{{Short description|Economic panic in the United States}} {{more footnotes needed|date = January 2014}} [[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]] 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>
== Background == 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 banks halted investments in the rest of the United States and called in outstanding loans.<ref name=":0"/>
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"/>
==Causes== The failure of several banks set off the panic of 1884.
=== Grant and Ward === 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.<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-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"/>
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 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.
=== John Chester Eno === 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"/>
==Result== 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"/>
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"/>
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"/>
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"/>
==See also== *Great Depression
==References== {{Reflist}}
'''Sources''' * {{Cite journal |last=Fels |first=Rendigs |year=1952 |title=The American Business Cycle of 1879-85 |journal=Journal of Political Economy |volume=60 |issue=1 |pages=60–75 |doi=10.1086/257151 |s2cid=153791133}}0 * {{Cite book |last=Kane |first=Thomas |title=The Romance & Tragedy of Banking: Problems & Incidents of Government Supervision of National Banks |publisher=Anro Communications |year=1981 |isbn=978-0405136597}} * {{Cite journal |last1=Richardson |first1=Gary |first2=Tim |last2=Sablik |title=Banking Panics of the Gilded Age |journal=Federal Reserve History |date=December 4, 2015 |url=https://www.federalreservehistory.org/essays/banking_panics_of_the_gilded_age}} * {{Cite book |last=Sangkyun |first=Park |title=Contagion of Bank Failures |publisher=Routledge |year=2012 |isbn=978-0415751698 |location=New York, New York}} * {{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}}
{{Banking panics in the United States}} {{Financial crises}} {{United States – Commonwealth of Nations recessions}}
Category:1884 in the United States Category:1884 in economic history Category:May 1884 1884 Category:Economic crises in the United States Category:19th century in economic history Category:Financial crises in the United States