The Panic of 1857 stands out in financial history for its severity, for the coordination of banks through the New York Clearing House (NYCH), for the establishment of a legal doctrine about illiquidity during a panic, and for its aggravation of regional tensions. Profiled in this case are the events of the panic, the range of potential causes, and the civic reaction. Excerpt UVA-F-1792 Rev. Jun. 17, 2020 The Panic of 1857, the New York Clearing House, and the Concept of Insolvency (A) Four Perspectives on the Unfolding Panic On the afternoon of October 13, 1857, John Livingston entered the Bank of New York seeking to convert two circulation notes into specie. The notes indicated that the bank would redeem them for specie on demand. The face value of each note was $ 100. Upon being presented with the notes for redemption, the teller refused. That same day, member banks of the New York Clearing House declared that they would suspend convertibility of their circulation notes into specie. In Livingston's view, an existing law enabled depositors to petition the courts for summary dissolution of any bank that had suspended convertibility for a period of time. Therefore, John Livingston sued to dissolve the Bank of New York in order to extract his claim of $ 200 in specie. The case was brought before Justice James J. Roosevelt of the New York State Supreme Court. On October 19, 1857, Roosevelt read an opinion in favor of the defendant (see Exhibit 1). Observers wondered why the court made this exception to the law. Was the court's decision sound policy? . . .