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{{Short description|Economic panic in the United States}} |
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{{more footnotes|date = January 2014}} |
{{more footnotes needed|date = January 2014}} |
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[[Image:Panic of 1884.jpg|right|thumb|A newspaper illustration from [[Harper's Weekly]], depicting the scene on [[Wall Street]] on the morning of May 14, 1884]] |
[[Image:Panic of 1884.jpg|right|thumb|A newspaper illustration from [[Harper's Weekly]], depicting the scene on [[Wall Street]] on the morning of May 14, 1884]] |
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The '''Panic of 1884''' was an economic panic during the [[Depression of 1882–1885]].<ref name=":0">{{Cite book|title=Colorado's Healthcare Heritage: A Chronology of the Nineteenth and Twentieth Centuries Volume One — 1800-1899 |
The '''Panic of 1884''' was an economic panic during the [[Depression of 1882–1885]].<ref name=":0">{{Cite book |last=Sherlock |first=Thomas J. |title=Colorado's Healthcare Heritage: A Chronology of the Nineteenth and Twentieth Centuries Volume One — 1800-1899 |date=2013-04-15 |publisher=iUniverse |isbn=9781475980257 |location=Bloomington, IN |pages=287}}</ref> It was unusual in that it struck at the end rather than the beginning of the recession. The panic created a credit shortage that led to a significant economic decline in the United States, turning a recession into a depression.<ref name=":1">{{Cite book |last=Quentin |first=Skrabec |title=The 100 Most Important American Financial Crises: An Encyclopedia of the Lowest Points in American Economic History |publisher=ABC-CLIO |year=2015 |isbn=9781440830112 |location=Santa Barbara, CA |pages=103}}</ref> |
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== Background == |
== Background == |
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In the late |
In the late 19th century, the [[gold reserves]] of Europe were depleted and, as demand for it rose,<ref name=":5">{{Cite news |last=Maslin |first=Janet |date=2012-05-13 |title=Great-Grandfather Was a First-Class Bamboozler |language=en-US |work=The New York Times |url=https://www.nytimes.com/2012/05/14/books/a-disposition-to-be-rich-by-geoffrey-c-ward.html |access-date=2021-02-04 |issn=0362-4331}}</ref> more than $150 million in gold was exported from the United States between 1882 and 1884.<ref name=":1"/><ref>{{Cite web |last=Nelson |first=Scott |date=17 October 2008 |title=The Real Great Depression |url=https://www.chronicle.com/article/the-real-great-depression |access-date=2021-02-04 |website=The Chronicle of Higher Education}}</ref> The New York City [[National bank (United States)|national bank]]s halted investments in the rest of the [[United States]] and called in outstanding loans.<ref name=":0"/> |
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The [[Panic of 1873]] was also a factor in the Panic of 1884. The 1873 panic was caused by practices including speculative bonds and overextension of credit to fund the construction of infrastructure.<ref name=":3">{{Cite web|last=Lee|first=Jennifer|date=2008-10-14|title=New York and the Panic of 1873|url=https://cityroom.blogs.nytimes.com/2008/10/14/learning-lessons-from-the-panic-of-1873 |
The [[Panic of 1873]] was also a factor in the Panic of 1884. The 1873 panic was caused by practices including speculative bonds and overextension of credit to fund the construction of infrastructure.<ref name=":3">{{Cite web |last=Lee |first=Jennifer |date=2008-10-14 |title=New York and the Panic of 1873 |url=https://cityroom.blogs.nytimes.com/2008/10/14/learning-lessons-from-the-panic-of-1873 |access-date=2021-02-04 |website=City Room |language=en-US}}</ref><ref name=":4">{{Cite news |last=Hiltzik |first=Michael |title=Perspective {{!}} Presidents who don't act decisively make financial crises worse |url=https://www.washingtonpost.com/outlook/2020/09/30/presidents-who-dont-act-decisively-make-financial-crises-worse |newspaper=[[The Washington Post]]}}</ref> Part of the overextension of credit before 1873 was for railroads, particularly the Northern Pacific railroad, which was financed by Cooke & Co.<ref name=":4"/> In addition, the failure of banks in 1873 undermined the confidence people had in them, increasing mistrust.<ref name=":3"/> |
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==Causes== |
==Causes== |
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The failure of several banks set off the panic of 1884. |
The failure of several banks set off the panic of 1884. |
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=== Grant and Ward === |
=== Grant and Ward === |
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Around 1880, Ferdinand Ward and Ulysses “Buck” Grant Jr, son of former president Ulysses S. Grant, joined |
Around 1880, [[Ferdinand Ward]] and [[Ulysses S. Grant Jr.|Ulysses “Buck” Grant Jr.]], son of former president [[Ulysses S. Grant]], joined to form Grant and Ward, a brokerage firm.<ref name=":6">{{Cite web |title=The Pioneers Of Financial Fraud |url=http://finance.yahoo.com/news/pioneers-financial-fraud-130000957.html |access-date=2021-02-04 |website=finance.yahoo.com |language=en-US}}</ref><ref name=":7">{{Cite web |title=Great frauds in history: the downfall of Ferdinand Ward – the "Napoleon of finance" |url=https://moneyweek.com/economy/people/601293/great-frauds-in-history-the-downfall-of-ferdinand-ward-the-napoleon-of |access-date=2021-02-04 |website=MoneyWeek |language=en}}</ref> Ward made a series of bad investments but altered the books to make it appear that the firm was still making money.<ref name=":7"/> He then raised money through a [[Ponzi scheme|Ponzi-style scheme]] by promising investors a 10% per month return on investment, but no money was invested. Payments came from new investors.<ref name=":7"/> In addition to capital from investors, the firm was financed in part by James Fish's Marine National Bank.<ref name=":32">{{Cite web |title=Great frauds in history: the downfall of Ferdinand Ward – the "Napoleon of finance" |url=https://moneyweek.com/economy/people/601293/great-frauds-in-history-the-downfall-of-ferdinand-ward-the-napoleon-of |access-date=2021-01-29 |website=MoneyWeek |language=en}}</ref> The Marine National Bank had taken a $1.6 million loan from the city.<ref name=":7"/> In April 1884, the city's comptroller reduced the city's deposits with the bank, causing the bank to fail and Ward's scheme to be exposed.<ref name=":7"/> |
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In May 1884 the two firms, the Marine National and the brokerage firm Grant and Ward, crashed when their owners’ speculative investments lost value. The failure of [[Grant and Ward]]<ref name=":5" |
In May 1884 the two firms, the Marine National and the brokerage firm Grant and Ward, crashed when their owners’ speculative investments lost value. The failure of [[Grant and Ward]]<ref name=":5"/> and [[Marine National Bank of New York City|Marine National Bank]] tipped off the Panic of 1884.<ref name=":6"/> When the firms collapsed, it had a ripple effect across [[Wall Street]], causing other firms to fail. |
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=== John Chester Eno === |
=== John Chester Eno === |
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Another cause of the panic and mistrust in 1884 was John Chester Eno's embezzlement of over $3 million from the Second National Bank.<ref name=":8">{{Cite book|last=Unterman|first=Katherine|url=https://books.google.com/books?id=7ayoCgAAQBAJ |
Another cause of the panic and mistrust in 1884 was John Chester Eno's embezzlement of over $3 million from the Second National Bank.<ref name=":8">{{Cite book |last=Unterman |first=Katherine |url=https://books.google.com/books?id=7ayoCgAAQBAJ |title=Uncle Sam's Policemen |date=2015-10-19 |publisher=Harvard University Press |isbn=978-0-674-91589-3 |language=en}}</ref> The embezzlement was news around the country and he fled to Canada after the bank was almost out of money.<ref name=":8"/> In light of the situation, large numbers of depositors ran to the bank to withdraw their deposits.<ref name=":9">{{Cite book |last=Wicker |first=Elmus |url=https://books.google.com/books?id=t0ThZfI-OIIC |title=Banking Panics of the Gilded Age |date=2000 |publisher=Cambridge University Press |isbn=978-0-521-02547-8 |pages=36 |language=en}}</ref> His father, [[Amos Eno]], replaced the money Eno had stolen.<ref name=":9"/> |
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==Result== |
==Result== |
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The panic was mostly contained to banks in New York City.<ref name=":10">{{Cite web |title=Banking Panics of the Gilded Age {{!}} Federal Reserve History |url=https://www.federalreservehistory.org/essays/banking-panics-of-the-gilded-age |access-date=2021-02-04 |website=www.federalreservehistory.org}}</ref><ref name=":2"/> |
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| ⚫ | The New York Clearing House thoroughly examined the Metropolitan and |
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The Metropolitan National Bank closed after a rumor spread that the president was going to borrow money from the bank to use on railroad securities.<ref name=":10"/> This claim was proven untrue later.<ref name=":10"/> The institution had financial ties to the banks around it, which raised doubts to the banks it was linked with, after its closure.<ref name=":10"/> This started to spread through Metropolitan's network to institutions located in New Jersey and Pennsylvania. But, it was quickly contained.<ref name=":10"/> |
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| ⚫ | The [[New York Clearing House]] thoroughly examined the Metropolitan and deemed it solvent.<ref name=":10"/> The Clearing House advertised the solvency and loaned the bank $3 million so it could withstand the situation and not crash.<ref name=":10"/> These actions reassured the public that their money was safe, and the panic came to an end.<ref name=":10"/> |
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| ⚫ | Some accounts blamed the New York Clearinghouse's decision to stop publishing bank-specific information along with other actions since it is viewed to have alleviated the need for a suspension of convertibility.<ref name=":2">{{Cite book |last1=Gorton |first1=Gary B. |title=Fighting Financial Crises: Learning from the Past |last2=Tallman |first2=Ellis W. |publisher=University of Chicago Press |year=2018 |isbn=9780226479514 |location=Chicago |pages=51}}</ref> It is argued that this is evidenced in the way the panic was largely confined to New York.<ref name=":2"/> |
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==See also== |
==See also== |
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==References== |
==References== |
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{{Reflist}} |
{{Reflist}} |
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*{{cite book |title=Panic on Wall Street: A History of America's Financial Disasters |last=Sobel |first=Robert |author-link=Robert Sobel |year=1968 |publisher=Macmillan |location=New York |isbn=1-893122-46-8|url=https://books.google.com/books?isbn=1893122468|no-pp=true|page=Chapter 6 }} |
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'''Sources''' |
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* {{Cite book |last=Sobel |first=Robert |url=https://books.google.com/books?isbn=1893122468 |title=Panic on Wall Street: A History of America's Financial Disasters |publisher=Macmillan |year=1968 |isbn=1-893122-46-8 |location=New York |page=Chapter 6 |author-link=Robert Sobel |no-pp=true}} |
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{{Banking panics in the United States}} |
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{{Financial crises}} |
{{Financial crises}} |
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[[Category:1884 in the United States]] |
[[Category:1884 in the United States]] |
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[[Category:May 1884 events]] |
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[[Category:Stock market crashes|1884]] |
[[Category:Stock market crashes|1884]] |
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[[Category:Economic crises in the United States]] |
[[Category:Economic crises in the United States]] |
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[[Category:19th |
[[Category:19th century in economic history]] |
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[[Category:Financial crises]] |
[[Category:Financial crises]] |
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Latest revision as of 23:42, 1 August 2024
 | This article includes a list of general references, but it lacks sufficient corresponding inline citations. (January 2014) |
The Panic of 1884 was an economic panic during the Depression of 1882–1885.[1] It was unusual in that it struck at the end rather than the beginning of the recession. The panic created a credit shortage that led to a significant economic decline in the United States, turning a recession into a depression.[2]
Background
[edit]In the late 19th century, the gold reserves of Europe were depleted and, as demand for it rose,[3] more than $150 million in gold was exported from the United States between 1882 and 1884.[2][4] The New York City national banks halted investments in the rest of the United States and called in outstanding loans.[1]
The Panic of 1873 was also a factor in the Panic of 1884. The 1873 panic was caused by practices including speculative bonds and overextension of credit to fund the construction of infrastructure.[5][6] Part of the overextension of credit before 1873 was for railroads, particularly the Northern Pacific railroad, which was financed by Cooke & Co.[6] In addition, the failure of banks in 1873 undermined the confidence people had in them, increasing mistrust.[5]
Causes
[edit]The failure of several banks set off the panic of 1884.
Grant and Ward
[edit]Around 1880, Ferdinand Ward and Ulysses “Buck” Grant Jr., son of former president Ulysses S. Grant, joined to form Grant and Ward, a brokerage firm.[7][8] Ward made a series of bad investments but altered the books to make it appear that the firm was still making money.[8] He then raised money through a Ponzi-style scheme by promising investors a 10% per month return on investment, but no money was invested. Payments came from new investors.[8] In addition to capital from investors, the firm was financed in part by James Fish's Marine National Bank.[9] The Marine National Bank had taken a $1.6 million loan from the city.[8] In April 1884, the city's comptroller reduced the city's deposits with the bank, causing the bank to fail and Ward's scheme to be exposed.[8]
In May 1884 the two firms, the Marine National and the brokerage firm Grant and Ward, crashed when their owners’ speculative investments lost value. The failure of Grant and Ward[3] and Marine National Bank tipped off the Panic of 1884.[7] When the firms collapsed, it had a ripple effect across Wall Street, causing other firms to fail.
John Chester Eno
[edit]Another cause of the panic and mistrust in 1884 was John Chester Eno's embezzlement of over $3 million from the Second National Bank.[10] The embezzlement was news around the country and he fled to Canada after the bank was almost out of money.[10] In light of the situation, large numbers of depositors ran to the bank to withdraw their deposits.[11] His father, Amos Eno, replaced the money Eno had stolen.[11]
Result
[edit]The panic was mostly contained to banks in New York City.[12][13]
The Metropolitan National Bank closed after a rumor spread that the president was going to borrow money from the bank to use on railroad securities.[12] This claim was proven untrue later.[12] The institution had financial ties to the banks around it, which raised doubts to the banks it was linked with, after its closure.[12] This started to spread through Metropolitan's network to institutions located in New Jersey and Pennsylvania. But, it was quickly contained.[12]
The New York Clearing House thoroughly examined the Metropolitan and deemed it solvent.[12] The Clearing House advertised the solvency and loaned the bank $3 million so it could withstand the situation and not crash.[12] These actions reassured the public that their money was safe, and the panic came to an end.[12]
Some accounts blamed the New York Clearinghouse's decision to stop publishing bank-specific information along with other actions since it is viewed to have alleviated the need for a suspension of convertibility.[13] It is argued that this is evidenced in the way the panic was largely confined to New York.[13]
See also
[edit]References
[edit]- ^ a b Sherlock, Thomas J. (2013-04-15). Colorado's Healthcare Heritage: A Chronology of the Nineteenth and Twentieth Centuries Volume One — 1800-1899. Bloomington, IN: iUniverse. p. 287. ISBN 9781475980257.
- ^ a b Quentin, Skrabec (2015). The 100 Most Important American Financial Crises: An Encyclopedia of the Lowest Points in American Economic History. Santa Barbara, CA: ABC-CLIO. p. 103. ISBN 9781440830112.
- ^ a b Maslin, Janet (2012-05-13). "Great-Grandfather Was a First-Class Bamboozler". The New York Times. ISSN 0362-4331. Retrieved 2021-02-04.
- ^ Nelson, Scott (17 October 2008). "The Real Great Depression". The Chronicle of Higher Education. Retrieved 2021-02-04.
- ^ a b Lee, Jennifer (2008-10-14). "New York and the Panic of 1873". City Room. Retrieved 2021-02-04.
- ^ a b Hiltzik, Michael. "Perspective | Presidents who don't act decisively make financial crises worse". The Washington Post.
- ^ a b "The Pioneers Of Financial Fraud". finance.yahoo.com. Retrieved 2021-02-04.
- ^ a b c d e "Great frauds in history: the downfall of Ferdinand Ward – the "Napoleon of finance"". MoneyWeek. Retrieved 2021-02-04.
- ^ "Great frauds in history: the downfall of Ferdinand Ward – the "Napoleon of finance"". MoneyWeek. Retrieved 2021-01-29.
- ^ a b Unterman, Katherine (2015-10-19). Uncle Sam's Policemen. Harvard University Press. ISBN 978-0-674-91589-3.
- ^ a b Wicker, Elmus (2000). Banking Panics of the Gilded Age. Cambridge University Press. p. 36. ISBN 978-0-521-02547-8.
- ^ a b c d e f g h "Banking Panics of the Gilded Age | Federal Reserve History". www.federalreservehistory.org. Retrieved 2021-02-04.
- ^ a b c Gorton, Gary B.; Tallman, Ellis W. (2018). Fighting Financial Crises: Learning from the Past. Chicago: University of Chicago Press. p. 51. ISBN 9780226479514.
Sources
- Fels, Rendigs (1952). "The American Business Cycle of 1879-85". Journal of Political Economy. 60 (1): 60–75. doi:10.1086/257151. S2CID 153791133.0
- Kane, Thomas (1981). The Romance & Tragedy of Banking: Problems & Incidents of Government Supervision of National Banks. Anro Communications. ISBN 978-0405136597.
- Richardson, Gary; Sablik, Tim (December 4, 2015). "Banking Panics of the Gilded Age". Federal Reserve History.
- Sangkyun, Park (2012). Contagion of Bank Failures. New York, New York: Routledge. ISBN 978-0415751698.
- Sobel, Robert (1968). Panic on Wall Street: A History of America's Financial Disasters. New York: Macmillan. Chapter 6. ISBN 1-893122-46-8.