When the National Cordage Company failed on May 4, 1893, it brought to a close a period of industrial prosperity that, except for short checks in 1884 and 1890, had been uninterrupted since the recovery following the panic of 1873. Its insolvency precipitated a serious panic, a reaction that had not followed the failure of the Philadelphia & Reading Railroad Company two and one-half months earlier. The slight impression the failure of that speculatively managed railroad 1 made on business had been hailed as "gratifying evidence of the soundness of the general financial condition." 2 By contrast, the stock-market panic accompanying the failure of the National Cordage Company, if not the event itself, had national significance.
The National Cordage Company3 was an example of the new type of industrial companies that had come into prominence since 1885. Like the American Sugar Refining Company, American Tobacco Company, and the Distilling and Cattle Feeding Company, it aspired to monopoly. To almost as great an extent as any of these companies, its stocks served as a medium for speculation. Since March 1891 the well-known speculator James R. Keene had been operating a pool in its securities.
To most observers the National Cordage Company would have seemed a profitable concern. In both 1891 and 1892 profits were reported sufficient to pay 8 percent on the preferred and 12 percent on the common stock. In January 1893 the company had increased by a stock dividend its common stock from $10 million to $20 million. The enlarged common stock was expected to receive 7 percent, and the rate on the preferred was raised to 10 percent. 4 A quarterly dividend at these rates was paid early in April.
When on April 29 the National Cordage Company attracted public attention by offering an additional $2.5 million of preferred stock to be sold at par for the purpose of increased working capital, neither the offer nor the amount was propitious. In the light of the