The Panic of 1893 and “The £1,000,000 Bank-Note”
Article first published online: 3 NOV 2010
© 2010 The Mark Twain Circle of America/Wiley Periodicals, Inc.
The Mark Twain Annual
Volume 8, Issue 1, pages 76–85, November 2010
How to Cite
LEAHY, N. (2010), The Panic of 1893 and “The £1,000,000 Bank-Note”. The Mark Twain Annual, 8: 76–85. doi: 10.1111/j.1756-2597.2010.00042.x
- Issue published online: 3 NOV 2010
- Article first published online: 3 NOV 2010
As a starting point for a new education at fifty-five years old, the shock of finding oneself suspended, for several months, over the edge of bankruptcy, without knowing how one got there, or how to get away, is to be strongly recommended.
—Henry Adams (1893)
The education Henry Adams has in mind in the epigraph above concerns the relationship between credit and lender, but not in the conventional sense that bankruptcy alerts or “educates” a lender of some magnitude of impending doom (Adams 337). Rather, Adams records that the prospect of losing his inherited fortune in the ensuing panic of 1893—then the largest in U.S. history—is invigorating: “[t]he humor of this situation seemed to him much more pointed than the terror, as to make him laugh at himself with a sincerity he had long been strange to.” What has Adams in stitches over the developing crisis is his conceptualization of it, and finance generally, as merely a zero-sum contest between the “same interest and socially the same person” extending and withdrawing lines of credit. Finance, for Adams, is absurdist theater, with competing forces pushing money into and out of circulation that at times reaches a stalemate. He continues:
When Adams went to his bank to draw a hundred dollars of his own money on deposit, the cashier refused to let him have more than fifty, and Adams accepted the fifty without complaint because he was himself refusing to let the banks have some hundreds or thousands that belonged to them. Each wanted to help the other, yet both refused to pay their debts, and he could find no answer to the question which was responsible for getting the other into the situation, since lenders and borrowers were the same interest and socially the same person. Evidently the force was one; its operation was mechanical; its effect must be proportional to its power; but no one knew what it meant, and most people dismissed it as an emotion—a panic—that meant nothing (Adams 338).
To be sure, Adams's response to the panic of 1893 is idiosyncratic. For many others caught up in and ruined by it, the panic meant more than “nothing.” His brother, Brooks Adams, to whom he deferred when it came to economics, considered 1893 a watershed moment in western economic history, indicative of what he believed was the inevitable shift from London to New York as the center of global finance:
During the summer of 1893 I became convinced that the financial convulsion which involved so many widely separated communities could only be due to some profound perturbation which extended throughout the world. Further reflection led me to surmise not only that such a disturbance actually existed, but that it originated at the very heart of the modern social system, or, in other words, London, and that it was caused by a relative decline in British vitality and energy (Adams v).
These divergent reactions to the same financial crisis—that it was an amusing but meaningless ontological and emotional puzzle; that it was a globally significant event marking British “decline” and American ascendancy—are fused together in Mark Twain's 1893 short story, “The £1,000,000 Bank-Note.” I will consider this critically neglected story in relation to the historical (and personal) economic turbulence in Twain's lifetime that inform it, especially the early 1890s leading up to and partially including the panic of 1893, to show how it registers a unique critique in the emerging genre of finance fiction dealing with the confluence of congealed capital, nationalism, and performed confidence. Finally, I address the larger question currently being addressed in a growing amount of promising scholarship on the role of literature in profound relationship between narrative, affect, and the determination of economic value. First, let me offer a brief overview of key events in the economic history of the early 1890s with an emphasis on the aspects of the panic of 1893 that are visible in “Bank-Note.”
The sudden collapse of Jay Cooke's investment firm in 1873 inaugurated a decades-long depression in the U.S. economy, a so-called “first Great Depression” that was characterized by spasmodic cycles of boom and bust in domestic markets instead of the protracted stagnation experienced in the 1930s. Speculation in U.S. securities during this period was unusually risky. However, the prices of U.S. railroad stocks, as well as those in industries closely related to railroad construction, generally remained on a stable upswing during this period due to a boom in the construction of new roads in the western states and territories. By the mid-1880s, railroad stock became among the most appealing and lucrative forms of financial investment. Moreover, between 1886 and 1890 it was especially trendy to issue negotiable railroad stocks as payment in exchange for merchandise from Britain, which was then investing enormous amounts of capital in North and South American markets. This trend came to a halt in 1890 when the prestigious British merchant bank, Baring Brothers, unexpectedly went into the red by overinvesting in what proved to be inflated Latin American markets, particularly in Argentina. This prompted a series of emergency loans to be issued from the Bank of England to the beleaguered firm, while it also triggered a panicky, large-scale liquidation of American assets by British investors, including large holdings of railroad stocks. Furthermore, the popular sentiment in London was that the Americas are just too risky to be invested in; the values of their commodities are murky, and the general volatility of the political debates surrounding their economies mitigated their appeal to the traditionally conservative British financial community. Whether to Argentina or the United States, British capital was reduced from a flow to a trickle across the Atlantic by 1891 (Lauck 63-78; Sobel 247).
In the U.S., this liquidation of British holdings exacerbated instability in an already ailing economy, plagued as it already was by fierce, contentious political disputes over labor, monetary policy, as well as financial and industrial regulation. The British sell-off of U.S. stocks between 1890-91 created an outflow of gold from U.S. banks at a time when they could least afford it. Most bank reserves of gold had been depleted below the standard of a 25 percent minimum because the recent Sherman Silver Act of 1890 mandated the Federal government to purchase and retain a set amount of silver which in turn led to a hoarding of gold (a phenomenon known as Gresham's Law). In lieu of rendering payment in gold, bank-notes were commonly issued in its place whenever possible, and most visibly by the U.S. Treasury when lending to other banks. This had the result of further impairing confidence in the health of the U.S. economy, particularly among foreign investors.
With the backing of U.S. credit in question, and the lending system in the U.S. under duress, the panic of 1893 was heralded by the bankruptcy of the Philadelphia & Reading Railroad on February 26. The railroad bubble had burst after twenty years of construction and expansion throughout the western United States. Railroad stocks, once seen as the most stable, were now being dumped by investors on both sides of the Atlantic. This sell-off was coincident with a nationwide run on banks in the US during the spring and early summer of 1893 spurred on in late April by a poorly considered statement by the Secretary of the Treasury, John Carlisle, that bank notes might only be redeemable in silver and not gold. This statement was interpreted by the public to mean that gold reserves were perilously low—beneath the rather arbitrarily determined amount of $100,000,000—and pay outs could now only be made in the less-desirous form of silver (Dewey 441). Despite President Cleveland's clarifying statement that there was an adequate amount of gold in reserve for redemption the damage had already been done. Carlisle's statement contributed an additional dose of uncertainty to an already anxious atmosphere. Stock prices continued to fluctuate wildly for a week until panic broke out and the market collapsed on May 3. By August 1893 the panic had bottomed out and President Cleveland requested an emergency session of Congress to deal with the crisis and to repeal of the Sherman Silver Purchase Act (Wicker 58-62).
So where is Twain's “Bank-Note” in all of this? Composed in 1892 and first published in Century in January 1893, Twain conceived of the story at least as early as 1879 when he recorded in a notebook: “Case of tramp who was loaned £1000,000 [sic] note for 30 days & he got rich on it because nobody could change it” (Anderson 297). He would entertain this idea several times over the next decade in relation to his own pecuniary difficulties relating to poor investments in a railroad stock. In early 1883 Twain invested $15,000 on margin into 300 shares ($50 per share) of the Oregon and Transcontinental Company. After watching the stock peak at $98 he ended up liquidating the shares a few months later at $12 per share, a loss of $11,400 (Browning 19; Camfield 116-117). Shortly after, Twain considered turning this failed investment experience into a literary venture, writing in his journal in the spring of 1883: “Write a Wall st play of “O.T.” A few pages later in the same notebook he records: “Make play of the £1,000,000 Banknote.” He revisits this idea yet again a few pages later, noticeably with a macabre plot twist that never made it to the final version of the story: “Let a Bonanza miser die of starvation in his treasure vault, gnawing at leather adornments & such things, preferring them to the gems of the first water. £1,000,000 Note” (Browning 44; 46; 50).
But these details, however tantalizing, and however much they indicate Twain was interested in the theatricality of wealth management (to say nothing of wealth generally) after he so spectacularly mismanaged his own, are fleeting, and a biographical reading of “Bank-Note” based on these musings in his journal would be conjectural. What I propose to do instead is to show how “Bank Note” holds a unique standing in the wave of U.S. literature that emerged in the 1880s (and continued through the 1930s) that was centrally concerned with money and finance. Twain's major contributions to this genre, The Gilded Age (1873) and A Connecticut Yankee in King Arthur's Court (1888) are well known and attended to by critics. These earlier forays into financial writing by Twain, while making potent critiques of the ethics and intricacies of financial speculation, do not engage in a critique of economic nationalism or consider the role nationalist thought plays in directing the flow of global finance capital.
“Bank Note” is the retrospectively narrated tale of a San Francisco stock broker named, curiously enough, Henry Adams. One day while sailing his yacht he is swept out to sea, rescued by a steamer bound for London, and is deposited in that city, shabbily clothed, with one dollar in his pocket. Two elderly brothers notice Adams on the street and, finding him, Adams supposes, as someone who “fills the bill all around,” they invite him inside their house (Clemens 340-341). Unbeknownst to Adams, the brothers have resolved to settle a dispute through a bet. The wager is £20,000 and they are betting on whether an impoverished man handed a rare bank note in the sum of one million pounds—one that is designed only for “some public transaction with a foreign country”—would either starve to death or prosper within thirty days. They hand Adams an envelop and a brief note instructing him to return to the house in thirty days, mentioning that if he steers clear of trouble in the interim he will be awarded “any situation” that he is “competent to fill” (Clemens 340; 344). Adams peeks inside the envelop and notices it contains money but fails to discern the amount. He races off to a restaurant. After his meal, when he opens the envelope to get cash for the check, Adams realizes his predicament. Straining to project composure and nonchalance, he asks the waiter to make change for his bank note. The waiter, incredulous as the sight of a bank note for such a large sum, responds by putting the meal on credit. A similar experience is had at the tailor, who furnishes Adams with a set of smart suits, and before long, Adams becomes known throughout London as a lovably eccentric American millionaire (caricatured in Punch, to his delight) who is given to masquerading as a tramp in the capital of global finance.
Adams publicly revels in his newfound fame but privately he is besieged with anxiety over being accused of theft (who would believe his story?) and what, if anything, will come of his stewardship of the note for the thirty days. During the day he is “happy to giddiness, to intoxication” but at “night, in the dark, the tragedy part [is] always to the front, and always warning, always threatening.” For all the doors the banknote note opens for him it is nevertheless an “immense burden” and he likens his precarious situation to “standing on a half inch crust with a crater underneath.” He quickly develops insomnia and is perpetually “pretty badly frightened” and by the “monster” he carries around in his pocket (Clemens 349; 358; 343).
Matters are further complicated when, driven by a sense of patriotic duty, he attends a dinner party at the U.S. embassy. There he learns that the U.S. ambassador is a longtime friend of his father. This revelation allays some of his anxiety about what to do “when the crash should come”; the ambassador might be able to save Adams from “total destruction” though just how he would do so, and what, in fact, “total destruction” really means for him, are left unclear. However, by framing his situation is such fateful and dramatic terms Adams begins to reflect on just how well he is getting along by living on borrowed credit, a line of thinking that spirals into absurdity:
… with all my borrowing, I was carefully keeping within my means—I mean within my salary. Of course I couldn't know what my salary was going to be, but I had a good enough basis for an estimate in the fact that, if I won the bet I was to have choice of any situation in that rich old gentleman's gift provided I was competent—and I should certainly prove competent; I hadn't and doubt about that. And as to the bet, I wasn't worrying about that; I had always been lucky. Now my estimate of the salary was six hundred to a thousand a year; say, six hundred for the first year, and so on up year by year till I struck the upper figure by proved merit. At present I was only in debt for my first year's salary. Everybody had been trying to lend me money, but I had fought off the most of them on one pretext or other; so this indebtedness represented only £300 borrowed money, the other £300 represented my keep and my purchases. I believed my second year's salary would carry me through the rest of the month if I went on being cautious and economical, and I intended to look sharply out for that (Clemens 350-352).
The barrage of arbitrarily determined sums and calculations in this passage works to conceal the underlying facts that Adams has no sense of what he needs to do to be awarded a gift from one of the brothers and that he has no logical basis for presuming such a gift could possibly come in the form of an annual salary of “six hundred to a thousand a year.” It is all fantasy, a wish masquerading as serious accounting that parodies the kind of exhaustively detailed descriptions of business transactions (and swindles) found in contemporaneous financial literature usually intended to explain the intricacies of financial speculation. The letter enclosed in the envelope instructing Adams to return to the brothers’ house in thirty days only stipulates that if one brother wins the bet (the subject of the bet is left unclear) he would provide a “situation” that is in his means to give, provided that Adams is “familiar” and “competent” to have it (Clemens 344). While the note mentions the gift must remain in the means of the giver, these means are left unclear, and furthermore, the decision to bestow the gift ultimately rests with the brother, even if he wins the bet, because it must be determined by him whether Adams is able to appreciate it.
This raises the issue of self-confidence and its relationship to accounting for future financial contingencies. Adams must project confidence and a casual attitude towards wealth to offset suspicion and forestall inquiries into how he came into possession of such an unusual arrangement of capital (unusual, that is, for private citizens; the note is intended for institutional transactions between “foreign nations”). In doing so, Adams is convinced he is proving himself competent to handle money given to him from the two English brothers, and this proven competence, in turn, will not only win him a “situation” but will lead to a continual flow of money from the brothers in the form of an annual salary.
At the embassy dinner Adams meets the final two important characters in the story, Portia Langham, the young Englishwoman he will court, and Lloyd Hastings, a former colleague and broker from San Francisco who is now in London desperately trying to unload his stock options in The Gould and Curry Extension (a silver mining company in Virginia City) by the end of the month but has been unable to find a willing British investor. In words echoing Henry's own thoughts about the ambassador, Lloyd pleads for Henry to purchase his options and “save him” from ruin. Henry considers confiding in Lloyd that he is actually only a custodian of a million pounds for a month and a pauper otherwise but instead resolves to aid his friend by associating his name—and thereby a sense of security—with Lloyd's holdings to entice British investors to purchase them:
I will save you, but not in that way; for that would not be fair to you, after your hard work and the risks you’ve run. I don't need to buy mines; I can keep my capital moving, in a commercial center like London, without that; it's what I’m at, all the time; but here is what I will do. I know all about that mine, of course; I know its immense value, and can swear to it if anybody wishes it. You shall sell out inside of the fortnight for three millions cash, using my name freely, and we’ll divide, share and share alike (Clemens 360).
The scheme to trade on what Veblen called the “folk psychology” of the marketplace pays off (Veblen 148-149). Adams vouches for Lloyd's stock, it readily sells, and by the end of the month they both have made a million dollars. Adams returns the note to the brothers at the end of the month, at which point it is also disclosed to Portia that his wealth was borrowed. As he makes his exit one of the brothers stops him to ask about the “situation” he is entitled to, but already having made a considerable sum trading on the perception of wealth, Adams politely declines. The brothers are insistent, at which point it is further disclosed that Portia is in fact the daughter of one of the brothers and knew all along about their bet. Portia is Henry's “situation”; the two are soon married, the bank-note is returned and cashed, and the cancelled note is framed and hung in the “sacredest place” in the young couple's home.
There is a temptation to read “Bank Note” as a fanciful romance featuring a clever upending of commodity fetishism, where the inexchangeability of a bank note, of all things, is what constitutes its primary social utility. But this is to lose sight of the key detail that this kind of bank note is designed for “public” transactions on a national level. Two notes for a million pounds are mentioned in the story. One of the notes is already cancelled and the other one is the put into circulation by the wagering brothers for their decidedly non-public transaction with a stranger on the street. This detail might be dismissed as superfluous but to do so closes off the interpretive possibilities of reading this story in its historical context as a distinct critique of economic nationalism and an intervention into the simmering political debates between the U.S. and Britain in the early 1890s as they competed for dominance in South American markets.
Such a reading is buttressed by the emphasis throughout the story on national identity. Twain's curious choice of name for his protagonist conjures up a string of associations in audiences on both sides of the Atlantic, particularly of the occasionally prickly relations between the U.S. and Britain. The wager itself is cast in nationalist terms: the brothers, unable to reach agreement, decided to place a bet which is “the English way of settling everything” which further removes and disorientates the displaced protagonist, unable to surmise the intent of the game he is caught up in (Clemens 340). Once in possession of the note, Adams becomes commonly known as the “foreign crank who carried million-pound bills in his vest pocket” and shortly thereafter is caricatured in the notoriously chauvinistic journal, Punch. Finally, and most crucially for our purposes, the frequent references to money throughout the story, including the bank-note itself, oscillate between dollars and pounds. Adams initial reaction to the bank-note at the restaurant when he first removes it from the envelope is to exclaim that he has “five millions of dollars” instead of one million pounds. He calculates his salary for holding the note in pounds, but the considerable money he generates by lending his name to Lloyd so he can unload his shares is first calculated in dollars and then back into pounds (there is a 5:1 conversion rate in this story, so the million dollars he banks for aiding Lloyd are the £200,000 he mentions near the ending). This serves to foreshadow the symbolic marriage in the end between Adams and Portia, British and U.S. interests, made possible, first and foremost, through diplomacy: the two meet at an embassy. After proving himself a worthy custodian of British capital, a “safe bet” whose business acumen and self-confidence turns a hefty profit of 100% and who pays back on time and in full, Adams wins his Portia from Shylock-Britain.
Composed and published during a period of intense economic turbulence and investor wariness, “Bank Note” may be profitably read as a standout text in the genre of U.S. financial writing for its unusually conciliatory regard for the Britain. The issue of bimetallism in the U.S. had hardly subsided after the Silver Purchase Act of 1890; dozens of pamphleteers, economists, politicians, and writers chimed in on the debate to demonetize silver and move the U.S. back onto a gold standard. The business community favored gold because it made the U.S. more competitive in the arena of global commerce as most nations, including Britain, were only on a gold standard. Bimetallists, on the other hand, felt this would inflate prices and squeeze out small business and farmers; a favored point in their argument was to demonize Britain as a rapacious hoarder of gold reserves and backing the dollar by gold alone would equate to shackling the U.S. economy to financial houses in London. The fluency Adams demonstrates in dealing with distinct national currencies—one bimetallist and the other based solely on gold—addresses this topic somewhat, but it is most directly referenced by the allusion to the Gould and Curry silver mine and the difficulty Lloyd is having trying to exercise his stock options in London. Since Britain had withdrawn enormous amounts of capital from U.S. markets by 1891, further exacerbating their volatility, Lloyd's initial failure to procure a buyer of stock in a silver mine, at a time when the fate of bimetallism was in question, is historically accurate and foregrounds the critique Twain is making throughout the story about the theatricality of determining value (harking back to the original ideas for this story recorded in his notebooks). Only when Adams, a publicly visible holder of considerable British capital, vouches for Lloyd do the stocks sell, and sell for an enormous profit. Adams has conveyed a sense of false confidence over the value of the stock simply by associating it with “stable” British capital.
Twain's story is unique among the U.S. financial fiction of this period because of its concern with how the U.S. is economically perceived from abroad during the 1890s and for its anticipation of the increasingly nationalistic (and anti-British) turn in the fierce debates in the U.S. that flared up in the wake of the panic of 1893 over the proper way to avoid a similar crisis in the future. As the historian Walter LaFeber has argued, this panic was unique not only for its severity but for the kinds of discussions it prompted between economists, business leaders, and the State department relating to the acquisition of territories overseas, and how the incorporation of those territorial markets into a national economy could offset future financial crises, then largely believed to be caused by underconsumption rather than overproduction (150-196). Twain's story stands as a unique counterpoint to his involvement in and writing for the cause of anti-imperialism, where collusion between British and U.S. interests is all but present.
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