money, hoarded and withdrawn from circulation, showed still further that the country was not actually impoverished. But public confidence was lacking and operated as a check on enterprise which, reacting industrially (as it must), reached all classes and was the cause of prolonged and intense suffering in every section of the country. It gave rise also to the grave danger of a run being started upon the savings banks. In fact, in many sections in the West this did actually take place, with the result that several really solvent institutions were forced to the wall for no other reason than that they were unable to realize on their securities with sufficient speed to meet the demands which came pouring in upon them. The savings banks in New York, when besieged by long lines of excited individuals all bent upon the recovery of their savings, averted similar disaster only by availing themselves of the law which allowed them to refuse payment of any account save on three months' notice. Although technically this did not constitute a suspension of payment, it amounted to the same thing in effect. Of course, after things had adjusted themselves, themselves, the savings banks were found to be as sound as

ever.

It was 1897 before the country once more fully settled down to its normal. level. Once this level had been regained, however, the industrial development of the Nation progressed at unprecedented speed. This led di

rectly to a general focussing of interests, and the years of 1901 and 1902 witnessed the rise and spread of vast industrial combinations, and the growth of the large corporate interests which have come to be known as "the trusts." This centralization of financial interests naturally created financial centres, of which New York City, controlled largely by the group of financiers designated as "Wall Street," was the undisputed chief. Prior to 1897 the rural banks had been accustomed to keep on deposit in the banks of New York only such small sums as were necessary to meet their ordinary exchange obligations, but the moment the concentration of the money power became apparent, money poured into the East from State and private banks in all quarters, either for investment or to be placed on deposit at interest. There can be no question that this money movement was a substantial factor in furthering the Nation's tremendous business development, yet before long it became apparent that the latter was going beyond even the new supplies of capital which had opened up to the banks. This was really the advance note of the third panic.

After the remarkable expansion which had preceded, it was no more than natural that the year 1903 should have been one of moderate reaction. During that period an inventory was made of real and paper values. Banking institutions had been severally taxed by the financing of such a great

number of large undertakings during the two preceding years, and not a few banks found themselves saddled with flotations which proved unmarketable. Money rates were consequently high throughout the year, but at the same time, although commercial failures were numerous, very few banks closed. This was due partly to the fact that, in answer to an appeal, the Government deposited $170,000,000 with them.

The reaction extended into 1904, the bank clearings falling sharply after the January disbursements and remaining below the normal until the close of the summer, when they suddenly began rocketing upward until new records were set in November and December. Thus, opening with highly encouraging conditions, 1905 was another year of great industrial growth and one which, in many respects, set unprecedented records. The same flourishing conditions prevailed most of the following year and 1907, too, began without any perceptible slackening in the industrial expansion. However, this growth, together with increased speculation which taxed capital almost without regard, had nearly exhausted the banking resources and fluid capital of the country. The necessity of limiting any further extension of credit became strikingly apparent, and the pressure for money was the dominant feature throughout the year.

Yet only the most astute could be persuaded to heed these unmistakable

signs, and the result was that, when the panic did actually ensue, it came with comparative suddenness to the majority. Beginning near the end of 1906, the downward movement of the stock market went on unchecked throughout 1907. Toward the close of the year came the silent or rich man's panic, which was the means of preparing the way for the general panic occurring in October and throwing the entire Nation into chaos, causing immense suffering, deranging business to an unprecedented extent, and affecting, while it lasted, all classes. The panic of 1907 was not of such long duration as that of 1893, but it was much more intense perhaps even more general- and in some respects presented the most serious financial situation which the United States has ever been forced to face.

No class suffered more than did the bankers, and the dangers attendant upon such concentration of capital as had continued so long were thrown into the boldest relief. The panic itself was greatly hastened by the collapse of a copper pool, headed by F. Augustus Heinze and his associates. When their attempt to corner United Copper stock fell through, conditions were such that confidence was lost in the Mercantile National Bank, Heinze's institution, and the long series of banks in which Charles W. Morse, the Thomases, and other well known men were interested. How great was the significance of this may be realized when it is understood that

these institutions included a round dozen National banks and trust companies and about as many State banks. The general feeling of uncertainty toward these institutions forced an examination, which disclosed that the series had been acquired by hypothecating the stock of a bank as soon as bought in order to furnish collateral for funds with which to buy up another. Refusing to countenance such methods, the clearing house forced Heinze, Morse, and the Thomases to resign from all official banking positions. A more thorough examination of these banks, however, proving that they were sound, the Association agreed to help them. But by that time the fear had become general, rumors of unsoundness were heard on every side and all banks began withdrawing their loans and deposits from affiliated institutions. A heavy run on the Knickerbocker Trust Company, of New York, finally compelling it to close its doors, brought the panic to its highest pitch.

It was then apparent that, unless strong measures were followed, utter ruin must follow. Accordingly, in an effort to save the general situation, a group of bankers headed by Mr. J. Pierpont Morgan, volunteered to aid the Trust Company of America, which had been found in sound condition. This institution successfully withstood a heavy run extending over four days, while the Lincoln Trust Company was the scene of another sensational run at the same time. These were the sig

nal for runs on banking institutions generally, not alone in New York, but in all parts of the country, the panic having quickly communicated itself to even the most remote places. The savings banks in particular were stampeded by panic-stricken depositors. Many banks were forced to suspend for a time, not from any inherent unsoundness, but from sheer lack of cash. Only a few were found to be unsound. In New York many savings banks were forced at last, as they had been during the stringency of 1893, to avail themselves of their charter rights and demand notice before deposits could be withdrawn.

George B. Cortelyou, at the time Secretary of the Treasury, hurried to New York and, making his headquarters at the sub-treasury there, did yeoman service in an effort to save the situation. Immediately he put $25,000,000 at the disposal of the National banks, stipulating that most of the capital should be used to help the institutions then experiencing runs. The Morgan group also still stood, working night and day to stave off disaster from many threatened institutions. John D. Rockefeller loaned $10,000,000 for a similar purpose, but still the panic continued, and more and more banks suspended daily. Call money reached a maximum of 125 per cent., and finally the general scarcity of both money and banking credit left the clearing house banks no alternative but to issue clearing house cer

The situation was complicated still further by the out-of-town banks, which began calling in their deposits on the New York banks. At the same time country banks, too, began to demand the return of their reserve deposits in Chicago, Pittsburg, St. Louis, and other centres, and the clearing house associations in these places were before long following the lead of New York in issuing clearing house certificates. The fact that the New York banks were forced to meet their obligations to interior correspondents by means of checks instead of cash, helped still further to extend the money stringency to all quarters.

The stock exchanges of Pittsburg, New Orleans, and Minneapolis closed; currency went to a 4 per cent. premium-5 per cent. in Pittsburgand remained at premium till the close of the year; while many banking houses and industrial corporations were forced by the prevailing lack of currency to put out a wild-cat currency of their own. The stringency was felt very keenly in the West. In many places it was found difficult even to pay employees their weekly salaries, while all business was retarded by the inability of business men to discount one another's notes. Many concerns were forced to go into the hands of receivers for a time, but, everything considered, the number of failures was surprisingly small. Still the fright of the depositors continued

themselves, and banks in all sections had to struggle for bare existence. Withdrawals were limited to $50 a week - even less in some cases while the inability of business men to meet loans which were called in threatened a widespread suspension. In several Western States the governors decreed a week's holiday in order to permit affairs to right themselves naturally and public confidence to return, and in at least one State (California) this holiday was extended almost to the end of the year. It was largely as a result of such wise precautionary measures that, despite the frenzied conditions prevailing in all sections, only one important bank suspension (that of the Kansas City National Bank of Commerce) was reported throughout all this period from the Middle West.

All the while Secretary Cortelyou remained in New York and continued to advance governmental aid to all parts of the country as rapidly as possible. In less than a month after the panic subsided government funds on deposit had increased by more than $80,000,000, while interior banks were further aided by importations of gold, which, by December 1, had almost reached the $85,000,000 mark. It thus came about that before the end of the year both the Western and Southern banks had amassed enough to enable them once again to meet full payment of check demands; but they were afraid to do this until assurances of

safety reached them through the resumption of payments on the part of the New York banks. Everything considered, the recovery of the latter was remarkably rapid. The deficit in their reserves, which amounted to nearly $55,000,000 late in November, had been reduced to almost $10,000,000 by the beginning of 1908, and it was not long before the general resumption of payment was effected throughout the land.

The return of confidence was somewhat slow and business men everywhere exercised great caution at all times, but before the end of 1908 conditions seemed to have settled down to their normal level again. The causes assigned for this panic, which came so near causing disaster to the Nation, were many and diverse. A great number, among whom were included several prominent bankers and close students of economic conditions, placed the blame on President Roosevelt's shoulders, holding that the sweeping investigations he had instituted dealing with the corporate interests and their methods had been the means of paralyzing public confidence. On the other hand, the supporters of the Administration maintained that there could have been no trouble had not corruption existed to an alarming extent and that, with such a state of affairs, a panic could not have been avoided, even if it might have been postponed. Perhaps the most plausible explanation is furnished by the tremendous increase,

Many things contributed to the general clearing up of the situation. Besides the pooling of banking interests and the co-operation of trust companies, the prompt aid of the Treasury and the introduction of clearing house certificates, new issues of government bonds and certificates and large importations of gold were prominent factors. The first of the latter was arranged for within a week after the panic ended, while others followed in rapid succession, finally resulting in a fall of the cash premium. Still another very important relief measure was supplied through a liberal interpretation of the National banking law which, in order to secure deposits, permitted all National banks having deposits of United States bonds with the Treasury to substitute for these approved securities, so that the bonds so released could be utilized to guarantee increased circulation. In this way the outstanding bank-notes were shortly increased to about $20,000,000.

As soon as conditions appeared to have righted themselves, numerous reform movements were begun, the dominant cry being for a more elastic currency. In addition, it was demanded that the practice of using bank depos