Panic of 1873
After the Civil War the Treasury Department, claimed the US banking system was growing rapidly but built on solid ground. However, the country was hit by a number of banking crises. One of the worst was in 1873 during the time of the Freedman’s Bank.
The panic started in Europe when investors began selling off their interests in America particularly the railroads.
In the mid 1800s railroads were a new invention and companies had been borrowing money to get the cash they needed to build new lines.
Railroads issued bonds that specified how much a company was borrowing and how much interest it would pay.
When Europeans started selling railroad bonds it flooded the market. There were soon more bonds for sale than anyone wanted.
Railroad companies could no longer find anyone who would lend them the cash they needed to stay in business. Many railroads went bankrupt.
Jay Cooke & Company, one of the biggest banks in New York City invested a lot of money in railroads and when the railroads began having problems Cooke & Company went bankrupt.
When people saw Jay Cooke & Company failed they ran to their local banks demanding the withdrawal of all their money.
The panic spread to banks in Washington, New York, Pennsylvania, Virginia, Georgia, Indiana, Illinois, Ohio and throughout the midwest. At least 100 banks failed nationwide
1873 was the first year TR spent the summer in Oyster Bay.