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The Panic of

THE PANIC OF 1907 We have seen what warnings were finding utter ance during 1906, both in the comments of experienced critics and in the action of the money markets, as to a possible approaching crisis. The powerful capitalists who were conducting the Ameri can speculation of the day paid no heed to them. Nor, apparently, did financial Europe, where it was stated on the highest banking authority, in the middle of 1906, that the United States, if it wished, "can borrow from Europe to a practically unlimited extent this season." This promise was made good. Serious estimates of the use of outside capital, in con nection with Wall Street's undertakings of the season, name sums which bewilder the imagination. Credit for upwards of $500,000,000 was asserted in conser vative quarters to have been obtained from Europe, and a private investigation by the New York Clearing House Association showed that not less than $300,000, 000 in loans had been placed at New York by our own interior banks.

It can hardly be supposed that all of this huge sum was devoted to Stock Exchange speculation pure and simple; but the speculators none the less relied on it to protect them against the handicap of the rapidly dwindling surplus reserves of New York banks. Their position was fortified in another way. The Union Pacific Railway, having received its share of Northern Pacific and Great Northern stocks in the Northern Securities liquidation, had sold a good part of them in the market. As a consequence, the company held, on June 30, 1906, in cash and money loaned on call, the sum of $55,968,000, as against $7,345,000 twelve months It embarked this mass of capital in purchase of railway shares such as New York Central, Atchison, Topeka & Santa Fe, and Baltimore & Ohio,—all of them active centres of speculation, some of them apparently procured from holdings of "inside" finan ciers, others from the open market.3 Not content with this, the Union Pacific management borrowed $75,000,000 more on its notes and used the proceeds similarly. In all, $131,970,000 was thus thrown into railway stocks by the Union Pacific, under the auspices of Mr.

Hariiman, its chairman, between June 3o, 1906, and February 28, In August, 1906, the Union Pacific's annual dividend was suddenly and unexpectedly increased from 6 to to per cent., and a speculation of excessive violence en sued on the Stock Exchange. It was believed to be conducted under the personal leadership of the com pany's controlling interests. Union Pacific stock rose 35 points within a fortnight; numerous other stocks 10 points or thereabouts; and then, as they ought to have expected, the speculators heard from the money mar ket. Such, indeed, was the strain now imposed on bank resources that, before the month was over, not only Wall Street demand loans, but merchants' dis counts, commanded the highest rate reached during August, outside of actual panic, in more than thirty years. With the opening of September, the New York banks reported a deficit in reserves. The United States Treasury was urgently appealed to for relief, and Secretary Shaw responded by depositing Govern ment surplus funds in banks which promised to use them for importing gold. The very large credits raised abroad by Wall Street bankers made this opera tion feasible; in September, no less than $36,00o,000 gold was engaged in Europe for New York.

This was apparently a turn in events for which Europe had not looked, but which those European bankers, who, in the glamour of seemingly invincible speculative success, had equipped the great manipu lators of American values, had themselves invited. Its first result was the crumbling away of the Bank of England's reserve, which fell, at October's opening, to very much the lowest level reached at that date since 1893, its ratio to deposits being only 35.5 per cent.—an abnormally weak position for the autumn season. On October 11th the bank rate rose from 4 to 5 per cent., and on the x9th, at a special meeting of the governors, from 5 to 6—the last-named rate having been reached only twice since 1873, in the London panic of 1890 and the Boer War panic of Lombard Street's own position was openly declared to be the worst since 189o. 2 In London, it was an open secret that the Bank had warned the London joint-stock institutions to call a halt in their granting of wholesale credits to New York, and had threatened a 7 per cent. bank rate if the warning was not Fortunately for London, it was heeded, and one main stay of the American speculation was cut off. The rise on the Stock Exchange stopped abruptly; it now began to look as if the great speculators had got them selves in a trap. For exhaustion of credit resources now began to make itself felt in other quarters than the stock market. The railway companies, imbued with the spirit of the times, had been laying plans of the most ambitious scope for improvement and ex tension. One of the most eminent of the railway presi dents had publicly declared that, in order to avert such "commercial paralysis" as, "long continued, would mean slow commercial death," they must raise not less than one thousand million dollars of new capital per annum during the next five years. This estimate compared with a total borrowing of less than $5o0,000,000 even in such a year as 1901, and with an average of only $7oo,0oo,000 in the five ensuing years. 2 But Mr. Hill's prediction had been scarcely uttered when the railways' suddenly found the money market shut against their stocks and bonds. Un luckily, most of the companies had already committed themselves to the costly undertakings, on the basis of borrowings from the open In any case, they had to meet that indebtedness. This was exactly what brought the crisis in the panic of 1873, when Jay Cooke & Co. and the Northern Pacific Railway both went down under a mass of floating debt which could not be it was what caused the three largest railway failures of As their floating debt of 1906 approached maturity, the railways made vigorous efforts to avert the impending crisis from themselves, and the efforts were successful, but only through the placing of notes with one to three years to run, at interest rates which ranged from 5 to 7 per cent., plus a heavy bankers' commission. During the first half of 1907, no less than $299,00o,000 was raised on this insecure and temporary Meanwhile, in March, 1907, and again in August, there occurred on the Stock Exchange sales so enormous, and at such sacrifice of values, as to convince the experienced Wall Street man, despite official denials, that forced liquida tion by the largest financiers was under way.3 We have learned, in another chapter, to what extent the conditions prevalent in America had prevailed in other communities. The money-market crisis at the end of 1906 had brought the reckoning in those markets also, and in 1907 their structure of inflated credit set the example of collapse. Egypt went first. In April, 1907, this was the course of events at Alexandria, as described by a competent observer on the spot: " The financial crisis threatening Egypt since January culminated, at the beginning of the present week, in a dead lock from which it seemed impossible for the market to ex tricate itself. Piles of shares were waiting to be sold, though the market was so satiated with paper that the offer of threescore shares in any security sent down quotations whole points. It was equally difficult at one time to buy. It was well known that a number of small houses were tottering, and when the crisis became most acute, one of these firms suspended payments."l A "hoarding panic" followed, which was broken only by instantaneous shipment of $3,o0o,o0o gold from London. 2 consequences of the crisis," said the Chairman of the Bank of Egypt, at the shareholders' annual meeting later on, "were felt not only by the per sons immediately concerned in the speculative business which had been going on, but by all other undertakings in Egypt." 3 In May of 1907, runs of depositors at the Egyptian capital began, and one of the important banks was compelled to close its doors. The situation was epitomized by an important Egyptian financier in these words: " We have been working beyond our means, by using capital which was not ours. At almost exactly the same time, and on the other side of the world, the Japanese market was similarly falling into panic. The review of the episode, by the Governor of the Bank of Japan, thus described what happened: "From the second half of the preceding year (2906) when the fever of enterprise rose high and when various causes contrib uted to aggravate it, men of judgment had already begun to look askance at this state of affairs. But as there were no means to check the trend of public feeling, it continued. To our deep regret, nevertheless, in May and June some banks were compelled to suspend payment because, the root of their trouble being deep-seated, no means of getting efficient succor were available."' On October 17, 1907, there occurred in Hamburg what a correspondent of the London Economist de scribed as "the biggest financial disaster that had overtaken the city since 1857." A few weeks later the same correspondent continued the story: Since the first severe shock to credit was experienced here some weeks ago, in the downfall of Messrs. Haller, Soehle & Company, it was fully expected that many other firms would feel the strain of 8 per cent. and io per cent. money almost to breaking point, and, indeed, suspensions of important commercial and industrial firms have since then multiplied, both here and in other parts of Germany."3 These three foreign panics occurred, it will be no ticed, in Europe, in Asia, and in Africa,—a fairly world wide distribution. It was left for the next, a very serious panic, to occur in yet another continent. Early in October, 1907, a panic of the first magnitude broke out in Chili. Beginning some months before the actual crisis, Chilian exchange on London had fallen from 13/ pence per peso, which itself was far out of line with parity, to 12 in the early days of October and to 8.5 before the year was over.' This amounted prac tically to depreciation of the currency. It was followed by a run on the Chilian banks and by complete dis order in business circles at Santiago and Valparaiso, by the failure of the large Mobiliario Bank of the first of these cities, and by a banking crisis which was re ported to have inspired an effort at relief by the Chilian Government, through issue of short-dated Treasury bonds to the threatened institutions. Holland and Denmark similarly, before the year was over, passed through a formidable convulsion of their credit mar kets, with numerous banking failures. But the turn of New York came next.

It had for many years been a cardinal doctrine, in American banking circles, that a panic like those of 1893 and '1873 would never again be witnessed in this country. The ground for this belief lay in the phe nomenal increase of our economic strength, the "co ordination of American industry" since 1899, the es tablishment of the gold standard of currency, and, more particularly, the great and concentrated resources of our banks. 2 We have possibly discovered, in our narra tive, the weak point of this argument; the strain im posed on credit had as greatly exceeded precedent as did the strength of the organism subjected to it. But there were other reasons why the idea of an Ameri can commercial crisis in 1907 had not been entertained.

One was the fact that predictions of the sort, in 1901 and 1903, had failed so signally of fulfilment. An other was prevalent belief in the "twenty-year cycle" between two great panics.' Such an interval had separated 1837 from 1857, and 1873 from 1893, and the theory would have fixed the next great panic, not for 1907, but for 1913. This last consideration will probably enough ' become a topic of future economic discussion. Perhaps it will be concluded that the extravagance of the demands on credit after 1904, in America especially, was so much greater than in any former epoch as to shorten the period of immunity. Perhaps more weight than heretofore will be allowed to the fact that the cycles of prosperity which ended respectively in 1857 and 1893, and which had lived out the full two decades, were marked by prolonged inter national peace, whereas the sixteen years between 1857 and 1873 contained the American Civil War and the Franco-Prussian conflict, and the fourteen year interval prior to 1907 had covered, as we have seen, three other wars involving prodigious waste of capital. 2 Even if not prepared, however, for another panic of the sort, the community found itself, as 1907 drew on, in a thickening amosphere of apprehension. In June, an $8,0oo,000 iron-manufacturing house went down at New York City; in midsummer, two New York City loans, offered for public subscription, failed to find a market'; in the early autumn, the $52,00o,00o New York street railway combination went into receivers' hands, followed, a few weeks later, by the $34,000,000 Westinghouse Electric Company; early in October, the storm broke with the utmost suddenness and vio lence on the New York banks.

One of the characteristic incidents of the era of speculation, watched by conservative financiers with much uneasiness, had been what was called "chain banking." In New York City, half a dozen banking institutions of the second rank had been bought up by a speculating financier. He had used his stock in one institution as collateral on which to borrow money; the proceeds he had used to buy stock in another bank, repeating the process with each new acquisition. Con trolling his "chain of banks" on such a tenure, he had utilized the whole of them to promote his personal This had been going on during half a dozen years. On Wednesday, October 16, 1907, one of these institutions, the Mercantile National of New York City, a bank with $11,5oo,000 deposits, applied to the other banks of the Clearing House for help.

While the Clearing House committee was investi gating the Mercantile's condition, financial uneasiness began to spread to the community at large. On Thursday, 'the committee announced that the crippled bank would be helped through, and an interval of relief occurred. Other events, however, which oc curred at the same time, and the demand of the Clearing House banks that, as a condition for their assistance, all the directors of the Mercantile should resign, dis closed the fact that the bank's predicament had occurred through misuse of its capital, by its president, in copper share speculation. During the two or three ensuing days, bankers were very generally employed in overhauling accounts of other institutions with which they had engagements. Late Monday afternoon, October 21st, the National Bank of Commerce sud denly announced that it would no longer accept for collection checks of the Knickerbocker Trust Company. With the next day's opening, a run began on that institution, a concern with 17,000 depositors and total deposit liabilities of $35,000,000. By noon the Knick erbocker had closed its doors; next day, nearly every trust company in the city was besieged by a line of panic-stricken depositors.

Nothing like this had been seen in New York City since 1873; even in 1884 and 1893, the New York bank runs were confined to one or two crippled institutions. The extraordinary phenomena which followed the Knickerbocker failure cannot be understood except by a glance at the nature and history of the institu tions on which the panic of 1907 now converged. In New York State, both the original acts chartering companies of this nature, and the general trust company law of 1887 and 1893, had in view merely banking organizations which should perform the duties of ex ecutor, administrator, or trustee. In these statutes there was therefore no provision looking either to per formance of a general banking business or to accept ance of demand deposits from the general No cash reserve was required, as in the case of banks, to be maintained against deposits. Not only was no cash reserve required, but the companies were em powered to invest their deposit funds in real estate, to buy and sell stocks, to lend money on realty—powers which, as a result of long experience, were either de nied outright to deposit banks by law, or were most scrupulously restricted. 2 It was not until the great financial revival after 1896 that the companies began to invade, on an extensive scale, the field of deposit banking. They found their authority in a section of the Trust Company Act, prob ably not intended for this application, but which pro vided for their acceptance of "any and all such trusts and powers, of whatever nature and description, as may be conferred upon or intrusted or committed to it by any person or persons." The language, broadly interpreted, covered acceptance and solicitation of de mand deposits, and on the basis of such interpreta tion the greater number of the trust companies engaged, without the restraints imposed by law and experience on deposit banks, in general deposit banking.

What opportunities and what temptations opened be fore these institutions, in a period such as I have re viewed in the last three chapters, is easy to imagine. We

have already seen how certain life insurance managers utilized the trust companies for illegitimate financiering; some of them were involved in the worst phases of the promoters' schemes of 1901 and 1902; the old and conservative institutions of the class dropped into the background as their younger competitors exploited the field of general deposits. Between 1899 and the end of 1906, their number increased in New York State from sixty-two to eighty-six. Offering interest on demand deposits which banks, with their 15 or 25 per cent. reserve requirement, could not afford to pay, they ran up the aggregate of such demand deposits from $198,00o,00o in 1898 to $834,000,000 in 1906; in addition to which sum, they held in the last-named year $115,0oopoo more, due to other banking insti tutions. In 1901, the actual cash holdings of the New York companies footed up only 1 per cent. of all de posits, or 2 per cent. of all except such as were classi fied as "trust deposits," and the ratio was not greatly changed up to 1906.

Now it is true that the companies supplemented this meagre cash reserve by keeping large credits with the banks. But these so-called "reserves on deposit" were not cash at all; in the banks' hands, they became liabilities; protected, like other city bank deposits, only by 25 per cent. reserve in cash. It was an inverted pyramid, and an uneasy feeling spread among con servative bankers, long before 1907, as to what might result from so ill-guarded a credit system. For the purpose of redeeming checks deposited or drawn in connection with this new branch . of their business, trust companies were accustomed to use indirectly the regular bank clearing-house; that is to say, although they were not members, they "cleared" or exchanged their checks through banks which were. As early as 1902, the Clearing-House authorities expressed the purpose of requiring trust companies which enjoyed such facilities to keep larger cash reserves; on February II, 1903, a rule was formally adopted by the clearing house stipulating minimum cash reserves of io per cent.' A controversy of much warmth broke out. During the discussion, such contemptuous terms were used, in public statements, as "the foolish fetich of a cash re serve." Banks were accused of trying to cripple trade competitors who had got ahead of them; in the end, nearly all the trust companies broke off their clearing -house connections, merely maintaining their balances in bank. Let it be observed that this action not only left the companies with the same inadequate cash reserve, but made it necessary to redeem across the counter all such checks as might be drawn upon them, and to send messengers to collect, across the counter of other institutions, all such checks as should be received upon deposit. This was reversion to methods and practices of a primitive banking era— methods to escape which clearing-houses were in vented, a hundred years ago. It was adopted by a body of institutions with a larger number of depositors and a larger aggregate sum in deposits payable on demand than all the New York banks possessed in 1873, and with a very considerable part of their client age drawn from the ranks of savings bank depositors by payment of interest on deposits, and subject, as savings bank depositors notoriously are, to sudden fright. We are now to see how all these conditions operated in a great financial storm.

The Knickerbocker closed its doors on October 22d; that night, certain other trust companies sought aid from the banks to safeguard them against a run. Knowledge of this conference, reported next morning in the daily papers, brought the run at once; and long before business opened on October 23d, lines of de positors had formed outside the doors of other com panies. The Knickerbocker had catered especially to the so-called "up-town clientage" of the shopping and residence district; its main competitor in this line of business had been the Lincoln Trust Company, with something like 8000 depositors and demand depos its of $i6,000,000. On Broadway and Wall Street, the Trust Company of America had accumulated $42,000,000 demand deposits from 12,000 separate de positors. Against these demand liabilities the Lin coln had been keeping $1,1oo,000 in its cash reserve and the America $3,zoo,000. 2 On these two institu tions, there now Converged such a run as was probably never witnessed in the history of banking. It must be remembered that banks and other trust companies, to whom the beleaguered institutions were indebted, or with whom checks on the Lincoln or America were deposited, had no other way of collecting than by stationing messengers in the line of frightened de positors; this was the punishment for the events of 1903. Recognizing the gravity of the crisis, the Secre tary of the Treasury, Mr. Cortelyou, came on at once from Washington, and arranged to deposit $35,000,000 of the Government surplus with the national banks, by whom it was hurriedly advanced to the trust com panies against their liquid assets.3 This great sum was almost instantly ingulfed in the withdrawals by depositors; the Trust Company of America alone had to pay out $34,000,000 to The runs con tinued fourteen successive days, depositors holding their places in line by night to get a chance to withdraw their funds next day. Ten million dollars cash pro vided by other institutions went with the rest; the run was not stopped until, on November 6th, the older trust companies had organized in committee to assume responsibility for the two hard-pressed institutions. In the meantime, during the panic week itself, six banks in Greater New York and three trust companies other than the Knickerbocker—mostly small institu tions, but with deposits aggregating $57,000,000—closed their doors, and a general run upon the savings banks caused application of the "sixty-day notice rule" for withdrawal of deposits. I On Thursday, October 24th, panic swept over the Stock Exchange. The bank position being then in its most critical phase, restriction of credit occurred on a scale which, if continued, would probably have re duced the Stock Exchange community to general in solvency. 2 This day of suspense — an unvarying incident of formidable credit panics—brought the rate for Stock Exchange demand loans up to 125 per cent.; before the day was over, however, personal intervention the president of the Stock Exchange and of Mr. J. P. Morgan with the banks caused release of $25,000, 000 which, in accordance with sound rule, was loaned out at high rates, but in such manner as to meet press ing exigencies. This averted the formidable aspect of the crisis which, in 1873, made necessary the closing of the Stock Exchange and which in 1907 forced the government of several Western States to decree a series of special holidays. The crisis of the banks, however, had only begun, and it followed the lines made familiar by all former crises. The New York City national banks alone held in 1907 no less than $47o,000,00o de posits due to other institutions; considerably more than double what had been thus held in Banks of interior cities, most of which had three fifths of their 15 per cent. reserve thus deposited in other hands, took natural alarm at the panic news, remembered 1893, and called for return of part of these deposits. What followed, merely repeated history—a history, however, which the country had been assured could never be repeated. The New York banks, on Satur day, October 26th, determined to take out clearing house loan certificates. The intent of this expedient, never adopted since the panic of 1893, was to help out hard-pressed banks through loan of the cash re sources of their neighbors; but its result, in 1907 as in 1893, was to bring about general suspension of cash payments in the clearing-house. Before the panic of 1907 was over, the New York banks had $88,420,000 of such loan certificates in use, as against a maximum of $38,28o,00o in the panic of 1893, and the loan certificates remained in use during twenty two weeks, as against only nineteen weeks' duration in the earlier Two days after New York had set the example, practically every clearing-house in the country took similar action—a wholly unprecedented event, which resulted in issue, throughout the whole United States, of $238,000,000 of such certificates, as against $69,00o,000 during Notwithstanding this recourse, reserves of the New York banks, which had stood at a surplus of $11,182,00o in the week before the panic, fell to a deficit of $54,1o3,00o on November 3d, very much the largest shortage of the kind in our banking history, the maximum deficit of 1893 having been $16,545,000.

This formidable shrinkage was occasioned by an actual loss of $51,000,000 cash in the five intervening weeks, and the position thus created brought suddenly into view two other phenomena of 1893.3 Hoarding of cash by individuals set in; it was estimated in high quarters that, in the country as a whole, no less a sum than $296,00o,000 actually disappeared from This hoarding partly caused, and was partly caused by, the policy of banks in limiting the amount of cash which they would pay out to depositors, and one im mediate result of such restriction being the issue of emergency currency by the banks of cities like Pitts burgh and Chicago, where manufacturers' pay-rolls created urgent need for great sums of The amount of such makeshift money has been estimated at upwards of The next result of the bank restriction was a premium on currency, paid in checks on such institutions, which rose to 4 per cent. and which continued for two months, as against only one month's duration in the panic of As in 1893, so in 1907, this premium caused a stampede to draw on Europe's gold supply. Gold was engaged at London, in November, at the abnormal exchange rate of $4.91 for the pound and $9o,c00,coo gold came from Europe in the next two months. As we have seen, Europe was in no position to regard com placently such a raid on its gold reserve. London alone lost $73,400,000 gold to New York in November and December the Bank of England's gold reserve fell $31,o00,o0o in the two weeks after the New York panic, and on November 7th the bank rate, for the first time since 1873, was put up to 7 per cent. ° In the dismay and bewilderment of the hour, intimations were made, in conservative quarters, of an 8 per cent. rate, or even 9, if the gold outflow to New York con tinued, and high banking authorities in London gave out word that the time had come for some arbitrary intervention by the United States Government to guarantee the That recourse was not neces sary. As usually happens on occasions of the sort, markets were passing out of the stage of actual crisis at the moment when despair seemed to have gained full sway in the financial community. The excited clamor for help through issue of Government fiat money was echoed, on this occasion, even in the recommenda tions from Lombard Street, and was followed by a futile expedient of the Treasury, whereby $50,000,000 Government bonds and $ioo,000,000 one-year Govern ment notes were offered to the banks with a view to providing a basis of new circulation? Only $24,998,040 of the bonds and $15,436,50o of the notes were taken.3 It soon appeared that the recourse was superfluous, and that the operation complicated rather than relieved the financial strain, and a few weeks after the announce ment of the loans, they were suddenly withdrawn from the market by the Government. With the arrival of the first few large consignments of gold from Europe, the acute stage of the panic ended.

There were left the larger after-effects, of which the panic itself was only a premonitory symptom, and which came only gradually into sight, along with asser tions that they would not come at all, on this occasion as on others of the kind. The panic of 19o7 was unlike the panic of 1893, which followed a period of uncer tainty and misgiving, leading to acquiescence, on the part of the community at large, in the certainty of prolonged reaction and depression. It resembled far more intimately the panic of 1873, which came, like the traditional "bolt from the blue," on a situation presenting so brilliant an aspect of assured prosperity that the people—most of all the great capitalists whose schemes had come to earth—refused for many months to admit that one chapter in finance and industry had ended and that another and different one was opening. The visible sequel to the panic of 1907 was necessarily recognized. That commercial failures in the United States should not only have increased, in the panic months of November and December, 3o per cent. in number as compared with 1906 and 125 per cent. in liabilities, but that the first nine months of 1908 should have shown increase of 55 per cent. over 1907 in number and 120 per cent. in liabilities, was a matter of record. I So was the shrinkage in the iron trade, in December, 1907, to 36 per cent. of normal, 2 and the 5o per cent. reduction in iron production during the first half of 19083; the decrease, for the full year 1908, of $290,000,000, or 11.5 per cent., in traffic receipts of American railways'; the shrinkage of nearly 17 per cent. in checks drawn on American the reduction in March, 1908, of 25 per cent. in output, Io per cent. in wages, and 25 to 5o per cent. in prices in the textile trade, and the great increase in number of unemployed.

But a full year had elapsed before the financial markets, and the trades dominated by great combina tions of capital, were willing to recognize the changed conditions. Recovery from the acute stage of de pression in general industry, as on the Stock Exchange, was misinterpreted as meaning immediate restoration of the old order of things—a tendency which found its complete expression in that extraordinary novelty of the after-panic year, known at the "Sunshine move ment" and embodied in the "Prosperity League," the basis of whose organized action was to persuade the community that, if they believed themselves to be prosperous, they would be prosperous, and whose methods were illustrated by the fixing, by resolution, of an arbitrary date as "Re-employment Day." Dur ing this same year 1908, an equally remarkable position was assumed in the steel trade, where the billion dollar United States Steel Corporation was dominant. The head of the company, declaring that "the mere fact that the demand is greater than the supply does not justify an increase in price, nor does the fact that the demand is less than the supply furnish an argument for lowering the price," announced that the price of steel, a basic material of industry, would not be re duced in response to the impaired demand, and that although consumption of steel was barely fifty per cent. of what it was in 1907, prices of 1907 would be maintained.' Throughout 1908 they were maintained, except for a trifling and ineffectual reduction. On the Stock Exchange, repeated outbursts of speculation for the rise occurred, in each of which it was confidently affirmed that the after-effects of panic were over, and that the "boom of 1906" was about to be resumed. In November, the people gave Mr. Taft a plurality over Bryan scarcely one-half the Roosevelt plurality of 1904, but except for that, the largest plurality of any presidential vote, and the first plurality ever polled for the Administration party in the election following financial panic. The speculative public rushed again impetuously into the Stock Exchange; the speculating capitalists resumed their manipulation of the market; many stocks rose to a higher price than in either 1907 or 1906.

The end of this singular demonstration came with the opening of 1909, when facts were suddenly recog nized, when prices for steel and other commodities came down, and when the Stock Exchange demon strations ended. With the closing of the year 1908, this history may properly close; for it marked the end ing of a chapter. What shape the next distinct epi sode of American finance will take, is a question to be determined by other influences. In the future, as in the past, the trend of the country's financial history will be fixed by the interplay of its natural resources, its capacity for production, the industry, inventiveness, and versatility of its people, and their disposition towards rash exploitation of such resources and towards venturesome experiments with capital.

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