The Panic of 1857

The Panic of 1857 was a financial panic in the United States caused by the declining international economy and over-expansion of the domestic economy. 

The New York branch of the Ohio Life Insurance and Trust Company failed on August 24, 1857. Soon, all across the nation, banks began to collapse. It emerged that the entire capital of the trust’s home office had been embezzled. 

Because of the invention of the telegraph by Samuel F. Morse in 1844, the Panic of 1857 was the first financial crisis to spread rapidly throughout the United States. The world economy was also more interconnected by the 1850s, which also made the Panic of 1857 the first worldwide economic crisis. In Britain, the Palmerston government circumvented the requirements of the Bank Charter Act 1844, which required gold and silver reserves to back up the amount of money in circulation. Surfacing news of this circumvention set off the Panic in Britain.

Beginning in September 1857, the financial downturn did not last long, but a proper recovery was not seen until the American Civil War, in 1861. The sinking of SS Central America contributed to the panic of 1857, as New York banks were awaiting a much-needed shipment of gold. American banks did not recover until after the civil war. After the failure of Ohio Life Insurance and Trust Company, the financial panic quickly spread as businesses began to fail, the railroad industry experienced financial declines, and hundreds of workers were laid off.

Because the years immediately before the Panic of 1857 were prosperous, many banks, merchants, and farmers had seized the opportunity to take risks with their investments, and, as soon as market prices began to fall, they quickly began to experience the effects of financial panic.

President James Buchanan proposed to Congress that the Treasury be authorized to sell revenue bonds for the first time since the Mexican-American War. In December, Buchanan propounded his new strategy of “reform not relief,” asserting that “the government sympathized but could do nothing to alleviate the suffering of individuals.” To avoid further financial panics, Buchanan encouraged Congress to pass a law requiring any banks that suspended their gold or silver payments to immediately forfeit their charters. He also asked state banks to keep one dollar in gold or silver for every three they issued as paper.

The Panic of 1873

The Panic of 1873 was a financial crisis that triggered a depression in Europe and North America that lasted from 1873 until 1879, and even longer in some countries (France and Britain). The Panic of 1873 and the subsequent depression had several underlying causes, of which economic historians debate the relative importance.

American post-Civil War inflation, rampant speculative investments (overwhelmingly in railroads), the demonetization of silver in Germany and the US, a large trade deficit, ripples from economic dislocation in Europe resulting from the Franco-Prussian War (1870–71), property losses in the Chicago (1871) and Boston (1872) fires, and other factors put a massive strain on bank reserves, which plummeted in New York City during September and October 1873 from $50 million to $17 million in US dollars.

The Burlington Warehouse Fire on Saturday, September 30, 1871.

About two o'clock in the afternoon on Saturday, September 30, 1871, a fire was discovered on the second floor of the building known as the "Burlington Warehouse 'A',” situated on Sixteenth Street, near the corner of State Street; a large brick structure used for storage purposes, and extending 165 feet on Sixteenth Street, with a depth of 135 feet to the Chicago, Burlington & Quincy Railroad tracks.

This illustration is presented as a visual aid.

The warehouse was built in 1804, by R. McCabe, and was subsequently purchased from him by Sturges & Co., who used it as a general receiving depot. At the time of the fire, it was owned by Samuel M. Nickerson, president of the First National Bank, and leased to S.W. Ailerton, as a warehouse.

The building was valued at $50.000 ($862,325 today). In the basement were stored large quantities of whiskeys, high-wines, syrups, and empty barrels. The first floor contained sugars, machinery, groceries, and general goods. On the second floor was an immense quantity of broom-corn, and the third floor was piled a large number of agricultural implements and other machines, stoves, castings, and hardware.

The fire originated in the broom-corn (a grain, which is used for food for humans, animal feed, and ethanol production), midway in the building in all directions, and spread rapidly. A man named Charles Stearns, who was employed in the building, perished in the flames. Owing to the persistent labor of the firemen, the loss was confined to this building, the adjoining property—Burlington Warehouse 'B' and Burlington Hall—only suffered from water and smoke damage. 

The value of the stock stored and of the building was estimated at over $650,000 ($14,057,300 today). The loss of the building and its contents was supposed to be covered by insurance to the extent of about $350,000. How much of this was ultimately recovered, it's impossible to say. 

After the destruction of the Post-office building in the Great Chicago Fire, eight days later, and the Federal offices were moved to Burlington Hall, making it a historic structure. The warehouse fire was reportedly caused by an incendiary device.

Compiled by Neil Gale, Ph.D.