Panic of 1893

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The Panic of 1893 was a major national economic depression which began in 1893 and lasted until at least 1897, causing widespread unemployment and numerous business failures, and slowing the growth of Birmingham just as the "Magic City" was entering its third decade.

The underlying causes of the 1893 financial panic were similar to those of the Panic of 1873 which nearly undermined Birmingham's infancy. A similar investment bubble in railroad stocks led to bank failures just as the public made a run on the nation's gold supply. Specific events triggering the plummet included a political coup in Argentina, a glut of silver on the market from new mines and federal policies, and a parallel decline in market prices for agricultural commodities.

The outfall from the financial crisis fell disproportionately on the fast-developing, railroad-dependent areas of the west and south, and especially those dependent on industrial activity. Depositors at the time had no recourse to salvage their savings in case of a bank failure and there was no "safety net" for those who lost employment when companies failed.

Blame for the suffering borne predominantly by farmers and laborers was pinned by populists on "robber barons" like J. P. Morgan and "Jewish bankers" like the Rothschilds of New York, both of which helped to buoy the U.S. gold reserve with $65 million in loans. Dissatisfied laborers carried out numerous strikes in protest of wage cuts, including the landmark Pullman Porters' strike of 1894. With Democratic president Grover Cleveland bearing the brunt of public outrage, the Republican party scored major victories in the 1894 general election. Over the next two years, "bimetallism" was the prevailing political topic, with Republicans favoring the gold standard and high tariffs on imports and Democrats favoring silver-backed securities. Republican William McKinley was elected in 1896 and the gold rush in Alaska's Klondike region helped shore up federal reserves, providing a basis for resumed economic growth that continued until the Panic of 1907.

Locally, Steiner Brothers Bank, which had participated in a recent issue of municipal bonds for the city, developed a plan to ask bondholders to defer interest for five years while they worked to avoid a default. They hoped they could buy enough time for passage of an amendment to the Alabama Constitution of 1876 to approve new revenues for the city. Sigfried Steiner, along with Judge A. C. Howze and Alderman James Meade traveled to other cities to appeal directly to major bondholders. Steiner personally bought securities from investors that remained unconvinced. Burghard Steiner led lobbying efforts for the amendment to increase property taxes in Birmingham to five mills, which he estimated would be just enough to service the bond debts. His proposal, dubbed the "Steiner Amendment," failed in a statewide referendum in 1896, but passed in 1898, thus avoiding default and securing the city's credit for the future.

Local effects

Other effects