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Browns, and The Panic of 1837

Browns, and The Panic of 1837. J.R.Killick, Athens, August, 2011. Brown’s Bail out by BofE, 1837. Browns in trouble - Spring 1837. Panic in US. US debtors unable to remit in time. £2m bail-out = $10m. Underlying strength. Too big to fail. Threat to GB exporters.

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Browns, and The Panic of 1837

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  1. Browns, and The Panic of 1837 J.R.Killick, Athens, August, 2011

  2. Brown’s Bail out by BofE, 1837. • Browns in trouble - Spring 1837. Panic in US. US debtors unable to remit in time. • £2m bail-out = $10m. Underlying strength. Too big to fail. Threat to GB exporters. • Brown’s cotton imports - 1838 = $7m. • US exports to GB - 1838 = $52m. • US Federal Govt Receipts - 1838 = $26m. • Why did BofE Help?- Moral Hazard etc.

  3. Crisis of 1837-Basic Chronology • 1835-6: US Boom. GB exports + Credits to US. • Mid 1836: President Jackson’s ‘Specie Circular’. • Fall 1836-: BofE pressure on ‘American Houses’.. • Jan 1837: Growing pressure in US. • March 1837: US panic. US payments to GB falter. • May 6th-29th: Packet Roscoe – US payments stop. • June 1st: Brown’s appeal to BofE. • June 2nd: ‘3 Ws fail. Panic in Liverpool. • June 2nd-22nd: BofE Negotiation. Guarantee fund. • June 22nd: BofE will carry Browns until Dec 31st..

  4. BofE Aid to Merchants, 1836-37 • Nov: Irish Banks – Aid to: • Dec: Northern & Central Bank - Failed. • Jan: Esdailes - £150k – Wound up. • Mar: Wiggins, Wildes, Wilson - £200k each. • June: ‘3 Ws’ failed – Creditors helped. • June: Browns - £2m – Saved -Re-paid • June: Morrison & Cryder – Saved - Repaid • June: Lizardi – Saved – Repaid. • Browns the largest, and most threatening.

  5. Can Anything More be Said? • Lehman et al collapse: Restudy timely – Browns’ part in 1836-41 events. 2008 parallel. • Existing Studies – Good quality Centenaries. • J.C.Brown, A Century…(1909); Aytoun Ellis, Brown Shipley, (1960); John Kouwenhoven. Brown Brothers Harriman. (1968). • Edwin Perkins, House of Brown (1975) – deliberately adds nothing – enough said. • But some possible chinks to exploit. – unused Brown records. Other merchant records.

  6. Brown Sources and Bibliography • NYHS: BBH Hist file. 1837 letters – WB, Shipley. Bowen - source for this talk – only part used. • LofC: Browns, Balto - Out letters + Ledgers. • Brown-Shipley: Wm B Letter books – Politics 1846-. • NYPL: Brown Brothers ledgers – but few letters. • Liverpool PL: William Brown Library: Very limited. • Other sources: Barings, Bates, Langton, BofE. • My interest: Anglo-Amn merchants – Trade, Shipping, Finance. Browns and Copes.

  7. Synopsis – Browns & Panic of 1837. • Browns’ background and Operations. • Traditional Explanations: Jackson, BUS, BofE. • Macro Interpretations – North, Temin. • Browns’ and the 1835-6 Boom. • Browns’ and the Crisis of May-June 1837 • The Negotiation between Browns and the BofE. • Browns’ in the Recovery, 1837-39. • The Renewed Crisis and Depression of 1839-44. • The Lessons Browns drew from the Crisis.

  8. Alexander Brown and Sons (1800-) • Alexander (1764-1834) – Ballymena to Baltimore, 1800. • Four long lived sons:- • 1. William to Liverpool, 1810 • 2. George remained in Balto. • 3. John to Philadelphia, 1818. • 4. James to New York, 1825. • Archetypal linked merchant network - Ulster Presbyterians – Scots Irish.

  9. Liverpool Importers, 1827/30

  10. Traditional Story - Jackson-v-Biddle. • Andrew Jackson, 1767-1844. • 7th Pres of USA, 1829-1837. • Military Hero. New Orleans. • Jacksonian Democracy – Populism – Disliked Banks. • ------------------------------------- • Nicholas Biddle, 1768-1844. • President 2nd BUS. • Philadelphia. Merchant. Aristocrat. Europe. • Federalist - Whig. • Ist Gt US Central Banker.

  11. Second BUS, 1816-36 - Policies. • 1st BUS: 1791-1811 - Hamilton. Copy BofE. • 2nd BUS: Federal Charter, 1816-36. • Branches in main cities. • NB-President -1820-40. • US Taxes. Deposits. • Currency Stability agt £. • Control State Banks – Centre -v- Periphery.

  12. The Bank War, 1832-41 • 1832: Election- BUS • 1834: NB squeeze. • 1835: Govt deposits to Pet Banks. • 1836: BUS re-charter. • 1836: Frontier boom. Specie Circular. • 1836-7: BofE squeeze - contraction. • 1837: Panic. • 1838: Recovery. • 1839: 2nd Crisis • 1840-4: Hard Times.

  13. Macro-Economic Interpretations, 1815-60

  14. 1. Central Role of Cotton in US Growth. 2. South - Cotton.West - FoodEast - Services. Douglass North – US Cotton trade.

  15. Peter Temin, GB Demand and BofE • Critiques Standard AJ -v- NB Story • Critiques North • GB Demand – Harvest, 1836-40 • BofE Policy, 1837 • Role of Credits and Merchants • Deflation rather than Depression.

  16. Merchants’ Role in Atlantic System, 1830s • Leading Players:- • Liverpool Mts • Country Banks. • GB Manufacturers. • Et Coast Mts. • Southern Factors. Trade + Credit Flows • Manufactureds. • Raw Cotton. London – Liverpool – East Coast – South. (From - Chapman, Merchant Banking)

  17. Brown’s Imports, 1820-40

  18. Leading New Orleans Factors, 1831-36

  19. Browns’ Advances to Factors, 1834-7 • 1834 – JAB – Phila – $4-500k advances to Reynolds-Byrne (Later Herman Briggs – 1st large failure, March 18th, 1837) • ‘The cotton trade is no doubt pleasant – but competition for it is so great people are willing to go to any lengths to get consignments… Some houses will advance the whole cost.. RB drew on JAB for more than the cost in New Orleans at time of shipment… as far as going on as last year, we might as well be in partnership with them’ - GB – WB, August 1834.

  20. GB Manufacturers Similar to Cotton • Browns organised several parties:- • 1. British Manufacturers – Credits to.. • 2. American Merchant Purchasers.. • 3. Packet Shipping lines who shipped goods- Cope Line of Philadelphia – my own special interest. Browns acted as Liverpool agents for. • 4. GB Banks – Browns discounted bills at… • Wide range of goods - Irish linen, Yorkshire woollens, Sheffield Steel, Birmingham hardware.

  21. BofE Policy, and Brown’s Reaction, 1836 • May-Aug: Growing BofE concern about US boom, gold outflows, and the ‘American Houses’ - Barings, Browns, the ’3 Ws’. etc. • Aug 24th: Harsh new policy – to refuse bills… Joshua Bates – Barings – Comment. ‘ Obnoxious edict’. • Aug 30th: Liverpool delegation to BofE – Led by WB? Wrote BofE - Sept 7th. BofE reduced pressure. • Sept-Dec: BofE monitored American Houses. Would discount trade, but not finance bills. • American Houses retrenchment – Baring’s US Agent - T.W.Ward – pressed US clients and debtors hard.

  22. Browns’ Reactions, Late 1836: Hubris. • Baltimore branch letters to Liverpool (in LofC) reflect Liverpool concerns – but still confident. • Aug : Your heavy acceptances for fall goods – will remit from Balto, Phila and NY asap. • Nov: Have seen your private letters, and understand your anxiety – am remitting fast. • Jan-Feb: Confident. ‘From the magnitude of our prosperity we can now sustain very heavy losses. $634k profit last year. Worth $6m. Offering credits to safe merchants.

  23. Beginnings of US Panic, Spring 1837 • BofE – gold reserves – foreign exchanges - continued pressure on US houses. • High interest rates - Fall in price of cotton – below level of advances – transferred to US. • Failures in cotton trade. Herman Briggs - New Orleans (March 18th), and Josephs, New York, (March 21st), and in NY Dry Goods import and distribution trade. • US government measures - Specie Circular, Distribution of Surplus etc. Too small to hurt ??

  24. Browns and Herman Briggs failure. • Mar 13th: Dear Wm: James + John are here. Encl Story’s letters (2nd, 3rd, 4th March from New Orleans about Herman Briggs). Immediately wrote HB that due to English money market, and probability of great fall in cotton prices, they should not consign to us. Will leave them with no apology for drawing. We expect if they suspend payment, they will be able to wind up and pay all. • Mar 15th: GB-Story: If HB actually have to suspend, we would expect Josephs and Jackson Riddle to follow…

  25. Browns’ Reaction to US Panic, Spring 37 • April 18th: GB-WB – Some houses here would be pleased if you declined accepting .. Would prevent goods coming here which can’t be paid for. • May 4th: GB-Story – When failures on this side are known in England, doubtful what action BofE will take with American Houses – May have to carry them through – but if not there will be huge damage to merchant community. • May 6th: Packet Ship Roscoe left NY with US Panic news. Arrived Liverpool, May 29th.

  26. Panic Arrives in GB, March-May 1837 • Winter 1836-37: Spasmodic Failures in GB. • Feb March: The ‘3 Ws’ apply to BofE for help – Given £200K each – Guarantees. BofE Aid. • March 6th: ‘Had it not been for the firmness of Palmer and the Deputy Governor, the Governor – Pattison - would have bought down every American House…’ – Glynn-Langton. • April: Pause. Pressure continued. Bank vacillated • May 24th: Browns short. Shipley sent to London. • May 29th: ‘Roscoe’ arrived with worst US news

  27. WB’s Reaction – Shocked. • May 29th: WB-Shipley – The packet is in.. Nothing can save us…Since Feb 8th I have felt I was going to execution... Make no hasty decisions. • May 29th: Bowen-Shipley - ‘WB thinks nothing left for us but Gazette.. Fortunately has not been out of the office since Roscoe arrived… has seen no-one but Langton. I was by while he was here and no mischief done. Proposed to call on friends – suggested it would be better to wait until he could see you, or hear from you…’

  28. Decision to Appeal to BofE. May 29th. • May 30th: Bowen-JS: WB calmer now – thinks BofE may sustain us as lesser evil. • May 31st: JS-WB – Came to London to show Denisons (bankers) how we could meet June engagements - Roscoe news ended that. • May 31st-June 1st: WB-JS- If BofE will help ‘3Ws’ – then they must help us. • June 1st: JS-WB: BofE will decide in hours – I will be sent for. 12noon. Governor seeing Ld Melbourne. Now 4pm – no news. Now 6.30pm – Board still sitting.. Irksome suspense…

  29. Browns Appeal to BofE. June 1st. • By the arrival of the last packet, we found our remittances from the US suddenly cut off… • Our capital £1.35m in December. Our engagements - £1.37m. (i.e about $6m) • Protested Bills from US to date - £0.47m. And due in June - £0.37m. Therefore need about £0.8m to carry us through. • Denisons heading Guarantee List with £50k. • Cotton in Liverpool, or on the way - £150k

  30. Implied threat of Failure, June 1st • ‘… We regret necessity of pressing this on you.. But our payments must be met tomorrow… (accounts enclosed).. as you will see two-thirds of all our engagements arise out of the export of British manufactures… you can readily judge what disastrous consequences would follow our stoppage at this time, and which we painfully apprehend would be more painfully felt than any other house in England…We hope you will support us’

  31. BofE Will Support Browns to June 8th. • No reasons in BofE Minutes – Only a respite. • BofE ditched ‘3 Ws’. Carr Glynn reported to Langton .. ‘the proposal (for aid) was lost by a bare majority and against the Governor and his Deputy”, and caused much commotion. • BofE aided Morrison and Cryder, and Lizardis, the other American houses, the same day. • Probably convinced Browns case was different. They were stronger, and risky to refuse help.

  32. Browns’ Survival in Balance - Factors • Momentum of Panic in US and Liverpool… as more firms failed – but fresh resources arrived. • Determination of Partners – WB, JS, Bowen • Debate in BofE – Hard liners -v- Pragmatists. • Support from their Bankers, and other allies. • Ability to raise assets – in GB, and from US • Guarantee List – Vital to demonstrate Support. • BofE fear of a wider panic if Browns failed. • News from the US – as fresh Packet ships arrived – often delayed by easterlies.

  33. William Brown, 1784-1864. Character. • Age 53 in1837 – Health? • Critical doubt on Guarantee List - Ready to give up. • Shipley Led negotiation. • Masterful Like Father? • Portraits. Writing. • Observers- Hawthorne. • Brown in Commons - inaudible. Hansard. • Provincial background.

  34. Joseph Shipley, 1795-1867 • Led negotiations in London. • Age 42. Portrait is c. 1825. • Wilmington, Del. Philadelphia. • Jr partner, 1826. Full partner, Brown-Shipley, 1839. • ‘It has only been in the last ten days that I have begun seriously to apprehend the possible loss of nearly all the earnings of eleven laborious anxious years’, JS-Cousin, May 14th.

  35. William Ezra Bowen, 1797-1861 • Philadelphia Quaker. • 1831 - Agent in Manchester – ordered textile exports. • May-June 1837: Supported WB in Liverpool. Letters. • June: Organised Guarantee list in Manchester, Birmingham, Kidderminster etc. • 1837 - Partner in Liverpool.

  36. BofE Divisions over American Houses. • Shipley reported Governor(Curtis) + Deputy (Reid) were always very helpful but Ex-Governor Pattison was difficult. • Deeply held conflicting views about BofE Role. Currency School -v- Bullion School. • Guarantee List Promises were conditional on BofE promise that BofE would sustain Browns through 1837 - Pattison critical – but defeated.. • Pattison responsible for restriction on American Houses, and decision not to assist ‘3Ws’

  37. Denisons headed List - £100k • GB-WB, Feb 7th. ‘I should regret… you doing anything with any other house than Denisons. You commenced with them when our capital was small, and now we…are second to (none in US trade), and when they ought to have unlimited confidence, it would be a hardship for them to throw away an account… so profitable to them without a particle of risk although at times you may have to lean pretty heavily on them, and by doing so you promote their interest as much as ours…’

  38. Bank of Liverpool, Hodgson, Langton • Bank of Liverpool, 1831. • 1st Liverpool Joint Stock Bank. Wm Brown, Chairman, 1831-35. • Strong support at BofE. • Supported Guarantee Fund – but marginally – until BofE position clear. Feared Director votes- Gvr of BofE comment. • Joseph Langton. • Manager, BofL • Helped organise Guarantee Fund • Adam Hodgson, • Chairman, BofL. Rathbone Hodgson. Quaker rivals of Browns.

  39. Henry.Van Wart..(1784-1873). American. NY, Director of Birmingham Banking Co. Export Hardware to US. Helped organise Guarantee Fund in Birmingham. Delegation from Birmingham to BofE. Sister md. Washington Irving. George Peabody, 1795-1869). Merchant, Banker and Philanthropist. b. Mass, but estd in Baltimore with aid from Alex Brown, 1816-37. Moved to GB 1837. Helped organise Guarantee Fund in Manchester. Negotiate with BofE. Antecedent of Morgans American Allies -Van Wart and Peabody

  40. Brown’s Assets Handed to Bank • Cotton arrivals – Shipments by Story (NwO), Adger et al. US debtors – New Orleans factors – but of course most could not arrive on time. • Protested Bills taken by BofE – at reduced value according to risk. • Stock – BUS; RR, • BUS acted for BofE in US. • Brandon – WBs estate, Carriage etc. stopped.

  41. Composition of Guarantee Fund • Relatives – Gihons, Hargreaves, Currell. • Firms that would lose if Browns fell. • Liverpool Merchants – Banks. Liverpool names. • Manchester – Bank. Textiles. Leeds – Gott. • Birmingham – Banks – Hardware. Not small men. • Ulster – Banks, Linen manufacturers. • London Merchants - Contrast with Funds for 3 Ws – London Banks – Bates polite, but cold. • Surprise – Pattison – ex-Gvr of BofE - Opponent.

  42. Weekly BofE Meetings - Critical Stages • June 2nd: Decision to carry Browns until June 8th, but to drop ‘3Ws’. • June 8th: Decision to carry Browns until June 15th to allow time for them to assemble resources • June 15th: Decision to carry Browns through until Dec 31st provided they could complete their Guarantee List. ‘3 Ws creditors rescued. • June 22nd. Agreed Guarantee List satisfactory. Browns could initiate moderate new business.

  43. WB-JS: Pessimism, June 2nd’ • Our duty to go on… to avoid public hurt, but could never forgive ourselves if our bankers and friends committed themselves, and then we had to stop… • Suspension would be a great shock – but our estate would probably be safe, and we could re-enter a moderate business… • Langton determined to raise a Guarantee Fund – but will only be available if BofE will carry us through, and if Denisons guarantee us. If we lose how could they help us after?

  44. JS working hard, but distressed by WB. • June 2nd. ‘3 Ws have gone – but BofE thinks our case different from the others - We must now arrange a Guarantee Fund in Liverpool and Manchester. (Denisons) say it would be madness to stop now… • June 3rd: I hope the failure of the 3 Ws will not stop you trying to get up Guarantee Funds. Denisons very anxious to help – will risk their £50k or more… • June 5th – Your letters embarrass me greatly… You exaggerate our losses…. But must just continue up to 8th unless your subsequent letters say otherwise.

  45. Bowen-Shipley, 5th June - Doubts. • Difficult to find guarantees here (Manchester) – those who would help can’t. No one will help unless sure it will be effectual. They doubt BofE’s good will. • If we stop, the distress here, and in other manufacturing districts, will be very much increased, and I fear for the consequences. • WB would have been ready to stop – but for damage to others - Circular and stone prepared… He has Langton near him…

  46. Shipley-WB. June 7th – Gloom. • Your letters leave me with poor hopes. After it was decided that the guarantees would only be given on condition of the Bank carrying us through, the renewals (were) less important. • My hope was that you might have got £150k, and as we have about that here, that it might have done. I am to see the Governor at 9.30am. • Denisons do not agree with you that they would be covered in paying until the 10th, and I doubt if we do not receive a guarantee list tomorrow, they will even pay tomorrow’s acceptances.

  47. BofE Decision, June 8th - Postponed • June 8th: BofE Minutes… BofE would sustain Browns until June 15th. In return for securities, cotton etc. and Denison’s guarantee. To give time to produce satisfactory Guarantee List. • June 8th: Shipley left London for Liverpool by coach after BofE Meeting. To fire up partners. • June 9th-13th: No letters. JS in Liverpool. • June 13th: Tuesday. JS returned to London.? • June 14th: JS-WB – Reported hard day. Meetings with Governor, and Denisons.

  48. John Kennard (Denisons)-JS, June 10th • ‘Pray do all you can to get up a guarantee list. On this… your fate rests. From.. conversations with the Governor, I am… convinced they want to carry you through on any thing deposited… that would justify them to their proprietors and the public… Your case is generally known, and all are waiting with breathless anxiety the event…. How deeply do I sympathise with you… God… only can avert the crisis we are fearing… I will look for a letter from you on Monday’ (June 12th).

  49. BofE Decision to Help, 15th June, • June 11th: Good US news reached London – Suspension. Solvency of US firms. • June 12th: Glynn-Langton – All in Good spirits – News will determine BofE decision on Browns. • June 13th: Meeting of London merchants chaired by Alexander Baring – US firms can and will pay. • June 14th: WB forwarding assets - but still gloomy! • June 15th: BofE decision to support Browns to Dec 31st Dec, up to £1.95m, and 3W’s creditors.

  50. Effect of Panic in GB and US, 1837-38. • Collapse GB-US credit System.. • GB exports to US. Annual and Monthly effects. • GB industries and Regions. Un-employment? • BofE rescues and BUS policies reduced effects.

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