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This Day In Market History: Cooke & Co. Bankruptcy Triggers Panic

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This Day In Market History: Cooke & Co. Bankruptcy Triggers Panic

Each day, Benzinga takes a look back at a notable market-related moment that occurred on this date.

What Happened: On this day in 1873, Jay Cooke & Co. declared bankruptcy.

Where The Market Was: The Jay Cooke bankruptcy predates both the Dow Jones Industrial Average and the S&P 500.

What Else Was Going On In The World: In 1873, Jules Verne’s book "Around the World in 80 Days” was published. Levi Strauss and Jacob Davis patented the first design for blue jeans with copper rivets. A necktie cost about 10 cents.

Panic Of 1873: Jay Cooke & Co. was a Philadelphia-based bank that opened in 1861 and served as one of the major funders of the Union Army during the U.S. Civil War.

Cooke & Co. sold hundreds of millions of dollars of government bonds to raise funds, and the company’s innovative use of the telegraph allowed the bank to coordinate sales efforts across the country from its headquarters in Philadelphia.

After the Civil War, Cooke & Co. continued to sell U.S. Treasury bonds but also began investing in railroads. After the bank ran into difficulty selling Northern Pacific bonds, Cooke & Co. ended up taking a 75% ownership stake in the railroad.

When bank customers became aware of the company’s debts, they withdrew funds from the bank, creating a bank run. The panic spooked investors and triggered a major market sell-off. The day of Cooke & Co.’s bankruptcy became known as “Black Thursday,” and the panic resulted in the U.S. stock market closing for 10 days.

 

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