Panics.Since 1837 periods of financial stringency and industrial depression have occurred about once every ten years, and many people have come to look upon these disturbances as an inevitable concomitant of our economic system. The panic of 1837 was before Kansas came into existence as an independent political organization. Some attribute this panic to President Jackson's opposition to the Bank of the United States, but it is worthy of note that the banks of England and Ireland were also affected, and in an investigation that followed in England it developed that speculation was the principal cause, the "three W's"the house of Wilson, Wildes and Wigginshaving been especially active in exploiting prices of cotton, etc., and at the same time carrying on irregular deals in financial circles.
If a panic was due in 1847 it was probably "side-tracked" by the War with Mexico, but in 1857 there was a financial crisis of widespread proportions. At that time Kansas was in the throes of the border war, her industries not having yet become sufficiently developed to feel the stress of the depression. The Civil war, from 1861 to 1865, delayed the decennial panic until 1873. Immediately following the war the country plunged into an era of wild speculation. Corporations were promoted, towns were projected all over the West, prices of real estate soared beyond the reach of the average individual, and fictitious values attached to almost every commodity. The panic was precipitated by the failure of the great banking house of Jay Cooke & Co., of Philadelphia, on Sept. 18, 1873. The Credit Mobilier was organized in 1863, right in the midst of the war. It was a company for facilitating the construction of public works, but in 1867 the charter was transferred to a company that had been organized for the purpose of building the Pacific railroad. The capital was increased and the work of construction was sublet to the old Credit Mobilier company, to which Jay Cooke & Co. made large loans on its bonds. An investigation later showed that much of the stock of the Credit Mobilier company was held by members. The exposure and the failure of Cooke started a panic that extended to all parts of the country. Great excitement prevailed in all the principal cities, but the failures were greatest in the East. Just as affairs were beginning to look brighter the failure of Henry Clews & Co., of New York, a firm that had extensive business relations with the South and West, started fresh trouble, the cities of Memphis, Tenn., and Augusta, Ga., being the worst affected.
Concerning the panic in Kansas, Hazelrigg's history says: "Banks suspended in several cities, and hundreds of persons were involved in the severest distress. The depression resulting from the panic was felt by all classes, and, for a time threatened to affect materially the prosperity of the state." The panic was perhaps more keenly felt in Leavenworth than in any other Kansas city. Shortly after the failure of Henry Clews & Co. the St. Louis banks resorted to clearing house certificates instead of paying out currency. The Union, and the Manufacturers' national banks of Chicago failed on Sept. 26, when several of the Leavenworth banking institutions entered into an agreement to "suspend payment by currency or exchange until further notice." Some of the banks reopened on the 30th and some never resumed business. Senator Pomeroy of Kansas lost heavily by the failure of the First national bank of Washington.
The country had scarcely recovered from the effects of the crisis of 1873 when another period of depression came. Appleton's Annual Cyclopedia says: "The panic was due to a variety of causes, none of which was entirely controllable. It may be said to have been the natural result of the inflation which began with 1878 and ended by the middle of 1881." A year before the actual commencement of the panic, business men all over the country intuitively became more conservative. Merchants and manufacturers bought goods and materials in small quantities for immediate demand; bankers were careful to scrutinize collateral offered for loans, and "retrenchment" appeared to be the universal watchword. The Marine national bank of New York closed its doors on May 5, 1884, and this suspension was quickly followed by the failure of the firm of Grant & Ward, the death of Gen. Grant being no doubt hastened by this catastrophe. Other New York banks followed, and in ten days the panic was on in earnest. The failures of the year amounted to about $240,000,000, but a majority of them were purely financial, and many were the direct consequence of stock speculation. A few merchants and manufacturers failed, but the panic was by no means a commercial or industrial crisis. Fortunately the West and South were not seriously affected and in a few months business was practically in its normal condition in those sections. The failure of Donell, Lawson & Simpson of New York, formerly of St. Joseph, Mo., inflicted some temporary distress in Kansas, where the firm had large liabilities.
Soon after the presidential election of 1892 a feeling of general distrust seemed to pervade the business circles of the country, and those pessimistically inclined began to foretell another panic. Financiers insisted that the unsettled conditions were due to the Sherman silver law, which many of the newspapers urged Congress to repeal. But Congress adjourned without doing so and matters grew worse. The $100,000,000 gold reserve maintained by an unwritten law of the treasury department for the redemption of United States notes was depleted by withdrawals of gold for export until it was but little over $80,000,000. President Cleveland called the 53d Congress to meet in special session on Aug. 7, 1893, and urged the repeal of the Sherman law to protect the gold reserve. This was done, but not until after the reserve had been diminished as above stated. The panic reached Kansas City, Mo., about the middle of July, before the special session of Congress was convened. On July 14 one of the largest and oldest national banks in the city was forced to close its doors. Telegrams were rushed to banks in other cities for assistance. The bank opened for business the following day, but the feeling of uncertainty awakened by its temporary suspension led to runs upon several banks about the mouth of the Kaw that resulted in their failure. One of the consequences of the depression was the Commonweal Army (q. v.) of 1894.
Owing to the almost phenomenal power of recuperation of the American peoplethe spirit that is not easily discouragedthe country quickly recovered from the effects of the panic, and the people enjoyed an uninterrupted era of prosperity until some New York speculators brought about the little flurry in financial and industrial circles in Oct., 1907.Pages 439-441 from volume II of Kansas: a cyclopedia of state history, embracing events, institutions, industries, counties, cities, towns, prominent persons, etc. ... / with a supplementary volume devoted to selected personal history and reminiscence. Standard Pub. Co. Chicago : 1912. 3 v. in 4. : front., ill., ports.; 28 cm. Vols. I-II edited by Frank W. Blackmar. Transcribed July 2002 by Carolyn Ward.
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