![]() ![]() In an effort to increase confidence in their ability to pay depositors, the Bank of Pennsylvania made an official announcement on the day of suspension: The president of the bank, Thomas Allibone, told reporters that the suspension - while temporary - was caused by the failures of other banks. 6 Suspension of Specie PaymentsĪ full month after the failure of Ohio Life, Philadelphia’s Bank of Pennsylvania suspended specie payment on September 25, 1857, producing further uncertainty in the banking system. 5 Historian James McPherson writes that the failure of Ohio Life set off a confidence crisis in the banking system. In the same period, the Illinois Central Railroad dropped 22 percent, Galena-Chicago by 18 percent, Chicago-Rock by 17 percent, and the Reading Railroad by 12 percent. Railroads such as the LaCross-Milwaukee declined 67 percent between August 27 and October 21. Ohio Life’s stock declined from $101 on August 27, 1857, just days after the suspension, to $5 on September 2 - a full 95 percent drop. Ludlow, made too many risky loans and embezzled money, which led the president of the bank, Charles Stetson, to suspend specie (gold and silver) payments to depositors on August 24, triggering a minor stock market crash. Ohio Life’s branch manager in New York, Edwin C. Video: Historian Eric Foner discusses role of the Crimean War on the Panic of 1857ĭiminishing demand for wheat was further exacerbated by the failure of the New York branch of Ohio Life, Huston writes, marking the beginning of the Panic of 1857. By June 30, 1858, flour exports dropped to 893,000 barrels, while wheat dropped to 5.12 million bushels, and by June 1859, only 984,000 bushels of wheat and 166,000 barrels of flour were purchased - a hard blow on one of the most important sectors of the American economy during this period. When the Crimean War ended, Europeans stopped buying as much wheat from American farmers, which decreased prices and profits.Įngland purchased 1.02 million barrels of flour and 8.56 million bushels of wheat in the fiscal year ending on June 30, 1857. While this was not the sole cause of land speculation in the American West, the demand for American grain (along with the California gold rush) played an important part. This increase in demand, in turn, increased wheat prices and facilitated the inflow of migration to the West. In his 1988 book The Panic of the 1857 and the Coming of the Civil War, Huston argued that the crisis was not only caused by the failure of Ohio Life, it was also a consequence of the ending of the Crimean War in 1856.īetween 18, the Crimean War interrupted Russian grain exports to Europe and increased the demand for wheat from the American West. ![]() Historians such as James Huston have revealed additional causes of the panic. In an article for Hunt’s Merchants’ Magazine, Michigan lawyer Ezra Seaman observed how crisis “soon extended to other banking companies.” Banks began to liquidate their investments, he wrote, selling off their once prized railroad stocks and bonds, an experience that “caused a rapid and unprecedented decline in the stocks and securities, and particularly in the bonds and stocks of railroads owing large debts.” 3įor observers of the crisis, such as Ezra and Gibbons, the failure of Ohio Life was the direct cause of the Panic of 1857. “Old houses, of accumulated capital, which had withstood the violence of all former panics, were prostrated in a day and when they believed themselves to be perfectly safe against misfortune.” 2 The failure of Ohio Life “struck the public mind like a cannon shot,” Gibbons remembered. Like many before and after, The New York Times used metaphors of disease to frame the panic as contagious plague.Īmerican scholar James Sloan Gibbon believed the panic was a more psychological experience - a plague of the mind. “The stoppage of the Ohio Life and Trust Company and the failure of the Mechanics’ Banking Association,” The New York Times editorialized, “must always be looked upon as the origin of the panic just as the first outbreak of the cholera is traced to a small village in British India.” 1 In the last months of 1857, many people concluded that the failure of Ohio Life and Trust Company on August 24, 1857, had set in motion a series of events that created the Panic of 1857. Morse invented the telegraph in 1844, news of the panic spread rapidly, creating a confidence crisis for investors throughout the United States and Europe. ![]() News of the financial crisis that occurred just 20 years prior could only travel as fast as the postal service. The Panic of 1857 was not the first financial crisis in American history, but it was the first to spread rapidly throughout the country. ![]()
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