# Panic of 1893 The **Panic of 1893** was the financial collapse that opened the deepest depression of the nineteenth century in the United States — roughly four years, 1893 to 1897 — and the event that broke [[Grover Cleveland]]'s second presidency, split the [[Democratic Party]] into gold and silver wings, and handed the [[Republican Party]] the realigning wave of the [[1894 Midterm Elections]] and the [[1896 Presidential Election]]. It is the direct predecessor of the [[Panic of 1907]] and, like it, was resolved by private financial power standing in for a central bank that did not yet exist. It matters for the KB as the cleanest Gilded Age case of a **politically timed collapse**: the Republicans who lost the [[1892 Presidential Election]] predicted disaster before Cleveland took office, the disaster arrived, and the party out of power profited from it. It is also the depression that produced the 1894 income tax, [[Pollock v. Farmers' Loan and Trust Company]], the [[Pullman Strike]], Coxey's Army, and — as a conciliatory gesture in the middle of the strike — [[Labor Day]] as a federal holiday. ## What Happened **The sequence.** The first failure came before Cleveland was inaugurated: the Philadelphia and Reading Railroad, one of the largest carriers in the East, went into receivership in the last week of February 1893 (most accounts give **February 20**; the Federal Reserve's Carlson study gives the 26th). Cleveland took office on **March 4, 1893**. Stock prices slid through March and April. On **May 4–5, 1893** the National Cordage Company — the rope trust — failed, and the market collapsed. Call-loan rates spiked, and in early June money began flowing out of New York back to the interior as banks in the South and West failed. The Erie Railroad failed on **July 25**; within two days banks across the country, beginning in New York, partially suspended cash payments, and currency traded at a premium until September, when the acute phase ended. **The scale.** Roughly 500 banks and 15,000 businesses failed in 1893. Railroad bankruptcies included the Northern Pacific, the Union Pacific, and the Atchison, Topeka & Santa Fe. Unemployment in 1894 is estimated at between 12% (Romer) and 18–20% (Lebergott and contemporaries); the vault's [[Grover Cleveland]] page carries the 18–20% range. The depression bottomed in 1894 and did not fully lift until 1897. **The causes.** Two real shocks and one monetary one. The railroads had overbuilt on borrowed money through the 1880s; agricultural prices had fallen for years, squeezing the farm sector and the Western and Southern banks that lent to it; and the Sherman Silver Purchase Act of 1890 — signed by [[Benjamin Harrison]] to placate silver interests — obliged the Treasury to buy silver with notes redeemable in gold, draining the federal gold reserve toward the $100 million floor that markets treated as the line between a gold country and a silver one. **The response.** Cleveland called Congress into special session and forced the **repeal of the Sherman Silver Purchase Act** (November 1, 1893), which held the [[Gold Standard]] but did not restore confidence and split his party permanently. When the gold reserve fell to $41 million in early 1895, he turned to private finance: under the **Morgan–Belmont agreement of February 8, 1895**, a syndicate led by [[J.P. Morgan]] and August Belmont Jr. supplied roughly $65 million in gold in exchange for about $62 million in 30-year 4% bonds — a bailout of the United States Treasury by a private banker, at a profit, which became the defining charge against Cleveland from the silver wing and the populists. ## The Political Timing The Republicans who lost in 1892 said the economy would collapse if it lost Harrison's "business man's administration," and the collapse duly arrived in the weeks around Cleveland's inauguration. [[Heather Cox Richardson]]'s September 4, 2026 letter quotes the *Chicago Tribune* of November 1892: "The Republicans will be passive spectators. It will not be their funeral" — and the suggestion that "perhaps the working classes of the country need such a lesson." Whatever the underlying causes, the panic let the party out of power blame the party in power for a crisis that had been building for years, and the Democrats — trying to steady markets by giving capital what it asked for — abandoned most of the pro-worker program they had been elected on. The consequences ran in one direction. The [[1894 Midterm Elections]] gave Republicans a gain of more than 100 House seats, the largest swing in the chamber's history; the [[1896 Presidential Election]] ended the Bourbon Democratic era when the party nominated [[William Jennings Bryan]] on free silver and lost to McKinley. The [[Populist Party]], which had carried five states in 1892, was absorbed. ## Why It Matters - **No lender of last resort.** As in 1907, the crisis was ended by clearing-house certificates and a private syndicate rather than by any public institution. The two panics together are the case for the [[Federal Reserve Act]] of 1913. - **The panic wrote the labor calendar.** The depression produced Coxey's Army (spring 1894), the [[Pullman Strike]] (May–July 1894), and the federal [[Labor Day]] holiday, signed by Cleveland on June 28, 1894, two days after the Pullman boycott began and a few days before he sent troops to Chicago. - **The income tax.** The Wilson–Gorman Tariff Act of August 1894 paired lower tariffs with a 2% tax on incomes above $4,000, meant to replace lost revenue without burdening wage-earners; the Supreme Court struck the tax down in [[Pollock v. Farmers' Loan and Trust Company]] the following spring. The [[Sixteenth Amendment]] is the eventual answer. - **The pattern.** A party that has just lost predicts ruin, ruin arrives, the winners govern by conceding to capital, and the predicted ruin is charged to them at the next election. The [[Great Depression]] under Hoover is the same script with the parties reversed. ## See Also - [[Panic of 1907]] — the sequel; same missing institution, same private rescuer - [[Grover Cleveland]] · [[Benjamin Harrison]] · [[1892 Presidential Election]] · [[1894 Midterm Elections]] - [[Gold Standard]] · [[J.P. Morgan]] · [[William Jennings Bryan]] · [[Populist Party]] - [[Pullman Strike]] · [[Labor Day]] · [[Pollock v. Farmers' Loan and Trust Company]] - [[Gilded Age]] · [[Gilded Age Plutocracy]] · [[Financial System Timeline]]