Panic on Wall Street by Robert Sobel
While ostensibly a history of financial disasters in the US from Washington to Kennedy, Sobel provides enough background information to make me add this to my list of US history books that we should have read before we graduated HS.
I have chosen twelve periods of Wall Street history, when the possibility of panic was foremost in the minds of many Americans. Not all were important; not all set off depressions; in fact, several were not panics in the truest sense of the term. Each has been chosen for different sets of reasons, and together they will illustrate the complexity of such moments, and our inability to make more than the vaguest generalizations about them as a group.
New York (City) prepared for the new year in a flush of optimism. The government was stable; Indian problems seemed on the decline; trade was booming, and the city would receive more than its share of the business; construction and other activities were satisfactory; the poorhouse was able to report that its numbers had diminished during the past year; and good crops seemed to assure a fine year for 1792. The social season had been a success, stilling fears that the removal of the capital to Philadelphia would make New York a "dead city". True, there were still slave hunts, as Negroes continued to elude their masters, and almost each issue of the newspapers carried reward notices for escaped slaves. But this had always been the case, and did not merit the attention of men of affairs.
Jefferson thought the total losses in New York alone were around $5 million. Since the property of the city was estimated at about that sum, he compared the panic to what might have occurred if the city had been leveled.
The new year arrived auspiciously, with riots in several cities and foreclosures and bankruptcies reported in all parts of the country.
Of all the great staples produced, the crops during the past year have been abundant, sales active, and prices high. No species of property has felt the effect of this state of affairs more sensibly than the negroes. The average price of field hands may be stated at $1500 and the tendency is upward. A-1 niggers sell for $1750 to $2000. These rates were never reached but once before, and this was during the speculative times of 1836. The South is getting out of debt and beginning to accumulate surplus capital.
This is not to say the (banking) system was stronger. For if the flagrant abuses of 1836-7 were missing, so was the comparatively primitive economy of the earlier age. The growth of inter-regional trade, especially in agricultural goods, put severe strains on the system. In late summer and early fall, during the planting and harvesting seasons, depositors in the South and West withdrew their funds from local banks, which responded by drawing upon their accounts in New York. The money would return in the late fall as farmers were paid for their produce and redeposited their money. But from August to October, the flow of money from the East to the South and West was great, and would usually cause the collapse of several small banks. The New York banks were indispensable to the national economy, and for the most part did their jobs satisfactorily. In 1857, however, they remained a weak link, and should pressures mount in the city, causing the downfall of one or more of the major institutions, repercussions would be felt throughout the nation.
By the late 1860's gold was transported openly, carried by messengers in heavy canvas bags. From time to time one of the bags would burst, and its contents -- usually $1500 in coin -- woudl scatter in the street. The custom on these occasions was for a crowd to form a circle around the area, not moving until the messenger had picked up all the coins. Anyone who stooped to take a gold piece would receive a boot in the rear.
The millionaires of America make corners as if they had nothing to lose. Let some amuse themselves financing as if it were only an expensive game. The English, however speculative, fear poverty. The Frenchman shoots himself to avoid it. The American with a million speculates to win ten, and if he takes losses takes a clerkship with equanimity. This freedom from sordidness is commendable, but it makes a nation of the most degenerate gamesters in the world.
A cynic once said that every President must fight to overcome his principles if he is to succeed in office.
(jp) Morgan and (teddy) Roosevelt had plans for the future. The aged banker continued to groom JP, jr. as his successor and to map strategy for art-buying expeditions and Episcopal Church matters. Roosevelt quietly ended the anti-trust phase of his Presidency, withdrawing suits against International Harvester and others. But he could not avoid the spectacular; with weeks he set into motion plans to dispatch the American fleet around the world. Still, he clung to his reputation as a trust buster and enemy of the Wall Street "interests". Perhaps in deference to this reputation, Roosevelt waited a few weeks before inviting Morgan to dine with him at the White House.