Part 8

We will recall here Buchanan's opinion about the Bank: "If the Bank 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 its 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. [Footnote: We have not the outside figures, the maximum or minimum.]

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 $344,000,006 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 $35,000,000 in 1848.

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 too 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 to Europe, fell from $49,000,000 to $35,000,000; with the following year the forward movement recommenced.

PANIC IN 1857.--The stoppage in 1848 was very brief. Discounts rose regularly from $332,000,000 to $364,000,000, $413,000,000, $557,000,000, $576,000,000, $634,000,000, and finally $684,000,000 in 1857. The progression was irresistible. The circulation rose from $114,000,000 to $214,000,000. The banks increased at such a rate that, from 707 in 1846, with a capital of $196,000,000, there were in 1857 1416, whose capital had risen to $370,000,000,--a very inferior figure, in comparison to the number of banks, to that of 1840, when 901 banks only had a capital of $358,000,000.

The metallic reserve, from $35,000,000 in 1847, easily reached $59,000,000 in 1856: but it was in proportion neither with the number of the banks nor their discounts and circulation; and, after all, this is only a moderate sum. We have not the extreme maximum or minimum, and the suspension of specie payments took place notwithstanding the amount of cash on hand, which was greater in 1857 than in 1856.

Deposits accumulated from $91,000,000 to $230,000,000; they rose to their greatest height in the very year of the crisis; nevertheless, they could not be drawn out.

During the Eastern war the prosperity of the United States had been so great that the clearing-houses established in New York in 1853, and in Boston in 1855, offered only a slight opposition to the excessive issue: at least, in 1837 the Congressional report stated the cash on hand was $6,500,00--that is to say, $1.00 in metal to each $6,00 in paper.

In 1857 cash on hand was $14,300,000, or $1.00 in hard money for each $8.00 in paper.

The banks had attracted deposits by high interest, and loaned the money to wild speculators. On the 22d of August, 1857, the amount of loans had become almost $12,000,000, counting together metal, notes, and deposits.

From December, 1856, to June, 1857, they had shown great strength. Discounts had risen from $183,000,000 to $190,000,000 in June; cash on hand had risen from $11,000,000 to $14,000,000. The only evidence of weakness, so to speak, was that the withdrawal of deposits had risen from $94,000,000 to $104,000,000, while the circulation diminished $1,000,000.

In June "the position of the Bank ought not to have caused any fear, to the most far-sighted," says the report of the Committee of Inquiry.

Foreign exchange was favorable, and it is known that is the bankers' guide. June, July, and August were tranquil, except for a slight disturbance in business experienced by the country bankers through the constantly increasing amount of notes presented for redemption, and among the city bankers by requests for discount.

The collapse of the "Ohio Life," which had the best New York connection, was the first muttering of the storm, and was soon followed by the suspension of the Mechanics' Banking Association, one of the oldest banks in the country. The suspension of the Pennsylvania and Maryland banks followed. Public confidence remained unshaken--it relied upon the circulating medium.

Only one bank went to protest, and that on September 4th, on a $250 demand. Another protest followed on the 12th, a third on the 15th, both for insignificant amounts. Demands in the way of withdrawal amounted to almost nothing, and there was nothing like a panic.

The deposits at the savings banks were a little less, but this did not continue. Only at the close of September was the demand by the country banks for payment upon the Metropolitan American Exchange Bank for payment greater than it had ever been.

On the 13th of October, with exchange at par, an abundant harvest, with a premium of 1/4 to 1/2 per cent. on metal, the banks suspended specie payment, but resumed it on the 11th of December. The most critical period lasted about a month. The first step towards resumption of payments was made after the resolution adopted by the Committee of Liquidation to call upon the country banks to redeem the notes of the Metropolitan Bank, paying an allowance of 1/4 of 1 per cent. interest, running from the 20th of November.

At this time the city bankers held, in bills issued and in signed parcels of $5,000 each, about $7,000,000 due by the country banks. They were thus enabled to accomplish the payment of their notes at the rate of 20 per cent. a month by the 1st of January, 1858. The same favor of repaying their notes at the rate of 6 per cent. was granted to the city banks.

We need not inquire if, having granted this delay, the banks proved their liberality. The abundant harvest also assisted liquidation.

From 1853 to 1857 the metallic reserve fell to $7,000,000, deposits rose to $99,000,000, and discounts and loans to $122,000,000.