On this day in New York · August 24, 1857
The Bank Failure That Struck Wall Street Like a Cannon Shot
One overextended Ohio trust company's New York office ran dry on a summer morning, and within weeks half of Wall Street's confidence, and thousands of New Yorkers' jobs, went with it.
The facts
- Date
- New York branch of Ohio Life suspends payments, August 24, 1857
- Liabilities
- About $7,000,000, per the New York Daily Times
- New York banks suspend
- October 13, 1857, when a run forced all but one bank to stop paying gold
- Recovery
- New York banks resumed gold payments on December 14, 1857
On the morning of August 24, 1857, the New York branch of the Ohio Life Insurance and Trust Company announced it could no longer pay its bills. The Cincinnati firm had sunk itself in bad loans tied to American farm exports, which collapsed once European agriculture recovered after the Crimean War, and some accounts also point to embezzlement inside the company. Liabilities ran to about seven million dollars, and because the news traveled by telegraph, it reached every trading floor in the country the same day. Businesses failed, railroads shut down, and hundreds of thousands of workers lost their jobs in the weeks that followed. New York's own banks tried to hold the line by hoarding gold, but a run on October 13 forced every bank in the city but one to stop paying out coin, and the city did not get back to normal until mid-December.
In their words
The day in the words of the people who were there. Every quote is verbatim, and every source links out so you can check it.
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struck on the public mind like a cannon shot
J.S. Gibbons, 1858, describing how news of the failure hit Wall Street
Source: Federal Reserve Bank of New York, Liberty Street Economics
Why it still matters
It was the first financial panic to move at telegraph speed and touch the whole country in a single day, a preview of how one overextended lender's bad bet can freeze a city's banks and cost ordinary workers their jobs long before anyone on Wall Street feels it.
Sources
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