Damaged by a Category 2 hurricane, the SS Central America sank on September 11, 1857, killing 425 passengers and crew. Only about 150 people survived. A huge amount of gold was lost on board, which was supposed to help the banks deal with the financial panic that had started a month earlier. The wreck and some of the gold were found in 1988. Image courtesy of the National Maritime Museum, London/Public Domain
What: Beginning of the Panic of 1857
When: August 24, 1857
Where: United States
When the New York branch of the Ohio Life Insurance and Trust Co. went bankrupt on August 24, 1857, allegedly due to bad investments and embezzlement, a financial panic began. Coupled with other national and global economic events, the early days of panic caused banks to curb lending.
To create a reserve for the banks, the US government arranged for gold to be shipped from the San Francisco Mint to the East Coast. Transported to Panama and loaded onto the SS Central America in September, the gold was valued at about $2 million in 1857, which is about $300 million today, according to the Library of Congress.
The SS Central America was caught in a hurricane on September 9 off the Carolinas. The damaged ship sank two days later, adding to the panic. By October, more depositors were withdrawing money from banks, leading to a bank shutdown in the Northeast on October 14.
“The beginning of the contraction [of bank loans] August twenty-fifth marks the very point where the panic took its destructive course. From that point on, distrust grew rapidly. The Telegraph spread it across the country. Every latent cause of embarrassment became active. Small things have been magnified a thousandfold. False alarms have been triggered and public concern sustained by successive disasters.”
– From “The Banks of New York, Their Dealers, the Clearing-House, and the Panic of 1857”, by JS Gibbons, 1858
In celebration of its 150th anniversary, Banker & Tradesman highlights significant moments in the history of Massachusetts real estate and banking. To suggest a topic, email [email protected]
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