Sunday, March 29, 2009

Our Financial Troubles:The Government and the Panic in America 1873 (3)

It is important also to observe that just as the American Government is in a peculiarly advantageous position to do its duty, and to refrain from making advances, it is in a peculiarly disadvantageous position if it deviate from its strict duty and make those advances. A Government like ours, or like the French Government, has a skilled agent whom it can trust to make them; the Bank of France or the Bank of England can safely lend at such junctures, while neither Government could do so without great peril. It was partly from the consciousness of this great difficulty that, in 1825__the greatest of our panics__the English Government itself refused to lend anything, but encouraged the Bank of England to lend to its last shilling. But the American Government has no similar resource; it has no skilled intermediary; it is face to face with the banks which have failed and with the nation which is distressed. it must itself lend all which has to be lent, and to give full relief to give, for example, such relief as the Bank of England gave in the panic of 1825__it must lend much, and it must lend on all sorts of securities, by the discount of bills, on the deposit of shares, and in all kinds of various ways. In most countries a Government would be much puzzled to judge of such miscellaneous securities, and at New York, it would be puzzled almost more than anywhere else, for such securities are there unusually treacherous, and the borrowers are unusually devoid of scruple.
On the whole, therefore, we consider that up to the present time the American Government has performed with great discretion the difficult duties which devolve on a Government during a great panic, and we hope that it will to the end of the panic preserve the same discretion, and be able to act upon it.

This article was transcribed verbatim from The New York Times November 15, 1873 Page: 4


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