America’s Biggest Banking Bubbles
The Panic of 1873
The Panic of 1873 was not America’s first depression,
but it was among the most severe and it involved the
failure of the Banking system as did all of the Depressions
in American history.
A major economic reversal began in Europe and
reached the United States in the fall of 1873.
The signal event on this side of the Atlantic was
the failure of Jay Cooke and Company,
the country’s preeminent investment banking
concern. The firm was the principal backer of the
Northern Pacific Railroad and had handled most of
the government’s wartime loans.
Cooke’s fall touched off a series of events that
encompassed the entire nation. The New York
Stock Exchange was closed for 10 days. Credit
dried up, foreclosures were common and banks
failed. Factories closed their doors, costing thousands
of workers’ jobs. The volume of destitute people soon
overwhelmed the abilities of charities to function.
Most of the major railroads failed.
The public tended to blame President Grant and
Congress for mishandling the economy. The causes
were much broader, however. The postwar period
was one of frenetic, unregulated growth with the
government playing no role in curbing abuses.
More than any other single event, the extreme
overbuilding of the nation’s railroad system laid
the groundwork of the Panic and the depression
that followed. Recovery was not realized until 1878.
In addition to the ruined fortunes of many Americans,
there developed from the Panic of 1873 bitter
antagonism between workers and the leaders of
banking and manufacturing. This tension would
erupt into the labor unrest that marked the following decades.
The Crash of 1929
The Stock Market bubble of 1929 was created by
Banks making risky loans to stock market Brokers
to finance the purchasing of stocks on a 10% margin.
When prices began to fall margin accounts were
called forcing selling. Selling caused more drops
forcing more selling.
On “Black Tuesday,” October 29, 1929, the market
lost $14 billion, making the loss for that week an
astounding $30 billion. that would be
The banks most heavily involved in financing
stock purchasing started to fail. Of the more
than 25,000 banks in business in 1929, fewer
than 15,000 survived to 1933.
Crisis of 2007
The financial crisis of 2007 to the present
led to the “Great Recession”. It was triggered
by a liquidity shortfall in the American banking
system. Unlike the Great Depression of the 1930s
when 10,000 banks failed only about 100 failed
this time. That was a lot different from the
normal failure rate. None of the big boys failed
because the Government wouldn’t let them.
It was felt that a world collapse would result
On the other hand, a collapse did occur on Main Street.
When the Technology Bubble burst in 1999/2000 and
the Stock market bottomed in Oct. 2002, the Bush
administration went with low interest rates and
promotion of the Housing market as the way out of
that recession. The result was a loss of Standards
beginning with Mortgage Brokers , up through the
bankers all the way to the Bond securities market.
The Housing Bubble grew until it started to burst in 2006
and the financial collapse followed. The Bankers were
saved and made big bucks. Main Street ended in a
depression and 10% official unemployment.