State of Affairs in 1853–4.

In 1853 the fears of war in Europe produced anxiety with regard to financial affairs both in England and here. The bank rate was at 5 per cent. throughout the autumn in London. Railroad building here amounted to 2,452 miles in that year. Stock speculation was unusually active throughout the winter and spring, and prices Were high. Undefined fears of the effects of a European war led to greater restraint in loans during the summer, and stocks suffered a fall. Many of the earlier speculations in exports to California had proved disastrous, and their results now accumulated. The discovery of a fraudulent issue of two millions of New York and New Haven Railroad stock was followed by similar discoveries in regard to some other stocks, and the result was a panic on the exchange,

“ The prosperity which prevailed almost universally up to the middle of last year [1853] had made our business men so confident in their own strength that all classes had expanded their engagements far beyond the protection of their own resources, and were exposed to the storm which began to gather on every side. The first great shock to credit was the discovery of the Schuyler fraud, which brought to a stand nearly all those works of internal improvement for whose successful completion a large share of public confidence was so necessary. From that moment sacrifice began... The war in Europe created more or less money pressure abroad, and capitalists there were less liberal in their investments here, at a time when their assistance would have been most acceptable.” The wheat crop was small and the cotton production lessened by the pressure of cholera. “ A worse panic began in the interior, and especially in the West and North-west. In Ohio, Indiana, Illinois, Michigan, Wisconsin, Iowa, and Missouri, and, to some extent, in the States on the south of the Ohio, a large circulation of bank-notes mostly of the free banks, had been obtained through expenditures for railroad purposes, and the general expansion of business. When the contraction began, this circulation came in rapidly, and found the banks wholly unprepared to meet it.... All the banks which held balances at the East drew for them, and borrowed to the extent of their credit besides, while between twenty and thirty, perhaps more, of institutions which were really solvent were compelled to suspend payment. A large number of private bankers were carried down in the crash, and the distress became general. During all this severe pressure in the money market, and general disturbance of public confidence, it is a cause for congratulations, that the mercantile community have stood the trial so nobly.... The reason of this may be found in the increased supply of metallic currency remaining in the country. Over one hundred millions in gold coin have been added to the circulation of the United States since the discovery of gold in California. Thus, although the rates of interest have been high for nearly eighteen months, there has been no such scarcity of money as has been felt in former periods of commercial embarrassment,... The banks have been severely tried, but those in our largest cities (with the exceptions before noticed) have mostly stood the shock unmoved.”