Q. David Bowers
The Panic of 1857
In 1857 the American economy paused to catch its breath, sneezed, and caught a cold. For the first time since the revival of prosperity, after the Panic of 1837 and its after-effects (which lasted until about 1844), there was a financial crisis. Securities dropped in value during the summer, and on August 24th the Ohio Life & Trust Company failed. On September 12th and 13th, numerous banks in Baltimore, Washington, and Philadelphia suspended operations. On October 13th, all but one New York City bank halted operations. Stocks continued to fall. It was estimated that over 20,000 people lost their jobs in New York City in October. However, in New Orleans the banks showed remarkable strength, and of nine banks reporting from that city, only four suspended operations, and these halted business for just a few days.
The Bankers' Magazine and Statistical Register, October 1857, printed this commentary: "In September there was a financial crisis in New York. This could be ascribed to two things-unfavorable foreign trade and unsound banking. Over $32 million worth of gold had been shipped from New York City for the preceding 37 weeks ending on September 19, 1857, thereby draining the banks of their specie reserve and forcing the draw on other cities. At the same time there were systematic efforts of the part of one or two New York journals to create a panic in the money market, by discredit 'of railroad securities and rumors prejudicial to the credit of the city and country banks.
"Further, various banks in the cities endeavored to obtain deposits from interior areas by offering unreasonably high rates of interest on balance. The average interest paid was 4%, and loans were ordinarily made at 7%, or in some cases at 8 to 12%. At the same time, the needs of railroad companies forced them to obtain some loans in the New York financial district to high rates of interest. The suspension of the Ohio Life & Trust Company, who had borrowed $2 million from the banks, caused a credit crunch.
"The pressure prevailing in the money market up to the 17th was heightened at that time and for some days afterwards by the intelligence of the loss of the California steamer Central America, holding on board about $2 million of gold, according to present estimates. The very prompting commemorable action of the Board of Underwriters, on hearing of the accident, will do much to mitigate the inconvenience of the loss, a payout [upon] advice of the amount, at once. All drafts drawn against the gold will, therefore, be honored on presentation at the respective banks and banking houses in which they are drawn ....
"On the 25th of September the Bank of Pennsylvania and the Girard Bank of Philadelphia suspended specie payments. The next day, Saturday, a general suspension of specie was conducted by other banks in Philadelphia and in Baltimore. Soon, many banks in Virginia, Pennsylvania, and other states also suspended specie."
In October 1857 many banks in other major cities, including New York, suspended specie payments. On December 11, bankers voted unanimously to resume specie payments. In a retrospective printed in the May 1858 issue, The Bankers' Magazine and Statistical Register stated that land speculation contributed to the panic of 1857.
The Year 1857 in History
The Supreme Court handed down the Dred Scott decision, which denied freedom to fugitive slave Dred Scott, who lived in Minnesota Territory, a free area, and who brought suit to preserve his freedom. The Court decreed that blacks could not bring suit in federal court, and that Congress lacked authority to ban slavery in the territories.
On September 11, the Mountain Meadows Massacre took place in Utah, when Mormon leader Brigham Young plotted the killing of 135 emigrants headed for California, and took their goods. Samuel L. Clemens was among the many Americans who were outraged, and he wrote a detailed narrative of the dastardly deed.
In 1857, the S.S. Central America was in service from New York City to the eastern side of the Isthmus of Panama. Between October 1853 and September 1857, the steamer with auxiliary sails completed 43 round trips and carried to New York about a third of the value of gold shipped on that route.(Information from Judy Conrad, Story of an American Tragedy, pp. xi ff.) On September 9th, 1857, while returning to New York on its 44th trip, the vessel ran into high seas whipped up by a hurricane. On the 11th, a major leak developed, and heroic efforts were made to bail out the water. On the 12th, all women and 28 of 29 children aboard were saved by a passing vessel, as were several dozen men. Shortly after eight in the evening of the 12th, the Central Americaslipped below the waves and was no more. Over 300 men were drowned. Aboard was a vast store of gold being shipped from the San Francisco Mint to the New York Assay Office, plus coins and bullion carried for other accounts and on the persons of passengers. The loss of this bullion is said to have been a precipitating cause of the Panic of 1857. Years later, in the 1980s, a group of intrepid treasure seekers, the Columbus-America Discovery Group, Inc., led by Tommy Thompson, Robert Evans, and Barry Schatz, discovered the remains of the ship in nearly 8,500 feet of water on the Outer Continental Shelf. Explorations soon yielded thousands of Mint State 1857-S $20 pieces, numerous privately-minted San Francisco gold coins (including U.S. Assay Office and Wass, Molitor & Co. $50 pieces), ingots and transport bars, and other items of numismatic importance. Judy Conrad edited a book on the subject, Story of an American Tragedy.
The first Currier & Ives lithographed prints were issued by the partnership of Nathaniel Currier (who had been producing prints since 1835) and James Merritt Ives. Colored by hand, the prints comprised a wide variety of subjects including presidents, clipper ships, farm scenes, horses, sports, and more.
The Act of February 21, 1857 had far-reaching numismatic implications. Among other provisions, the half cent, coined intermittently since 1793, was abolished, as was the large copper cent, minted continuously since 1793 (with the solitary exception of 1815). The new cent, of the Flying Eagle design, copied Gobrecht's bird from the dollar reverse of 1836-1839, was of reduced diameter, and was made of a new alloy consisting of 88% copper and 12% nickel. This alloy was to continue in cents through early 1864, although the design would change to the Indian Head type in 1859.
On May 25, 1857, the new Flying Eagle cents were exchanged with the public for large cents, half cents, and worn Spanish-American silver coins. To facilitate this a temporary structure was set up in the yard of the Mint, with two windows, one marked CENTS OR CENTS and the other CENTS FOR SILVER, to which coins could be brought and exchanged for cloth bags containing 500 cents ($5 worth).
The Mint changed its reporting and accounting system from a calendar year basis to a fiscal year basis (July 1 to June 30). 1857 was the first year under the new system.