The Panic of 1873 was caused when Jay Cooke and Company, a major financial company at that time, shut its doors and signaled an economic collapse. Because Jay Cooke and Company backed many of the country's railroad projects at the time, it was a believed to be a bad sign.
After the Civil War, railroad construction became a major industry in the United States. It is estimated that there was 35,000 miles of track laid in the 8 years leading up to the Panic of 1873. Because of this, a number of industries like banks were putting all of their money behind it. Once Jay Cooke and Company claimed bankruptcy, a number of other companies followed suit and the economic collapse began.