Panic of 1893

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

• The First National Bank of Birmingham failed on August 2, 1893, but resumed operating on October 9.
• Enoch Ensley, who had opened the Ensley Works in 1888, put his land development project on hold to tend to his ill wife. When he returned, the meager value of pig iron forced his company into receivership. The Ensley property was auctioned off for $16,000 and the enterprise re-launched in 1898 by Erskine Ramsay and Paschal Shook. The furnaces themselves were the foundation of the recovery of the Tennessee Coal, Iron and Railroad Company, which lost enormous investments in railroad construction. TCI focused its activities on iron and steel production and moved its headquarters to Birmingham in 1895.
• Investors from Nashville took over controlling interest in the Birmingham Railway & Electric Company.
• The Red Mountain Railroad, first to cross Lone Pine Gap, failed.
• The Birmingham Brewing Company declared bankruptcy. Its former brewery was taken over by the Alabama Brewing Company in 1897.
• Construction of the Lakeview School, planned as early as 1890, was delayed until 1901.
• Henry DeBardeleben and W. T. Underwood's Mary Pratt Furnace was idled. The property was bought at public auction for $35,000 in 1898 by the Alabama Consolidated Coal and Iron Company.
• The 1894 miner's strike disrupted operations in the Birmingham District.
• The Brierfield Ironworks, damaged by an explosion, was unable to reopen.
• Finances were South Highland Presbyterian Church were thrown into a precarious situation which was not resolved until 1900.

Other effects

• William Hoover's plans to build a town called "Hooverville" in the vicinity of his brickworks outside Russellville failed.
• The planned industrial city of New Birmingham, Texas failed in the wake of the 1893 panic.

References

• Cleveland, Frederick A. (January 1899) "The Final Report of the Monetary Commission" Annals of the American Academy of Political and Social Science No. 13, pp. 31–56
• Stevens, Albert Clark (January 1894) "An Analysis of the Phenomena of the Panic in the United States in 1893" Quarterly Journal of Economics No. 8, pp. 117–48
• Lauck, William Jett (1907) Causes of the Panic of 1893
• Hoffman, Charles (1956) "The Depression of the Nineties: An Economic History". Journal of Economic History. Vol. 16, No. 2, pp. 137-164
• Reznick, Samuel S. (1953) "Unemployment, Unrest, and Relief in the United States during the Depression of 1893–97." Journal of Political Economy. Vol. 61, No. 4
• Elovitz, Mark H. (1974) A Century of Jewish Life in Dixie: The Birmingham Experience. Tuscaloosa: University of Alabama Press ISBN 0817369015
• Steeples, Douglas, and David O. Whitten (1998) Democracy in Desperation: The Depression of 1893