TheBaring crisis[1] or thePanic of 1890 was an acuterecession in theUnited States. Although less serious thanother panics of the era, it is the 19th century’s most famoussovereign debt crisis,[2] and the 17th largest decline in U.S. stock market history.[3]
The crisis was precipitated by the near insolvency ofBarings Bank in London. Barings, led byEdward Baring, 1st Baron Revelstoke, faced bankruptcy in November 1890 due mainly to excessive risk-taking on poor investments in Argentina.Argentina itself suffered severely in the recession of 1890, with its real GDP falling by 11 percent between 1890 and 1891.[4] An international consortium assembled byWilliam Lidderdale, governor of theBank of England, includingRothschilds and most of the other major London banks, created a fund to guarantee Barings' debts, thereby averting a larger depression.Nathan Rothschild remarked that if this had not happened, perhaps the entire private banking system of London would have collapsed which would have caused an economic catastrophe.
The international financial distrust generated by this crisis burst thebubble in theBrazilian economy, which had been inflating since the previous decade, bringing forward its expected end and seeing a Brazilianfinancial crisis, which in turn along with Argentine andUruguayan crises slashed repatriations and short-term investment byEuropeanimmigrants from Latin America to their countries of origin, affecting the region significantly in the 1890s.[5]
