The Panic of 1873 began another period of depression, which had its effect in keeping down the city's growth. The country's seeming economic well-being is shattered by a major financial crash.

The economy is in fact over-expanded, particularly in railroad construction, and the weak link turns out to be the banking house of Jay Cooke and Company, which helped the U.S. Government finance the Civil War and also underwrote the construction of the Northern Pacific Railroad. Jay Cooke and Company, a large and respected banking house declares itself bankrupt, and announces its failure on September 18, 1873.. (The bank's collapse precipitates the "Panic of 1873" and the ensuing three yea depression during which more than 10,000 businesses fail. 
 
 The basic economic problems are overproduction, a declining market and deflation. Investors in Europe, where a depression is already underway, begin to call in American loans. The New York Stock Exchange closes its doors for 10 days; other businesses fail; and railroad construction is curtailed, with some railroads defaulting on their bonds. The unemployed begin to move about the country seeking jobs, and bread lines appear in the cities. The hard times drove numbers of laboring people and those in humble circumstances to the West and other portions of the country, to seek the rewards which the stagnation of business in the great commercial centre denied them.
 
 1 "It was a wild day in Wall street yesterday. The announcements of The Times in the morning prepared the public in a certain degree for the trouble which was to ensue, and many parties were enabled to go in the market early in the morning and protect themselves from loss. While many did this, and so saved themselves from ruin, there were others, and by far the majority, who thought that the trouble was solely brought about by machinations of the bears, and that there would only be a small sized panic, which would result in a sudden rebound in prices. Those who took this view of the situation held on to their investments as long as possible, and, so soon as their margins gave out, were compelled to go under. Of course, there were many who, by superior strength, were enabled to hold on to their purchases, and so escaped being sold out, at least for the time.
 
 Parties who were frightened the night before by the marked decline in prices became sanguine and predicted an altogether better date of the market. This continued, however, but for a short time. The first intimation which came into the Stock Exchange of any change in the program  was contained in a brief notice, which said authoritatively that Jay Cooke & Co. had suspended payment. To say that the street became excited would only give a feeble view of the expressions of feeling. The brokers stood perfectly thunderstruck for a moment, and then there was a general run to notify the different houses in Wall Street of the failure.
 
 The brokers surged out of the Exchange, tumbling pell-mell over each other in the general confusion, and reached their respective offices in race-horse time. The members of firms who were surprised by this announcement had no time to deliberate. The bear clique was already selling the market down in the Exchange, and prices were declining frightfully.
 
 The news of the panic spread in every direction down-town, and hundreds of people who had been carrying stocks in expectation of a rise, rushed into the offices of their brokers and left orders that their holdings should be immediately sold out. In this way prices fell off so the wall. Men went about the street with blanched faces, and requested piteously of their brokers that their stocks should not be sold out as more margin would be obtained in the morning; but self-preservation seemed to be the first law of nature with every one, so the accounts of the customers were closed out, and the losses became a fixed fact.
 
 Some of the men who were ruined swore, some of them wept, some went out of the street without saying a word; others talked of the trouble in a jovial way, and went about trying to borrow money from friends to get on the short tack with."
 
 Fifth Annual Message
 
 During the term of Ulysses S. Grant while in office as President March 4,1869 to March 4, 1877.
 
 Executive Mansion, December 1, 1873.
 
 Volume: VII Page 235 (extract) "In the midst of great national prosperity a financial crisis has occurred that has brought low fortunes of gigantic proportions; political partisanship has almost ceased to exist, especially in the agricultural regions; and finally, the capture upon the high seas of a vessel bearing our flag has for a time threatened the most serious consequences, and has agitated the public mind from one end of the country to the other.
 
 Volume: VII Page: 243-245 (extract) "The revenues have materially fallen off for the first five months of the present fiscal year from what they were expected to produce, owing to the general panic now prevailing, which commenced about the middle of September last. The full effect of this disaster, if it should not prove a "blessing in disguise," is yet to be demonstrated. In either event it is your duty to heed the lesson and to provide by wise and well-considered legislation, as far as it lies in your power, against its recurrence, and to take advantage of all benefits that may have accrued.
 
 My own judgment is that, however much individuals may have suffered, one long step has been taken toward specie payments; that we can never have permanent prosperity until a specie basis is reached; and that a specie basis can not be reached and maintained until our exports, exclusive of gold, pay for our imports, interest due abroad, and other specie obligations, or so nearly so as to leave an appreciable accumulation of the precious metals in the country from the products of our mines. The development of the mines of precious metals during the past year and the prospective development of them for years to come are gratifying in their results. Could but one-half of the gold extracted from the mines be retained at home, our advance toward specie payments would be rapid.
 
 To increase our exports sufficient currency is required to keep all the industries of the country employed. Without this national as well as individual bankruptcy must ensue. Undue inflation, on the other hand, while it might give temporary relief, would only lead to inflation of prices, the impossibility of competing in our own markets for the products of home skill and labor, and repeated renewals of present experiences. Elasticity to our circulating medium, therefore, and just enough of it to transact the legitimate business of the country and to keep all industries employed, is what is most to be desired. The exact medium is specie, the recognized medium of exchange the world over. That obtained, we shall have a currency of an exact degree of elasticity. If there be too much of it for the legitimate purposes of trade and commerce; it will flow out of the country. If too little, the reverse will result.
 
 The experience of the present panic has proven that the currency of the country, based, as it is, upon the credit of the country, is the best that has ever been devised. Usually in times of such trials currency has become worthless, or so much depreciated in value as to inflate the values of all the necessaries of life as compared with the currency. Everyone holding it has been anxious to dispose of it on any terms. Now we witness the reverse. Holders of currency hoard it as they did gold in former experiences of a like nature.

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