Financial History: Sunday Reads
*Panic Series (Pt. V) - 1857*
• Congress Fueling Speculation
• The Telegraph & Stock Prices
• Our First Railway Panic
• California Gold Rush
• Westward Expansion
investoramnesia.com/2021/10/17/pan…
*Panic Series (Pt. V) - 1857*
• Congress Fueling Speculation
• The Telegraph & Stock Prices
• Our First Railway Panic
• California Gold Rush
• Westward Expansion
investoramnesia.com/2021/10/17/pan…
Somehow we’ve made it until the 5th installment of this Panic Series without mentioning railroads.
But that changes with the Panic of 1857!
But that changes with the Panic of 1857!
The 1840s and 1850s witnessed insane growth for American railways.
20,000 miles of track was laid in the 1850s alone.
This was spurred by government incentives, particularly federal land grants to railroads, which subsidized RR expansion.
20,000 miles of track was laid in the 1850s alone.
This was spurred by government incentives, particularly federal land grants to railroads, which subsidized RR expansion.
Alongside this growth, the number of banks *doubled* between 1850-1857.
However, the chart below shows that banks were getting riskier with their lending (higher liabilities to gold/silver reserves ratio).
However, the chart below shows that banks were getting riskier with their lending (higher liabilities to gold/silver reserves ratio).
Financial institutions like Ohio Life Insurance & Trust Company had 75% of their assets invested in railway stocks/bonds!
This was fine as long as railway security prices remained high…
Which they did, until the summer of 1857…
Which they did, until the summer of 1857…
Due to their heavy exposure and risky loans to railways, Ohio Life was brought to the brink of collapse.
On August 24, 1857 the New York branch of Ohio Life announced it was suspending specie payments to depositors.
This is widely considered to be the panic’s trigger.
On August 24, 1857 the New York branch of Ohio Life announced it was suspending specie payments to depositors.
This is widely considered to be the panic’s trigger.
Ohio Life Insurance Stock Price:
August 27: $101
September 2: $5
😳
August 27: $101
September 2: $5
😳
• • •
Missing some Tweet in this thread? You can try to
force a refresh
