The President, who had been on his way from Pittsburg to Long Branch on Saturday, was, in company with the Secretary of the Treasury, at the Fifth Avenue Hotel on Sunday, the 21st, and gave audience to a large number of leading merchants and bankers, who urged upon him the necessity of immediate action on the part of the Treasury to save the country from further disaster, the issue of the "reserve" of forty-four millions of greenbacks as a loan to, or deposit with, the banks being the remedy generally suggested. The President, however, was firmly opposed to this, and suggested that a week of Sundays would probably afford more relief than anything else, but promised to do whatever seemed advisable within the limits of the law. On the next morning the assistant treasurer gave notice that he would continue the purchase of bonds, paying for them at the average prices of the Saturday previous. This he did until Thursday morning, when he ceased buying, twelve millions in all having been bought up to that time, and the available currency balance in the Treasury, without encroaching on the forty-four millions of unissued greenbacks, being exhausted.
On Monday there was a run on most of the city savings banks, which was met by an agreement among their officers to avail themselves of their legal privilege to require thirty or sixty days' notice of the intended withdrawal of deposits; and this being announced by the respective institutions, the run, as a natural consequence, ceased, and, fortunately, without the slightest popular disturbance. On the 22d the Security Trust Company and a private banking-house in Pittsburg, Pa., suspended, as also a banking-firm at Wilmington, Del. The failure of Henry Clews & Co. on the afternoon of Tuesday, the 23d, followed by that of Clews, Habicht & Co., London, caused fresh uneasiness. This house, being the financial agent of the Burlington and Cedar Rapids Railway, a new line, had been run upon for some days previously, and it showed much strength in holding out so long. The news was almost simultaneously received that the Baltimore banks had agreed upon the issue of six per cent. certificates in the manner adopted by the New York association, and that five National banks in Petersburg, Va., had closed their doors. On the morning of the 24th Howes & Macy, known to be a very strong and conservative banking-house, suspended, and this added fuel to the flame of excitement, and wild rumors of impending failures were again afloat. The steady but quiet run which had been kept up on the banks now increased, and they decided upon the issue of another ten millions of certificates, and a third issue of a like amount, if required. They also agreed to certify cheques "payable only through the Clearing-house" until the first of November, the payment of currency for cheques, for the accommodation of their dealers, to be optional in the interval with each individual bank. This involved a suspension of currency payments by all the banks in the association. The failure of the Dollar Savings Bank and a private banking-house at Richmond, Va., was reported on the same day, as also that of a banking-firm at Baltimore, and another at Wilkesbarre, Pa. On the 25th there was no change in the situation in New York, but the banks of Cincinnati, Chicago and New Orleans suspended currency payments, as those of Baltimore had done previously, and two banks at Memphis, Tenn., three at Augusta, Ga., all those at Danville, Va., and a savings bank at Selma, Ala., closed their doors. On the 26th six National banks at Chicago suspended, and a trust company, and two banks at Charleston, S.C., in addition to a banking-house at Washington; and the last day of the week, the 27th, opened on anything but an encouraging prospect. The telegrams from Europe reported an unsettled market for American securities; gold for a short time rose to 115-1/2; seven of the Louisville banks suspended, and the Boston and Washington banks voted to suspend currency payments, and (those of each city) to issue ten millions of certificates on the New York basis. But toward the close of the day favorable rumors were circulated regarding settlements on the street; and a petition for reopening the Stock Exchange was circulated, while stocks, which had been informally quoted very low, advanced several per cent.
During all this week there had been a dead-lock in business in Wall street, although a crowd of persons not belonging to the Exchange gathered on Broad street daily to buy or sell stocks for cash on delivery, the sellers forced by their necessities, and the buyers eager to secure stocks at lower prices than had been known for years. But there were so few persons provided with "the sinews of war" that the aggregate of transactions was small. The usual weekly bank statement was again omitted by the Clearing-house from motives of policy, but it transpired that the whole of the New York associated banks held on the morning of the 27th only twelve millions two hundred thousand of greenbacks, an aggregate still further reduced, at one time, to a point below ten millions, against nearly thirty-five millions—bank average—on the 20th, the date of the last statement issued. Their determination to sustain each other was, however, so strong that it tended to inspire confidence in their ability to weather the storm. It was also made known that they had agreed, on the resumption of business by the Stock Exchange, not to certify cheques except against actual balances while any certificates of their own issue remained outstanding. Twenty millions of these had been issued up to this time, and the additional ten millions before referred to were ordered to be issued in like manner, as required. The Treasury paid out during that week, including the previous Saturday, in New York and elsewhere, about thirty-five millions of greenbacks—namely, twenty-two millions in exchange for $5000 and $10,000 certificates of deposit—used as legal tenders at the Clearing-house, and presented by the banks for redemption, for which there is a special reserve of notes in the Treasury—and about thirteen millions for the purchase of the twelve millions of bonds already mentioned. It also sent to the National banks in the West and South three millions of new notes, issued under the act of July, 1870, authorizing an addition of fifty-four millions to the three hundred millions of bank-note circulation previously outstanding, nearly the whole of which has now been issued.
The bank failures West and South, and the pressing requirements to move produce to the ports, led to very urgent demands for currency in Wall street, and certified bank-cheques were quoted at a discount of from two to four per cent. as compared with greenbacks, while fears were entertained that the continued suspension of business would be only productive of harm. Hence, when the governing committee decided to reopen the Stock Exchange on the morning of Tuesday, the 30th, a feeling of positive relief was experienced.
On Monday, the 29th, only two unimportant country-bank failures were reported, and encouraging accounts were received from the West, although the suspension of a wool-manufacturing company in New York and an iron-manufacturing company in Massachusetts—each employing some hundreds of men—and the discharge of more than a thousand men from the locomotive works at Paterson, N.J., showed that the crisis had already affected labor. On all sides an anxiety to retrench was shown, and large numbers, in the aggregate, were thrown out of employment all over the country. The retail trade was very unfavorably affected, the losses sustained by the crisis, combined with the scarcity of currency, causing people to expend as little as possible; and this feature, resulting from the crisis, is likely to be a marked one for a considerable time to come.
During the previous week bills on Europe had been, as a rule, unsalable, and rates of exchange were depressed to a very low point, bankers' sterling at sixty days being quoted on Friday at 103 @ 105, and merchants' bills at 101 @ 102-1/2. The difficulty or impossibility of selling exchange greatly embarrassed shippers and retarded the movement of produce from the West; but owing to a heavy reduction by the steamship lines of the rates of freight to induce shipments, strenuous efforts were made to take advantage of it, and the exports from New York for each of the two weeks noticed were valued at about six millions and a half, while for the week ending October 4 the valuation was unusually large—namely, $8,378,130. This was the most encouraging feature of the time, especially in view of the previous heavy preponderance of the exports over the imports at New York, the value of the former having increased forty-eight millions during the first nine months of 1873, as compared with the corresponding period in 1872, while the latter were twenty-seven millions less, and while our exports of specie were also seventeen and a half millions smaller. The receipts for customs duties, however, fell far short of the usual amount, and the movement of goods out of bond was correspondingly light. Under the improved feeling visible on Monday, the 29th, the foreign exchange market became less unsettled, and rates began to improve rapidly; so that on Tuesday bankers' bills on England at sixty days had risen to 106-1/2 @ 106-3/4, and mercantile to 104-1/2 @ 105-1/2. Before this, however, the Bank of England had advanced its rate of discount from three to four per cent., and again from four to five per cent., and we had received cable advices of the shipment of about eight millions of gold from England for the United States, with further shipments in anticipation, partly the proceeds of American negotiations previous to the panic, and partly to make grain payments. The shippers of cotton and general produce were cheered by this opening of a market for their bills at such a decided improvement in rates, and on the Produce Exchange the return of confidence was marked, while quotations, which had been depressed, showed an upward tendency.
Meanwhile, the Stock Exchange opened punctually at the appointed time, and the opening prices were higher than those previously current in the informal market on the street. But it would have been too much to expect a settled market after such demoralization as had prevailed and such ruinous sacrifices as had been made. The improvement was not sustained, and prices were depressed from two to eight per cent., during the next three days, chiefly under sales to make settlements between parties on the street.
Occasional failures, both among stock and banking-houses and the mercantile and manufacturing community, and in as well as out of New York, were still reported, including three large city dry-goods firms; and the pressure for greenbacks to send to the country continued to be so severe that from three to four per cent., was paid for them, as compared with certified bank-cheques, for several days, though the premium dwindled to one-half and one per cent., before the end of the week, advancing a week later, however, to one and one and a half. The difficulty of moving produce from the West also continued very great, owing to the almost total dead-lock in the domestic exchanges, but otherwise the excitement and alarm attending the crisis seemed to have passed away, leaving only its depressing effects still visible. Money became comparatively accessible to first-class borrowers on call. But the bank statement was again omitted on the following Saturday, and it was announced that none would be made until after the banks had resumed greenback payments, and till the certificates of their own creation had been withdrawn. The deposits held by the banks at the close of business on that day, October 4, had been reduced to about a hundred and fifty-three millions, against over two hundred and seven millions and a quarter on September 13.
Before the middle of the month the continued drain of gold to the United States—the shipment from England of about sixteen millions of dollars having been reported from the beginning of the crisis to the 18th of October—caused the Bank of England to further advance its discount rate to six per cent., and shortly afterward to seven per cent. But, notwithstanding, the price of gold gradually declined to 107-3/4, a lower point than it had touched since 1861. The New York banks meanwhile lost rather than gained strength, and their aggregate of greenbacks under control of the Clearing-house was reduced to less than six millions, although this fact was not published. It was, however, at the same time believed that three or four millions more were distributed among them, of which they made no return to the association. Currency during the latter half of the month began to return somewhat rapidly from the West in the shape of collections by the merchants, and this, in turn, led to remittances to the South, where it was greatly needed for the cotton crop, the movement of which had been almost entirely arrested. Affairs on the Stock Exchange were, in the interval, unsettled, and enormously heavy sacrifices were made in order to adjust differences between brokers, as well as by outside parties in pressing need of cash. On Tuesday, the 14th of October, almost another panic prevailed, and prices touched a lower point than they had before reached. New York Central sold down to 82, Lake Shore to 57-1/2, Western Union to 45, Rock Island to 80-1/2, Pacific Mail to 25, Wabash to 32-3/4, Ohio and Mississippi to 21, Union Pacific to 15-1/2, North-western to 32, St. Paul to 23, St. Paul Preferred to 50, and Harlem to 100, while the feeling of the street was worse than at any time during the crisis; but a quick recovery took place from the extreme point of depression, and the resumption of greenback payments by the Cincinnati banks, following that of the Chicago banks, led to an improved feeling in both financial and commercial circles. The National Trust Company of New York also, about the same time, resumed payment. It was noticeable, however, that little or none of the money reported by the express companies as coming from the West was received by the New York banks—a natural result of their suspension of currency payments, which virtually forced individuals and corporations to be their own bankers. The banks had ceased to perform this function: they were utterly unable to maintain their reserve, cash cheques or discount commercial paper for their customers, and so far the National banking system had failed.
Having reviewed the disastrous course of this crisis up to the date of writing, I will briefly consider its causes. It may be traced remotely, in some degree, to the distrust of American railway securities in Europe which attended the reckless administration of the Erie Railway under Fisk and Gould, and which lingered after their overthrow, indisposing capitalists, as well as small investors, to have anything to do with American railways. It is true that a market still remained there for these securities, but it was a much more limited one than it probably would have been but for the Erie scandal, and within the last year or two it was entirely glutted. Financial agents found it impossible to float a new American railway loan even where the security offered was a first mortgage bond. Thus, Jay Cooke & Co. were greatly disappointed with respect to the sale of their Northern Pacific bonds abroad, and nearly as much so in the demand for them at home; but they were pledged to the undertaking, their solvency became dependent on its success, and they were sanguine that confidence in the great enterprise would grow with every mile of new road constructed.