PANIC of 1873
by : ben stu kandin
panic of 1873
Since the end of the Civil War, railroad construction in the United States had been booming. Between 1866 and 1873, 35,000 miles of new track were laid across the country. Railroads were the nation's largest non-agricultural employer. Banks and other industries were putting their money in railroads. So when the banking firm of Jay Cooke and Company, a firm heavily invested in railroad construction, closed its doors on September 18, 1873, a major economic panic swept the nation
http://www.pbs.org/wgbh/americanexperience/features/general-article/grant-panic/
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On this day in 1873, the New York Stock Exchange set a record, although it was one they would be ambivalent about for the next 140 years, Founded in 1792, the Exchange had survived early volatility (1794), a challenge from competitors (1802), a merger and a new name (1825), a punishing diet
more facts
It is safe to use the word unprecedented when discussing the financial collapse of the United States in 1873. There had been a series of economic downturns before (1837, 1857, 1869), but nothing as far-reaching as this event.
So what happened?
Concisely, most financing firms in the United States invested heavily into the building of the Northern Pacific. Unfortunately, the firms ran out of capital and declared bankruptcy, which crippled the financial system of the United States.
Jay Cooke and Company of Philadelphia was the leading financial firm involved with the building of the Northern Pacific line. This was an organization that recorded great success as a Union bond marketing firm during the Civil War. The federal government rewarded the firm with the second transcontinental railroad for its reputable work. Cooke and Company managed to acquire upward of 100 million dollars in investment bonds from European nations as well as private investors. Additionally, major banking institutions and public investment firms in the nation poured equity into the endeavor in the hopes of making a major profit. Unfortunately, Cooke and Company did not realize how large of an investment was needed in order to build a rail line (the land needed to be cleared, tracks needed to be laid, etc).
On September 18, 1873, Jay Cooke and Company realized it had exhausted its money as well as the money of its investors. The financial firm closed and immediately filed for bankruptcy. The banks and businesses that invested in the Northern Pacific project also proceeded into bankruptcy. The financial sector of the United States was in serious peril.