banks of New York (collective)

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: 25cf989e

Response Measures

None

Description

Article describes the collective suspension of specie payments by the banks of New York on Dec 28, 1861 and the resumption of specie payments on Jan 1, 1879. This is a coordinated suspension (not a depositor run) driven by wartime finance needs and government borrowing; therefore classified as a suspension with later reopening. 'Banks of New York' refers to the group rather than a single chartered bank. OCR corrected nothing significant.

Events (2)

1. December 28, 1861 Suspension

Cause: Macro News
Cause Details: Large government borrowing and wartime financial pressures depleted specie reserves, prompting coordinated suspension of specie payments by New York banks.
Newspaper Excerpt: On Dec. 28, 1861, the banks of New York ... suspended specie payments.
Source: newspapers

2. January 1, 1879 Reopening

Newspaper Excerpt: On Jan. 1, 1879, the government and the banks resumed specie payments.
Source: newspapers

Newspaper Articles (1)

1. January 30, 1879 Fayette County Herald Washington Court House, OH

Article from Fayette County Herald, January 30, 1879

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Article Text

# 1861-1878. # A Brief Resume of Our Financial Legislation for Seventeen Years. On Dec. 28, 1861, the banks of New York, whose course was promptly followed by all the other banks in this country except those in California, suspended specie payments. Practically the Government had already suspended. On Jan. 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 interest, 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 sixty days. They were to receive therefor 7.30 notes, which they were to sell to the people, and thus 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 indebtedness. Although the Government was scattering thie money all the way from the Merrimac to the Rio Grande, and only the banks in the Eastern cities were in the association helping the Government, 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 reduced between August and December 7 only from $40,000,000 to $42,000,000. In spite of the delay in printing the 7.30 notes the people had already subscribed 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 rejecting 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 Government 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 Dec. 7 and Dec. 28 about $13,000,000, 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 concluded to save what was left. On Dec. 28 they suspended specie payments. About this period the original Legal Tender act was introduced in Congress by Representative E. G. Spauling, of Buffalo, and became a law Feb. 25, 1862. It authorized the issue of $150,000,000 in notes which were to be legal tender for all purposes except the payment 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, amounting to $60,000,000, were declared legal tender. Only five months passed and a second issue of $150,000,000 in legal tenders was made, July, 1862. In March, 1863, a third issue of $150,000,000 was authorized, but only a part of the notes were issued. The act making the demand notes legal tender provided they should be deducted at least to the amount of $50,000,000, 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 the legal tenders two-thirds were in lieu of $100,000,000 of notes authorized by the resolution of Jan. 17, 1863, so that the increase of currency by the act of March, 1863 was only $50,000,000. The gold premium fell somewhat after the act of March, 1863, was passed, but the greater part of the increase of the currency authorized by that act had already taken place, and the gold premium, which was 42.1 in January, rose to 60.5 per cent. in February. The disbandment of the armies rendered vast immediate disbursements by the Government necessary, and Hugh McCulloch, Secretary of the Treasury, issued more than $500,000,000 of three years 7.30 notes for this purpose. 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 January, 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 currency which would be of uniform value in all parts of the country while the $202,205,000 of State-bank notes current in 1861 ranged all the way from par to a heavy discount. In May, 1862, the gold premium was 3.3 per cent. and from that time it began a long ascent. In June the premium was 6.5 per cent. In July the second issue of greenbacks was made, and the premium went up to 15.5 per cent. It fell 1 per cent. in August. ant with