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A mass gathering of unemployed New Yorkers swelled the ranks of Tompkins Square on November 6, 1857. Speakers rallied in support of Mayor Fernando Wood's proposal for a considerable public works program, the adoption of which could mitigate the plight of the unemployed due to the recent national business downturn. From the square, a "disorderly, fierce, and noisy" crowd marched on Wall Street, one marcher stating that workingmen should not starve while 20 million in specie (gold and silver coin) sat unused in the city's banks. While the crowd did not cause any ruckus on Wall Street that afternoon, the city's financial condition had worsened since the summer; Wall Street bankers had little appetite for lending, allowing specie deposits to increase by 46.7% during August alone. Further, consumer deposits in the city's banks had dwindled from $94.5 million to $75.8 million that summer. Exacerbating the credit crisis even more and contributing to a major correction on the Street, a substantial creditor and holding company in New York City, Ohio Life Insurance and Trust Company, collapsed on August 24, 1857.
Ohio Life Insurance and Trust Company, organized and incorporated in Cincinnati in 1834, functioned as a life insurer, trustee, mortgage holder and financial intermediary for Ohio banks operating on Wall Street. Its founders consisted of a "who's who" in Ohio politics: former US Senator Jacob Burnet of Ohio, US District Judge Benjamin Tappan and Ohio Supreme Court judge Alvin Peace, to name a few. In accordance with its charter, the firm had a total capitalization at the time of $2 million comprised of bonds and interest-bearing notes. The charter allowed the firm to establish branches without banking powers and required that profits be invested in federal, state, municipal and corporate securities. Ohio Life could also issue bills and promissory notes equal to twice the amount of funds deposited for less than a year, but greater than one half its paid-in-capital. Revocation of Ohio's charter would result from the suspension of specie payment, or if it charged interest greater than 7% on transactions.
Though such policies seemed prudent, the founders were often at odds with the Ohio Life trustees over lending practices. Furthermore, the company sometimes violated its state charter. For example, during the 1830s, management ignored...