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Panic of 1896

The Panic of 1896 was the last money panic of the 1800s to affect Chicago. It resulted in bank failures, suicides and criminal investigations. Of the ten panics of that century, only eight concerned Chicago.

Aerial view of Chicago
Photo by Scott Olson/Getty Images

The causes were of the money panic and resulting depression were many. A fall in silver reserves caused concerns about the gold standard. Commodity prices for wheat and cotton were down which initiated serious lows in the stock market. Declines in agricultural trade and in industrial productivity increased the setbacks. The real estate market experienced numerous failures. The banks didn’t carry enough reserves to survive the crisis. In fact, call money—money banks borrow from each other to maintain reserves—carried a loan interest rate of 125%.

In Chicago, the conditions became serious. Fearing major sell-offs, the Chicago Stock Exchange closed for three months. The W.H. and J. H. Moore Company, an investment firm in Chicago, folded on Aug. 3 because they were unable to cover their losses. On Dec. 21, the National Bank of Illinois collapsed producing a chain reaction of bank failures. William Hammond, vice-president of the national bank, approved risky loans and used bank funds to cover losses on his personal investments. Hammond drowned himself in Lake Michigan. The National Bank of Illinois also made secret payments for questionable loans and hid the documentation in foreign exchange accounts. The Wasmandorf and Heinemann Bank of Chicago failed, and its president Otto Wasmandorf committed suicide with a revolver. Chicago banker Edward S. Dreger went to the Illinois State Penitentiary for his conviction of 15 charges of false pretenses, conspiracy and larceny.

After the election of President William F. McKinley and the Klondike Gold Rush, the economy started recovering in 1897.

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