order to induce it to turn to them for help, and through the issue of “circular
specie”, oblige it to adopt a system of paper money.
A bill was brought forward with
this view. Biddle, who wished to increase the circulation, said he could resume
specie payments, and thus forced his shares to rise; but rejoicing of the Bank
party was soon disturbed by the fact that collectors of taxes were forbidden to
receive any bank note for less than $20 which was not redeemable in hard money.
After a struggle of eight years,
the separation became complete, and the administration of National finances was
withdrawn from the bank.
In 1836, a law was passed
providing that upon the expiration of its charter, the National funds should be
again deposited with it, as soon as the Bank resumed specie payment. Upon the
suspension in 1837, the Government was forced to abate the law, in order to
protect specie, an imposed on its financial and postal agents some of the
duties of the Treasury. In 1840, the management of the public Treasury
constituted a separate and distinct department. Such was the liquidation
following the panic, that Congress granted the Bank three months in which it must
either resume specie payment or liquidate. To conform to this decree, the State
of Pennsylvania
fixed the resumption of specie payments by its banks, for January 15, 1841. The
shares of the Bank, which had yielded no dividend in 1839, and offered a similar
outlook for the first half of 1840, fell to $61. They had been quoted as high
as $1,500. General liquidation and a loss of 50 per cent. was inevitable. This
occurred in 1841. Thus ceased for a time the bank mania in the United States .
We will recall Buchanan’s opinion
about the Bank: “If the of the United States, after ceasing to be a national
bank, and obtaining a new charter in Pennsylvania, had restrained itself to
legitimate banking, had used its resources to regulate the rate of home
exchange, and had done everything to hasten the resumption of specie payments,
it would have resurrected the National Bank. But, this is no longer possible;
it has defied Congress, violated the laws, and is mixed up in politics. The
people have recognized the viciousness of administration; the President, Mr.
Biddle, has concluded the work Jackson
began.”
Tables indicating the banks which
suspended during the panic: In 1814 – 90; in 1830 – 165; in 1837 – 618; in 1839
– 959.
The last panic from 1837 to 1839,
produced, according to some pretty accurate reports of 1841, 33,000 failures,
involving a loss of $440,000,000.
PANIC OF 1848.
– The entire discounts, which had
risen to $525,000,000 in 1837, fell to $485,000,000 in 1838, only to rise again
to $492,000,000 in 1839, and the real liquidation of the panic occurred only
then. Discounts fell at once to $462,000,000 then $386,000,000; the abundance
of capital and the low price at which it was offered, cleared out bank paper
until it was reduced from $525,000,000 to $254,000,000 in 1843.
The metallic reserve increased
from $37,000,000 to $49,000,000 (1844); the circulation was reduced from
$149,000,000 to $58,000,000.
The number of banks in 1840, from
901 fell to 691 in 1843, and the capital itself from $350,000,000 in 1840, was reduced
to $200,000,000 in 1845, and to even $196,000,000 in 1846.
All these figures clearly
indicate liquidation. The market, freed from its exchange, was enabled to
permit affairs to resume their ordinary course.
In fact, an upward movement was
taking place. Discounts rose from $264,000,000 to $344,000,000 in 1848.
Banks increased from 691 in 1843
to 751 in 1848, and their capital grew from $196,000,000 in 1846 to
$207,000,000. The paper circulation rose from $58,000,000 to $128,000,000 in
1848. Deposits from $62,000,000 reached $103,000,000 in 1848. The metallic reserve
alone fell from $49,000,000 in 1844 to $48,000,000.
The consequences of the European
panic were felt in America ,
but without causing much trouble. The liquidation of the panic of 1839 was barely
over, and was still to recent to have permitted sufficient extension of
business.
Embarrassments were slight and
brief; discounts, nevertheless, fell from $344,000,000 to $332,000,000.
The store of bullion, in spite of
the surplus and the favorable balance produced by the export of grain in Europe , fell from $49,000,000 to $39,000,000; with the
following year, the forward movement recommenced.
PANIC IN 1857.
– The stoppage in 1848 was very
brief.
…
(“A BRIEF HISTORY OF PANICS and
their periodical occurrence in the United States ”
by Clement Juglar, Vice-President of a LA SOCIETE D’ECONOMIE POLITIQUE; The
Knickerbocker Press – 1916 New York and London )
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