The
collateral deposited by the banks represented $2,500,000 in 1856, on
which credit of $2,000,000 in notes was granted.
In 1857 the same collateral did not exceed $560,000 estimated value, on
which a credit of $383,000 in paper was granted.
At the height of the crisis failures were so numerous that a general
suspension of payments, and, in consequence, a stoppage of business was
dreaded. This suspension, in place of being general, turned out to be
merely partial; it occurred at a juncture when it might well be feared
that it would lead on to the very greatest disasters, but, far from
harming, it helped the market. The banks had suspended payment upon a
common understanding among themselves and with business circles. The
critical moment having passed, tranquillity reappeared as soon as the
course determined on was known.
If suspension of payment hurts the credit of a bank, it does not
necessarily lead to the depreciation of its bank notes.
There are a good many proofs of this: in 1796, when the Bank of England
suspended, its bank notes did not depreciate; and if this state of
things did not last, the blame must be laid upon the excessive issue.
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