first class, be safe?'

A panic, in a word, is a species of neuralgia, and according to the
rules of science you must not starve it. The holders of the cash
reserve must be ready not only to keep it for their own liabilities,
but to advance it most freely for the liabilities of others. They
must lend to merchants, to minor bankers, to 'this man and that
man,' whenever the security is good. In wild periods of alarm, one
failure makes many, and the best way to prevent the derivative
failures is to arrest the primary failure which causes them. The way
in which the panic of 1825 was stopped by advancing money has been
described in so broad and graphic a way that the passage has become
classical. 'We lent it,' said Mr. Harman, on behalf of the Bank of
England, 'by every possible means and in modes we had never adopted
before; we took in stock on security, we purchased Exchequer bills,
we made advances on Exchequer bills, we not only discounted
outright, but we made advances on the deposit of bills of exchange
to an immense amount, in short, by every possible means consistent
with the safety of the Bank, and we were not on some occasions
over-nice. Seeing the dreadful state in which the public were, we
rendered every assistance in our power.' After a day or two of this
treatment, the entire panic subsided, and the 'City' was quite calm.

The problem of managing a panic must not be thought of as mainly a
'banking' problem. It is primarily a mercantile one. All merchants
are under liabilities; they have bills to meet soon, and they can
only pay those bills by discounting bills on other merchants. In
other words, all merchants are dependent on borrowing money, and
large merchants are dependent on borrowing much money. At the
slightest symptom of panic many merchants want to borrow more than