15445. Banks of New York (collective) (New York, NY)

Bank Information

Episode Type
Suspension → Reopening
Bank Type
state
Start Date
December 28, 1861
Location
New York, New York (40.714, -74.006)

Metadata

Model
gpt-5-mini
Short Digest
87c0e71e

Response Measures

None

Description

These articles describe the collective suspension of specie payments by the banks of New York on Dec 28, 1861, a coordinated wartime measure that was later reversed when banks (and the government) resumed specie payments on Jan 1, 1879. No discrete depositor run is described in these snippets — the action is a coordinated suspension tied to Civil War finance and heavy government borrowing.

Events (2)
1. December 28, 1861 Suspension
Cause
Macro News
Cause Details
Banks collectively suspended specie payments as specie reserves were depleted while advancing large sums to the federal government during the Civil War; a coordinated, precautionary suspension tied to wartime finance and government borrowing.
Newspaper Excerpt
On December 28, 1861, the banks of New York ... suspended specie payments.
Source
newspapers
2. January 1, 1879 Reopening
Newspaper Excerpt
On January 1, 1879, the Government and the banks resumed specie payments.
Source
newspapers

Newspaper Articles (2)
1. December 31, 1861 The New York Herald New York, NY
Article from The New York Herald, December 31, 1861

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Article Text

The following are the resolutions passed at the bank meeting on Saturday evening:Resolved, That it is expedient for the banks of New York to suspend specie payments, and wo hereby agree to do so. Resolved, That the Secretary of the Treasury be requested to draw for another ten per cent to be applied to the payment of the interest on the government debt due January 1, and his drafts drawn in favor of the State of New York. The bonds and coupons of the city of Brooklyn, maturing January 1, will be paid at the Long Island Bank on the 2d of that month. The interest on the capital of the United States Life Insurance Company, at seven per cent per annum, will be paid at the office on Thursday for the half year. A special meeting of the directors of the Erie Railroad Company is holding to-day with reference to the proposed release of the concern from the receivership on the first of the new year. The State of Ohio has paid during the year $565,000 of the principal of the State debt, ending November 15, 1861. This was paid by taxation from the sinking fund. The war debt is $1,212,039 45-money advanced by the State and to be refunded by the government. At a meeting of the directors of the Michigan Central Railroad, held at Boston on the 27th inst., the following resolution was adoped:Voted, Thai, in consideration of the aspect of public affairs, the subject of declaring a dividend be postponed for the present. At this meeting the following statement was made:The balance to the credit of the income account is $228,014 78, showing an increase since the annual report of June 1, 1861, amounting to $189,580 54. If to this gain is added the annual payment made in October to the trustees of the sinking funds, $84,500, it will be found that during the six months ending November 30, 1861, the not earnings of the road, after paying operating expenditures and interest, have amounted to $274,080 54, or about four and one-hair per cent upon the capital stock of the company. During the last six months the bills payable-which upon the 1st of June amounted to $125,000-have been entirely paid. The company is now free from floating debt. A comparison of the six months just closed with the corresponding six months of the last year results as follows:The gross receipts for six months ending Nov. 30, 1860, were $1,176,341 80 The gross receipts for six months ending Nov. 30, 1861 1,144,617 10 Showing a decrease in receipts of $31,724 70 Operating and interest expenditures six months last year 868,046 19 Operating and interest expenditures six months this year 870,536 56 $2,491 37 Showing an increase in expenses of And net receipts less than last year of 34,216 07 Of the sum of $228,014 78, which appears as the balance to the credit of income account, we have on hand in cash and loaned on call the sum of $145,354 80. The remainder has been used in the extinguishment of our tooting debt, and will be replaced by an early realization from valuable assets.

2. March 13, 1879 The Manitowoc Pilot Manitowoc, WI
Article from The Manitowoc Pilot, March 13, 1879

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Article Text

On December 28, 1861, the banks of New York, whose example was prompt- ly followed by all the other banks in this country except those in California, suspended specie payments. Practically the Government had already suspended. On January 1, 1879, the Government and the banks resumed specie payments. At this moment, above all others, does the financial history of the United States for seventeen years possess peculiar in- terest, the more so because the history of the finances of this country during and after the war is not so familiar as it might be. At the beginning of the late war the Government obtained funds through the associated banks of New York, Boston and Philadelphia. The banks of these cities agreed to lend the Government three sums of $50,000,000—a total of $150,000,000—of which sum New York undertook to advance $105,000,000. The banks advanced $5,000,000 every six days. They were to receive therefor 7.30 notes, which they were to sell to the people, and thus to obtain money to advance to the Government. Owing to the delays in the preparation of these notes the banks for months received only non-negotiable certificates of in- debtedness. Although the Government was scattering this money all the way from the Merrimac to the Rio Grande, and only the banks in three Eastern cities were in the association helping the Govern- ment, yet the internal-trade movement was so intense that the coin advanced by the banks came back to them in the ordinary course of trade in about a week. After the associated banks had taken the third loan of $50,000,000.and the banks of New York city alone had advanced to the Government $80,000,000, the latter banks found that their aggregate specie reserve had been re- duced between August and December 7 only from $49,000,000 to $42,000,000. In spite of the delay in printing the 7.30 notes the people had already sub scribed to the banks for $50,000,000 of the notes. About this time, the Government commenced issuing the old demand notes. These notes passed readily into circulation and were offered at the banks on deposit and in subscriptions for 7 30 notes. The banks were advancing gold coin to the Government and they were compelled to take their choice between receiving Government notes and reject- ing them. To do the former was to render it impossible for them to continue advancing coin to the Government. They could not receive paper and pay out coin for any length of time. To do the latter was to discredit the Govern- ment to which nearly all their means had been given, and whose securities they were trying to sell. The latter course was out of the question, and the old demand notes were received by the banks. As a result the specie reserve of the New York banks was reduced between December 7 and December 28 about thirteen millions, nearly double the loss in the preceding four months. It was only a question of a few days when the banks would find themselves without any gold at all, and they con- cluded to save what was left. On De- cember 28 they suspended specie pay- ments. About this period the original Legal-Tender act was introduced in Congress by Representative E. G. Spaulding, of Buffalo, and became a law February 25, 1862. It authorized the issue of one hundred and fifty mil- lions in notes which were to be legal tender for all purposes except the pay- iment of duties on imports, and interest on the public debt. These notes were fundable at par in 6 per cent. twenty- year gold bonds. In less than a month after the passage of the Legal-Tender act the demand notes of July, 1861, and February, 1862, amounted to sixty millions, were declare legal tender. Only five months passed and a second issue of one hundred and fifty millions in legal tenders were made, July, 1862 In March, 1863, a third issue of one hundred and fifty millions was author- ized, but only a part of the notes were issued. The act making the demand notes legel tender provided they should be deducted, at least to the amount of fifty millions, from the legal tenders whose issue had been authorized, so that by this act the amount of legal tenders was very slightly augmented. Of the third issue of legal tenders two-thirds were in lieu of one hundred millions of notes authorized by the resolution of January 17, 1863, so that the increase of cur- rency by the act of March, 1863, was only fifty millions. The gold premium fell somewhat after the act of March. 1863, was passed, but the greater part of the increase of the currency author- ized by that act had already taken place and the gold premium, which was 45.1 in January, rose to 60.5 per cent in February. The disbandment of the armies ren- dered vast immediate disbursments by the Government necessary, and Hugh McCulloch, Secretary of the Treasury, issued more than five hundred millions of three years 7.30 notes for this pur- pose. The soldiers were paid in part with the notes themselves. The amount of the 7.30 three years notes outstanding was in 1864, $109,- 356,150; in 1865, $672,578,850; in 1866, $806,900,750; in 1867, $488,- 647,140; in 1868, $37,717,650. Since that year the amount has been trivial. The average gold premium for Janu- ary, 1862, was 2.5 per cent., and for February, 3 5 per cent. The passage of the Legal-Tender act was followed by a fall of the premium to 1.8 per cent. in March, and 1.5 in April. The Legal Tender act promised the people a cur-