Substitutes for Cash in the Panic of 1907

Claims Supported by This Source

1. The autumn of 1907 saw "the most widespread and prolonged breakdown of the credit mechanism" since the establishment of the national banking system. Banks in more cities than ever before used clearing-house loan certificates, issuing them in large amounts, for long periods, and even in small denominations (p. 497).
2. Legal holidays declared by state governors: Nevada from Oct 24 to Nov 4; Oregon from Oct 28 to Dec 14; California from Oct 31 to Dec 21 (over 7 weeks, courts also closed). State authorities in Indiana, South Dakota, Iowa, and Oklahoma issued letters that effectively condoned payment restrictions (pp. 498–500).
3. Of 145 independent cities with populations over 25,000, at least 71 used substitutes like loan certificates, clearing-house checks, and cashier's checks; 20 designated "payment only through the clearing house"; and about two-thirds restricted cash payments. 36 cities had withdrawal limits ($10–$300). 53 cities imposed no restrictions (e.g., Washington, Rochester, Toledo) (pp. 501–504).
4. The total for Table I (by city) is $330,066,223. New York: $101,060,000 (Oct 26 to Mar 30, 1908; max outstanding $88,420,000). Pittsburgh: $7,445,000 in certificates plus $47,000,000 in payroll checks (p. 502). Table II (33 towns under 25,000) totals $4,420,513 (p. 505).
5. 7 types of substitutes (A. Large-denomination loan certificates, B. Small-denomination loan certificates, C. Clearing house checks, D. Cashier's checks, E. New York exchange, F. Certificates of deposit, G. Pay checks). Large-denomination certificates were used in 42 cities, compared to 8 cities in 1893, and the New York issue was two and a half times the previous maximum. The nationwide total of large-denomination certificates was $238,053,175 ($69,111,000 in 1893) (pp. 506–507)
6. Small-denomination certificates were issued in at least 21 towns in Georgia, with denominations from $1 to $20, and in Montgomery, from 25 cents. Recorded small-denomination certificates totaled $23,831,813, clearing house checks $12,060,248, and issues by individual banks $13,541,500. Pay checks in Pittsburg totaled about $47,000,000 (pp. 507–513)
7. New York banks decided to issue loan certificates on Saturday, October 26, and banks elsewhere followed on Monday, October 28. In many places, suspension occurred as a preventive measure before a run started. In New York, it was 22 weeks from the first issue to the final retirement (3 weeks longer than in 1893) (pp. 513–514)
8. Recorded emergency currency totaled $334,000,000 (large-denomination certificates $238M, small-denomination certificates $23M, clearing house checks $12M, cashier's checks $14M, pay checks $47M). Including unreported amounts, the estimate exceeds $500,000,000. Most of it was illegal (prohibited by the National Bank Act, 10% tax on state bank notes), but no one was prosecuted, and "fiat money issued without the sanction of law" became the principal means of payment in a large part of the country for more than two months (pp. 515–516)

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