USA > Missouri > Encyclopedia of the history of Missouri, a compendium of history and biography for ready reference, Vol. II > Part 79
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FILLMORE-FINANCIAL CRISES.
and John D. Filley, and four daughters, Mrs. Ellen Richards, Mrs. Maria Jeannette Davis, wife of John T. Davis ; Mrs, Alice Moore, and Mrs. Jennie Morton, wife of Isaac Morton.
Fillmore .- A town of about 400 inhab- itants in Jackson Township, Andrew County, fifteen miles northwest of Savannah, the county seat. The site of the town was occu- pied by the claims made by Levi Churchill and Barney Harper about 1840. In 1845 it was laid off by Levi Churchill, F. K. Cham- bers, John L. Griffith and Indiana Kenyon. It has lodges of the orders of Masons, Odd Fellows and Good Templars, a post of the Grand Army of the Republic and a Women's Relief Corps, and Methodist Episcopal, Methodist Episcopal South and Christian Churches. The Round Prairie Bank, of Fill- more, which is located there, has a capital and deposits of $11,300, and deposits of $35,600.
Financial Crises .- One of the weak- nesses of the vast system of buying, selling, distributing and delivering which goes by the name of commerce, and takes up so large a share of the civilized world's time, energy and attention, is the abrupt and disastrous general disturbances it is subject to. These disturb- ances are all the more calamitous because they are interruptions of a system, complex, sensitive and responsive, in which order-mo- notonous, unvarying and uniform order-is an absolute prerequisite. When it works smoothly, all is well; the enormous internal traffic of the country moves by the day and hour, and almost by the minute, in harmony and with precision, and the numbers, amounts, qualities and proportions, in which it expresses itself at the important points of conveyance and departure, are exactly noted to serve as a basis for the next day's or the next hour's estimates and transactions. The volume and value of the internal commerce of the United States have been variously esti- mated, and some of the results are expressed in figures so great as to be confusing; but it may be grasped when it is stated that its daily movement involves 1,370,000 persons travel- ing, and 2,000,000 tons of freight carried by rail, with 170,000 telegraph messages, and 3,840,000 telephone calls, and that the clear- ing house exchanges representing the trans- actions effected by checks and drafts, which
pass through banks in the cities, amount to $186,000,000 a day. When crops are good and prices of farm produce good, manufac- turing and mining industries prosperous, with .
increasing consumption, and that general confidence prevailing which supplements the supply of actual money with easy and ample credits, this vast movement goes on with the cheerful humdrum of the well adjusted ma- chinery of a mill or factory. It will continue to move on with undisturbed regularity, sometimes even when something is at fault and there is danger ahead-for business is so averse to interruptions, and so helpless to ex- tricate itself from the very complications of expanded credit which it invites, that there is no escaping the crash except by the very methods that usually precipitate it-limita- tion of transactions and curtailment of credit. If all business was conducted with cash pay- ments financial crises and panics would be impossible, for there would be no transac- tions to go over from one day to another, and no uncertainties. But the vast system of domestic and international commerce of this age is, and has to be, conducted largely on credit. The $1,140,000,000 paper money in circulation in the country, and the $186,000,- 000 in checks and drafts that pass through the clearing houses every day, are credits devised to economize the use of real money, and they answer the purpose of business not only as well as real money, but even better, in those periods of ease and prosperity when general confidence prevails. But confidence lies at the base of the system, and when that is affected, a shock of alarm passes through the whole. It is one of the effects of con- ventional, or credit money, to stimulate speculation and encourage the buying of property, and thereby to increase prices-and when this process has reached a point at which difficulty in meeting engagements is encountered, a premonitory failure here and there gives a warning of trouble, and the banks begin to contract their loans; distrust take the place of confidence, and in the gen- eral effort to escape or prepare for the im- pending crisis it is precipitated with a force proportioned to the extent to which the credit system has been unwisely expanded. Not unfrequently the collapse is occasioned by the discovery of peculations or embezzle- ments in a bank or some other trusted cor- poration-or it may be precipitated by one of
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those wild panics so easily started in a strained and excited condition of the public mind. A panic does not always indicate a condition of business ripe for collapse. It may be unreasonable, like the sudden fear that moves a popular assemblage, and some- times affects even an army-and it may be effectually quieted by the prompt, resolute action of banks or individuals. The South Sea Scheme, or Bubble, as it was called in England, had its origin, in 1711, in the propo- sition of Lord Harley, Earl of Oxford, lord treasurer of England to fund a floating debt of £10,000,000, the interest on which, about £600,000 a year, was to be secured by perma- nent duties on wines, wrought silk and to- bacco. Purchasers of these bonds were admitted to the privilege of being sharehold- ers in the South Sea Company, a corporation which would have a monopoly of trade with the Spanish provinces of South America, whose yield of gold and silver was exciting the cupidity of the world. The first backset to the scheme was the refusal of Spain to open her South American trade to the Eng- lish, as had been expected; but, in spite of this, the corporation which contained many' men of wealth, continued to flourish or to maintain a show of success as a monetary institution, by concealing its misfortunes and circulating false reports of valuable conces- sions. Its credit was established, and its hold on the public confidence was almost absolute -and matters went on well until 1817, when the directors resolved to imitate Law's Mis- sissippi scheme in France, then in the full tide of successful experiment. They proposed to take charge of the national debt-£31,000,000 -and pay it off, and so complete was their ascendancy that Parliament accepted the proposition by large majorities in both houses. Then speculation rose to frenzy, and the entire nation plunged into it, nearly all the government annuitants converting their holdings into the more popular shares of the scheme, which rose rapidly from 300 to 1,000. In the midst of the excitement in England came the ignominious collapse of Law's Mis- sissippi scheme in France, but so accustomed are the English people to hold themselves above not being affected by the caprices of excitable Frenchmen, and so unbounded was their confidence in their own scheme, that the catastrophe in France gave no warning across the channel. But the delusion was too in-
tense and absurd to last, and when, in August, 1720, four months after the collapse of Law's scheme, it was discovered that Sir John Blunt, chairman of the company, and others familiar with its conditions, had drawn out, the shares began to deciine, going down rapidly until in December the company stopped payment, and the crash came. A great many persons of fortune were beg- gared, and it was many years before the effects of the disaster entirely disappeared. Law's Mississippi scheme was started in France, in 1717, six years after the beginning of the South Sea Bubble in England, but it reached its crisis sooner, and was the first to collapse. It was organized by John Law, a native of Scotland, with the object of develop- ing and dealing with the resources of Louisi- ana Territory, and the country on the lower Mississippi, supposed to be rich in gold and silver deposits. The corporation was organ- ized in August, 1717, was called the Company of the West, with a capital of 200,000 shares of 500 livres each, and it was given the exclu- sive privilege of trading with the Mississippi country, farming the taxes and coining money. Great expectations of profits to come were raised, and from the first the shares were eagerly sought, and, when, two years later, the company's privileges were ex- tended so as to include a monopoly of trad- ing with China, the East Indies, the South Seas and all the possession of the French East India Company, a mania seized the peo- ple, and the demand for shares grew into a wild, uncontrollable movement, which the company had difficulty in meeting. The bet- ter classes were most affected, and the num- ber of applicants rose to 300,000. The corporation, now known as the Company of the Indies, made an additional issue of 50,000 shares, which rose to an enormous price. under Director General Law's promise of annual dividends of 200 livres a share. Law's house, with the street in front of it, was crowded daily with applicants of both sexes and all ranks, so eager for the privilege of purchasing even single shares, that they would wait for hours to secure an interview with the mighty magnate who possessed the power of making them all rich. The wild speculation had the effect of stimulating trade in Paris; every department of business showed the effect of the factitious excite- ment ; the prices of all kinds of manufactures
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FINANCIAL CRISES.
were quadrupled, and still the demand could not be supplied. The population of the city was largely increased by the throngs of peo- ple who came in, content to find shelter in garrets, kitchens and stables, while waiting to secure a few of the coveted shares, or to par- take of the sudden prosperity of the French capital. But one of the accompaniments of the speculation was an increase in the paper circulation of the National Bank, and this had caused the cooler heads to grow suspi- cious. They began to sell their shares at the exorbitant prices that prevailed, convert their money into gold, and send it to England and Belgium. A scarcity of gold followed, and was severely felt. There was a run on the National Bank, accompanied by a rapid de- cline in price of the Company of the Indies' stock. The trouble was met and partly relieved by an amalgamation of the National Bank and the Company of the Indies, and severe punishments inflicted upon those who had sent the gold out of the country; but the speculation in the unsubstantial enterprise had run its course, and when, in July, 1720, the National Bank stopped payment, the whole aerial structure tumbled to ruins. La:v was compelled to flee the country to escape the vengeance of the thousands who had been reduced to poverty by his scheme.
The panic of "Black Friday," the sharpest and most exciting affair of the kind that had ever before taken place in this country, was not a commercial or financial crisis in the usual meaning of the terms, but the product of a cold-blooded, artificial and daring at- tempt to corner the gold market by a small clique of persons, the chief of whom was Jay Gould, who afterwards became eminent as a railroad owner and the most successful oper- ator in stocks, money and railroad properties, known in New York in his day. It was in 1869, when the government and the banks of the country were still in suspension, and the only money in common use was paper. The considerable amounts of gold that the government required for the payment of in- terest on its bonds were obtained through the customhouse, all duties on imports being exacted in gold. As these duties yielded about $200,000,000 a year, the government always had a supply of gold on hand, and it was accustomed to sell it to the highest bid- der, and thus return it to the importers and others who needed it. In short, during the
war gold had ceased to be a stable money, with a fixed value, and become a commodity whose market price varied from day to day, and even from hour to hour, according to the progress of campaigns, the result of battles, and the action of Congress, and it continued to be a commodity after the war, nearly up to the time of specie payment resumption, in 1879. At one time during the war it reached the price of 285, making one dollar in gold worth $2.85 in current paper money ; and as the fluctuations in price were constant and frequently violent, gold became the favorite subject of gambling. One of the strongest houses on Wall Street, New York, was Smith, Gould, Martin & Co., and it was the second member of this firm who was credited with the organization and management of the scheme to corner the market by buying the limited amount of gold in New York, outside the subtreasury vaults-estimated at about $15,000,000-and sell it to importers on the conspirators' terms. The successful working of the scheme required that the government's weekly sales of gold should be suspended, and this was arranged after much trouble, and many interviews, by bringing President Grant and Mr. Boutwell, Secretary of the Treasury, to believe that a steady advance in the price of gold would stimulate the move- ment of the crops to market, increase prices, and promote the general prosperity. Gould was at the time president of the New York & Erie Railroad and joint owner in two lines . of steamboats, and was recognized, even then, as a power on the street. His steamboat partner, Jas. Fisk, Jr., prominent also as an operator, was associated with him in the gold scheme. The business began in the spring of 1869, when the conspirators bought up about half the available stock of gold in New York City, and put it out on call loans to the im- porters who had use for it, and when the government sales of gold were suspended, in September, of course the price advanced. September 13th the price was 1351/2; on the 23d it was opened at 1391/2, and closed at 144. Next day, Friday, the clique's chief broker, Speyers, began by offering 145, but there were no sellers. Then he offered suc- cessively 146, 147, 148, 149 and 150, and a half-million was sold to him at the last named figure. Then followed a steady upward bid- ding, amidst an intense strain of excitement, till Speyers called out, "Any part of five
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millions at 160," and the answer came back: "One million taken at 160," from Mr. James Brown, a merchant who represented a com- bination opposed to the clique. In an hour Speyers had bought seven millions at the price of eleven millions in currency, and by noon the purchases for the clique amounted to sixty millions, when it was announced that the government would sell four millions. This broke the corner and the scheme col- lapsed, the price falling instantly to 140, and in a short time to 133. The conspirators had both bought and sold, and by the unexpected interference of the government, contrary to what they had been led to believe, their losses, estimated at $20,000,000, greatly ex- ceeded their profits ; but by a skillful manipu- lation of injunctions and other judicial processes, through corrupt judges, they man- aged to avoid payment of their losses, and got away with profits estimated at $11,000,- 000. It was a flagitious conspiracy against the public welfare, and was attended and followed by ruin to private persons, discredit to the community in which it was developed, and shame to the country. During the time when the conspirators were working the scheme to its crisis, business in New York was almost paralyzed, and the importers who needed gold for the payment of duties were at their mercy. Even the national credit was affected and the sale of government bonds was for a time retarded.
The calamitous crisis of 1837 is said to have been caused by the lack of capital in the coun- try to transact its business. But this is not the full explanation. The real cause was the attempt to remedy the lack of capital by cre- ating it through the processes of engraving and printing, to supply the demand for money by issuing an indefinite quantity of paper promises, which, it was imagined, might per- form all the functions of real money. The crisis followed a period of seven years marked by tokens of prosperity. Mines were opened, canals were constructed, and rail- roads were laid out and built at the rate of 250 to 465 miles a year, more than the coun- try could find profitable use for ; and British capital was largely sent over to be invested in these and other similar enterprises. The result was general speculation and the diver- sion of energies from the pursuits that alone can bring and maintain prosperity. People left the farms and flocked to the towns and
cities. Banks were established which en- couraged the rage for speculation by provid- ing the means for indulging it. Paper money was abundant, and the people were satisfied with it without inquiring whether it would be ultimately convertible or not. Be- tween the years 1830 and 1837 the number of banks increased from 329, with an aggre- gate capital of $1 10,000,000, to 788, with an aggregate capital of $290,000,000. Plenty of money made prices high. Imports increased from $103,208,521 in 1834, to $168,238,675 in 1836, with an adverse balance of $61,316,995; and even food was among the imports. But these indications of an unhealthy condition were overlooked, and the public view was occupied with the false tokens of prosperity. The national debt was extinguished, and the government deposits were increasing beyond the capacity to find use for the money. On January 1, 1836, they amounted to $25,000,- 000, and six months later, on June Ist, they had increased to $41,500,000-mainly through the sales of public lands, which had become the favorite subject of speculation, and which were bought in vast amounts, not by actual settlers, but by persons who ex- pected to hold them until they could sell them again to actual settlers, at an enormous profit. The lands were paid for in bank money, and this kind of paper constituted the bulk of the government deposits, which had grown to such proportions that Congress passed an act to distribute the money to the States in four quarterly installments, begin- ning with January 1, 1837. The whole sum ap- portioned was $37,000,000-a vast sum for that day-and not only was the act taken as a proof of the country's growth in wealth, but the presence of the money in the State treas- uries gave a new impetus to the speculation which was already driving the country to a precipice. A few thoughtful persons had apprehensions of coming trouble, and Gov- ernor Marcy, of New York, in his message to the Legislature, sounded a warning against the increase of banks, and the multi- plication of paper money. On July 11, 1836, a treasury circular was issued from Wash- ington, requiring payment for public lands to be made in specie, with an exception until December 15th following in favor of actual settlers, who were still allowed, until that date, to pay in bank paper. As there was little gold and silver in the country, not one
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dollar to ten of the bank paper that had been put out, this sudden change in the practice of the government not only arrested the specu- lation in public lands, but created general alarm, and when it was followed shortly afterward by the Bank of England increasing the rate of discount, with the object of ar- resting the investment of English gold in American enterprises, the collapse which all classes had assisted to provoke, and which all classes were unprepared for, came in full force. The failure of the cotton house of Herman Briggs & Co., at New Orleans, caused the failure of the correspondent house in New York, and the New York banks, one by one, suspended, and were followed by those of Philadelphia and Baltimore. The derangement of the machinery of business was attended by great distress, losses and un- certainty. Paper money fell to 20 per cent discount, gold and silver were hoarded by the few who were fortunate enough to have it, and cotton was almost unsalable. A special session of Congress was called, which, how- ever, did nothing but authorize an issue of treasury notes to meet the demands on the ' government, and the banks followed the ex- ample by issuing more of the paper currency that the country was already afflicted with. More speculation followed, chiefly in cotton, and in 1839 there was a second panic, brought on by the withdrawal of English loans. In October of that year the Philadelphia banks again suspended, followed by those in the South and in Rhode Island, and the rate of interest advanced to 20 per cent. The failures from 1837 to 1839 were 33,000, a larger num- ber than had ever been known before in a similar period. The prostration of business was universal, and the distress that afflicted all classes caused the period to be known as "hard times." St. Louis suffered less than any other Western or Southern city, but enough to derange its river trade with the South, and cause the prostration of many of its business houses. The Chamber of Com- merce adopted a petition to Congress which many leading merchants signed, praying for the establishment of a national bank to sup- ply the country with a convertible paper cur- rency. The Bank of the State of Missouri which had been established in 1837, was a bank of issue, and kept its notes at par; but the greater part of the supply of money in St. Louis consisted of the notes of banks of
other States of doubtful solvency, and when, on November 12, 1839, the Bank of the State adopted the rule of "receiving from and pay- ing only to individuals her own notes and specie, or the notes of specie-paying banks," there was a violent outbreak of feeling from nearly the entire business community. A public meeting was held at the courthouse, at which it was resolved that "it will be no discredit to any individual having paper maturing this day at the Bank of the State of Missouri to allow said paper to go to protest if a tender is made at bank or to a notary of currency hitherto bankable, and is refused." Notwith- standing this action, the bank refused to mod- ify its rule, and the result was an estrange- ment that led many merchants to withdraw their business and place it in the hands of insurance companies.
The crisis of 1857 found the country pros- perous. It was a time of unusual prosperity. The cotton crop was the largest ever raised before-3,665,000 bales-and the price was 131/2 cents a pound ; and the other farm crops were good also, with good prices. The ex- ports of domestic produce for the preceding year had been $266,438,000, 24 per cent greater than they had ever been before, and they had nearly doubled in the preceding six years. The product of our gold mines for the preceding six years had been $350,000,- 000, considerably greater than in any other six-year period before or since. Immigration was large, manufactures were flourishing, and railroad building was being prosecuted with unusual energy, 3,642 miles of road having been built in 1856; a mileage that had never been reached in any one year before, and that was not reached again until twelve years afterward. But it was the very. prosperity of the period that invited the extravagance in living and enterprise which brought on the collapse. The laws of trade were not under- stood, and even the facts and figures were misinterpreted. Because the California mines were yielding $60,000,000 in gold, year by year, and our exports of farm produce were constantly increasing, it was assumed that money could not become scarce, nor business be otherwise than profitable. It was over- looked that our imports were, year by year, greater than our exports-the excess for 1857 being $54,600,000, and for the five years pre- ceding, $243,700,000-and that it took nearly
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all our annual yield of gold to settle this balance of trade against us. No signs of dis- turbance were apparent in the business world down to the middle of the year. The New York banks showed on August 8th loans to the unprecedented amount of $122,077,262, and there were no warnings of coming trouble when, on August 24th the suspension of the Ohio Loan and Trust Company, of Cincinnati, with liabilities of $7,000,000, sent a shock through New York City, whose banks held the drafts of the company. It soon became known that dishonesty had, for several years, been the rule in the manage- ment of the institution ; not only its own col- laterals had been hypothecated, but the property of its dealers and customers also, and the entire capital of $2,000,000 had been embezzled. What followed in the realm of business was something like the reversal of a railway engine to avoid a collision. The New York banks called in their loans, the panic spread, the banks of Philadelphia, Bal- timore and Washington suspended on Sep- tember 12th and 13th, followed a month later by the suspension of those of New York and New England, and the country found itself in such a general and complete collapse as it had not known for twenty years. In St. Louis the crisis of 1857 had been pre- ceded by the suspension of the great house of Page, Bacon & Co., two years before. This house had burdened itself with the con- struction of the Ohio & Mississippi Railroad, and on Saturday, January 13, 1855, was forced to close its doors. It was a surprise and shock to the community, but fortunately, the Sunday following afforded time for reflec- tion and preparation, and when Monday morning came, a number of leading and wealthy citizens of St. Louis had decided upon a plan of action to quiet apprehension and avert the threatened run on the banks. This was the following card :
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