Empire Rising: Spain

Chapter 209: Chapter 152: Cook Bank (Part 3)

In order to save the railroad company, Cook could only issue him a short-term loan.

Although the interest on the short-term loan was very high, at least it could ensure the continued construction of the Northern Pacific Railway Company’s railroad. As long as the railroad was completed, the company could at least recover some funds and continuously obtain income from its operation.

But things often aren’t as wonderful as expected. After the Vienna economic crisis broke out, European capital swiftly withdrew its investment in the United States.

Cook’s bank was also seriously affected, with funding pressure multiplied.

Coincidentally, the Northern Pacific Railway Company also encountered trouble at this time. The company not only couldn’t repay the principal and interest of the short-term loan on time but even needed Cook to invest more funds to continue operating.

Clearly, at this point, Cook was already out of money.

And the railroad company, lacking investment funds, decisively declared bankruptcy.

Along with the successive bankruptcies of the Northern Pacific Railway Company and Cook’s bank, coupled with the European economic crisis causing panic among Americans, the fluctuations in the American stock market quickly ensued.

The bankruptcy of Cook’s bank triggered panic among Americans. People rushed to the banks, eager to withdraw their money from their accounts early.

But where was there so much money in the bank accounts?

The previous era of prosperity wasn’t just a boom for construction companies and railroad companies, but also for the banking industry.

These banks obtained high income by providing massive loans, and there were still many bank loans that hadn’t been recovered.

Lacking sufficient funds for exchange, the banks naturally faced a severe bankruptcy crisis. This wave swiftly spread to many banks, and also affected numerous investment companies and railroad companies.

From early June when Cook’s bank and the Northern Pacific Railway Company went bankrupt to the official closure of the New York Stock Exchange, only two and a half weeks passed, but these two and a half weeks were a devastating blow to the United States economy.

During these two and a half weeks, at least a hundred banks went bankrupt in succession, including relatively large chain banks.

Investment companies suffered even more, with at least hundreds of investment companies announcing bankruptcy due to the collapse of their funding chains.

The bankruptcies of banks and investment companies quickly impacted the railroad companies. Many railroad companies that relied on loans and bonds to survive could hardly continue in such an economic environment, and another wave of bankruptcies arose.

For the United States, this was just the beginning of the disaster.

Like other European countries, at this time the United States also hadn’t established a central bank to regulate finance and debt, and even the issuance of bonds was completed by authorizing private banks to act as agents.

Due to the absence of a central bank, the United States Government couldn’t save American enterprises by providing monetary supply and relief to companies on the brink of bankruptcy, ultimately helplessly watching the economic crisis in the United States exacerbate.

Moreover, because bonds were handled by private banks, their mass bankruptcy was certainly not good news for Americans.

Not only did their deposits disappear with the bank bankruptcies, but even the bonds they originally purchased vanished into thin air.

After all, with banks gone, where could they redeem the bonds they purchased?

For the United States, a nation undergoing rapid development, the impact of the economic crisis was more severe than in European countries.

The industrial and economic growth rate of the United States during this period indeed far exceeded that of European countries, proving that the comprehensive potential of the United States was higher than that of European countries.

But clearly, the development speed of the United States was relatively uncontrolled and lacked government regulation.

In just two and a half weeks, the United States already faced the bankruptcy of nearly a thousand enterprises, including medium and large-scale enterprises and factories.

This also meant that within a short time, more than a hundred thousand Americans suddenly lost their jobs, and the income of a hundred thousand families plummeted.