The Panic Of 1893

The Panic of 1893 was one of the most serious banking panics of the National Banking Era. ² Of the roughly 9,500 banks that existed in 1893, about 550 were compelled to close their doors either permanently or temporarily during the panic (Bradstreet's 1893). Unlike some of the other banking panics of this era which appeared to originate in the financial center of New York City, the troubles in the banking sector were first manifest in the interior of the country and spread to New York. It can be helpful to divide the panic into two parts. During the first part of the panic there were widespread runs that forced bank closures in the interior which in turn put pressure on New York banks and the money markets there. In the second part of the panic, these pressures became sufficient to cause the New York banks to sharply restrict currency shipments to interior banks. As the New York banks played a key role in banking and payment systems, the restrictions on the convertibility of interbank deposits in New York to currency represented a second shock to the banking system that further disrupted financial markets.