Without cash to finance operations and refinance debts that came due, many railroad firms failed. Those banks soon felt strained. [citation needed] Causes. This period was called the Great Depression, until the even greater depression of 1893 received that label, which it held until the even greater contraction in the 1930s -- now known as the Great Depression. Wicker, Elmus. The adjective “gilded” means covered with a thin gold veneer on the outside but not golden on the inside. Jalil, Andrew J. Soon after, the Second National Bank suffered a run after it was revealed that the president had embezzled $3 million and fled to Canada. The Panic of 1893 was perhaps the hardest depression in American history, in terms of its total impact. Instability arose for two key reasons. The Panic of 1884, by contrast, had a more limited impact. The severity was great in all industrial cities and mill towns. Troubles began to spread to other institutions, including brokerage firms in Philadelphia and Richmond. The Great Debate on Banking Reform: Nelson Aldrich and the Origins of the Fed. how did the panic of 1893 effect farmers? (Library of Congress Prints and Photographs Division, LC-USZ62-66364), http://www.federalreserve.gov/pubs/feds/2002/200211/200211pap.pdf, http://www.gutenberg.org/files/3178/3178-h/3178-h.htm, Before the Fed: The Historical Precedents of the Federal Reserve System. The 1896 Broadway melodrama The War of Wealth was inspired by the Panic of 1893. The Panic of 1893 or Depression of 1893 was a massive contraction in the American economy that began in 1893 and ended in 1897. Carlson, Mark, “Causes of Bank Suspensions in the Panic of 1893,” Federal Reserve Board of Governors, 2011. http://www.federalreserve.gov/pubs/feds/2002/200211/200211pap.pdf. Farmers needed currency to bring their crops to market, and the holiday season increased demands for currency and credit. This dynamic could, in turn, trigger more runs in a chain reaction that threatened the entire financial system. The Panic of 1893 was one of the most severe financial crises in the history of the United States. The major thrust down took place during the Panic of 1893. The crisis spread through Metropolitan’s network to institutions in New Jersey and Pennsylvania, but the crisis was quickly contained. However, the failure of the 1890 wheat crop and a coup in Buenos Aires ended further investments. Fearing for the safety of their deposits, men and women began to withdraw funds from banks. The second source of this instability was that economic activity slowed prior to the panic. Page 1 of 14 - About 131 essays. First, gold reserves maintained by the US Treasury fell to about $100 million from $190 million in 1890. That price is known as the interest rate. Their divestment depressed the market, lowered prices on stocks and bonds, and impeded financing for railroad firms. Over the next fourteen years, politicians, bureaucrats, bankers, and businessmen repeatedly proposed additional reforms (see Wicker, 2005, for a summary), but prior to the Panic of 1907, no substantial reforms occurred. By 1896, following the Panic of 1893, the party had become almost exclusively identified with the free silver movement. Towns like Sioux City were booming everywhere. why? Nationwide, at least one-hundred banks failed. The New York Clearing House audited Metropolitan, determined it was solvent, advertised this fact, and loaned Metropolitan $3 million so that it could withstand the run. Farmers were obl Still a majority of the American population in 1893, the terribly high prices railroads charged farmers to ship their products drove many of them to collapse. The Panic of 1896 is perhaps best known for the fiery speech of William Jennings Bryan (1860-1925) who was the Silver Democrat’s Presidential candidate that year. The recession raised rates of defaults on loans, which weakened banks’ balance sheets. The panic spread to financial institutions in Washington, DC, Pennsylvania, New York, Virginia, and Georgia, as well as to banks in the Midwest, including Indiana, Illinois, and Ohio. The Coinage Act of 1873 demonetized the use of silver in America, and the Resumption Act of 1875 further established the gold standard. In early August, New York banks sought to save themselves by slowing the outflow of currency to the rest of the country. One may also ask, what caused the panic of 1893? Railroads had expanded rapidly in the nineteenth century, and investors in many early projects had earned high returns. Other bank failures included 172 state banks, and 177 private banks, as well as 47 savings banks and 13 loan and trust companies and 16 mortgage companies. How did the Panic of 1893 affect farmers? The Free Silver movement arose from a synergy of farming and mining interests. 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