what: Beginning of the Panic of 1857
when: August 24, 1857
On August 24, 1857, the failure of the New York branch of the Ohio Life Insurance and Trust Company was reportedly due to improper investments and embezzlement. A financial panic has begun. Combined with other domestic and global economic events, banks began to restrict lending early in the panic.
To create bank reserves, the U.S. government arranged for the shipment of gold from the San Francisco Mint to the East Coast. This gold, which was transported to Panama and loaded onto the SS Central America in September she was worth about $2 million in 1857, is worth about $300 million today, according to the Library of Congress.
SS Central America encountered a hurricane off the Carolinas on September 9. Her damaged ship she sank two days later, and panic worsened. By October, more depositors were withdrawing money from banks, and on October 14, banking operations were halted in the northeast.
“The beginning of labor pains [of bank loans] August 25 marks the exact moment when the panic began in a devastating process. From that day on, distrust grew rapidly. The telegraph spread it all over the country. All potential sources of embarrassment have come into action. A trivial cause magnified a thousand times. False alarms were issued and public unrest was heightened by successive disasters. ”
—JS Gibbons, from The Banks of New York, their Dealers, the Clearing-House, and the Panic of 1857, 1858
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