"In New York City it became a question of the suspension of the banks or of the merchants as a body. Capital in the shape of deposits, for the first time in the history of this country, and I think I may say in the world, sided with the business men and against the banks. The great concentrated call loan was demanded, and in such amounts that a single day's struggle ended the battle; and the banks went down before a storm they could not postpone or resist. * * * The most sagacious banker, in his most apprehensive mood, never for a moment deemed it possible to have a general suspension in this State from a home demand for coin; while coin itself was at little or no premium with the brokers."[1]
The banks of New York City all suspended but one—the Chemical. The suspension became general except in the Ohio Valley, at New Orleans, in South Carolina, and some scattered exceptions elsewhere. Fourteen railroad companies, amongst which were some of those which are now the strongest in the world, suspended payments. The failures were put at 5,123, with liabilities for $299.8 millions. A meeting of representatives of the banks was held October 13th, at which it was resolved to send a committee to Albany to ask the Governor to call an extra session of the Legislature "to consider the necessity of enacting some law to give relief in the present financial emergency." The Governor excused himself from action. The Constitution, in fact, explicitly forbade anything which the Legislature might have proposed to do. Resort to the judiciary was more successful.
During the run, October 14th, two one-hundred dollar notes were presented at the Bank of New York, with a demand for specie, which was refused. Application was made to a Judge of the Supreme Court for an injunction, which was refused, on the ground that, although, during a period of general suspension, a bank may refuse to redeem its notes, yet that does not prove that it is insolvent, since it may have assets greatly in excess of its liabilities. This was in accordance with an agreement which the Judges had entered into, and it was in line with earlier decisions interpreting State laws which provided for an injunction when note redemption was refused.[2] Nevertheless, it was nothing less that a coup d'etat. The Constitution had explicitly provided against any suspension of specie payments, on any pretext whatever, and this constitutional provision now proved as ineffective as all the old legislative enactments. The situation was somewhat paradoxical. It had been hoped that the severe constitutional prohibition would prevent the banks from ever putting themselves in a position to suspend. They had come into that position. It was said that the terror of forfeiture was what made them adopt their policy of self-protection, to the ruin of the mercantile world, although the construction of the bankers was that the public was in a panic lest the banks should all be wound up in case they suspended.[3] This was the knot which the Judges cut, and everybody was forced to acquiesce in their action. It was a most conspicuous failure of
