Panic of 1837

10 Key excerpts on "Panic of 1837"

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  Reforming the World

  Social Activism and the Problem of Fiction in Nineteenth-Century America

  • Maria Carla Sanchez(Author)
  • 2009(Publication Date)
  • University Of Iowa Press

    (Publisher)

  The Panic of 1837 was a disaster engineered by bankers, provoked by the chief executive of the United States, exacerbated by crop fail-ures and foreign investment losses, and felt throughout the entire country, from Manhattan and Beacon Hill to the unplowed fields of Michigan, Illinois, and Indiana. It bankrupted previously wealthy families and made charity cases of the working poor. It was also pre-ventable. Myriad figures exist which measure the damage caused: a nationwide total of “33,000 [bank and business] failures, involving a loss of $440,000,000”; newly unemployed laborers numbering “a half million nationally”; afterwards, over a one-year period, 41,000 appli-cants for bankruptcy protection in a single federal district of New York. 8 These figures translated to idleness in New Bedford, Massa-chusetts, for example, where “the streets . . . are now thronged with seamen out of employment. Forty whale ships are lying at the wharves, but nothing doing to fit them out for sea” (McGrane 130– 131). In Philadelphia, thousands demonstrated outside Independence Hall, protesting the “system of fraud and oppression” which they saw The Panic of 1837 and the Failures of Literary Men 35 in banking; nearly 75 percent of clerks and salesmen in the City of Brotherly Love had been discharged from their jobs (Sellers 355). For the new town of Port Sheldon, Michigan, roads were laid, a light-house and hotel built, the charter obtained for a railroad stop. But after the Panic, “the hotel and thirty lots were sold for less than the cost of the glass and the paint . . . the remainder of the land was bought for its hemlock bark.” 9 Paper money lost its value, becoming mere “shinplasters.” For thousands of Americans, things fell apart. The causes of the Panic are plural, but certain narratives of its his-tory found more popular appeal in antebellum America than did oth-ers.

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  The 100 Most Important American Financial Crises

  An Encyclopedia of the Lowest Points in American Economic History

  • Quentin R. Skrabec Jr.(Author)
  • 2014(Publication Date)
  • Greenwood

    (Publisher)

  The Panic of 1837 and the resulting depression changed the political system of America. The Whig Party, with its strong economic and nationalistic platform, became popular in the manufacturing states: the New England states, Pennsylvania, Ohio, Indiana, Kentucky, and Tennessee. The Panic of 1837 also started a national debate on the need for a gold standard and the use of paper money. Once again, the old problem of printing paper with little backing of metallic coin had allowed inflationary speculation. The panic also forced states to become more responsible for their own banking systems, because without a central bank, the federal government was unable to come to the aid of state and local banks in a crisis.

  See also: 1792—Panic; 1819—Panic; 1847—Panic; 1857—Panic; 1873—Panic and Global Depression; 1893—Panic; 1901—Rich Man’s Panic; 1907—Panic; 1929—Wall Street Crash and Great Depression; 1987—Black Monday; 2008—Banking and Subprime Mortgage Crisis; 2009—Great Recession

  Further Reading

  McGrane, Reginald. The Panic of 1837: Some Financial Problems of the Jacksonian Era. New York: Russell & Russell, 1965.

  Sharp, James Roger. The Jacksonians Versus the Banks: Politics in the United States after the Panic of 1837. New York: Columbia University Press, 1970.

  Sobel, Robert. Panic on Wall Street: A History of America’s Financial Disasters. New York: Macmillan Company, 1968.

  1847—Panic

  The panic of 1847 was a British and European event with little direct economic impact on the United States, but its indirect effects would change America forever because many of the people most affected by this panic would become future Americans. The panic of 1847 also showed how major economic disruptions in the world often indirectly affected countries around the world. It was a pattern that, in 1847, Americans were just starting to fully appreciate.

  The panic of 1847, which came in the midst of great crop failures and food riots throughout Europe, would create a mass wave of immigration into the United States in 1848 and 1849. Many once highly paid craftsmen from Europe headed for America in hopes of better wages and living conditions. The wave would flood the American labor market, driving wages down and stretching the ability of the nation’s infrastructure to accommodate the mass of people. It was the beginning of urban slums built to house the poor of Europe. It would help fuel the great Gold Rush as well as a nativist American movement to restrict immigration. As Irish and Germans immigrants poured in, America’s politics would also be changed. The U.S. economy was expanding but not fast enough to absorb this mass immigration. But this painful period would give birth to America’s Industrial Revolution.

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  The Fear Factor

  What Happens When Fear Grips Wall Street

  • C. Read(Author)
  • 2009(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  Soon after the bank failure, there was rioting in the streets of New York City over the subsequent wrath of smaller bank failures. Soon the companies depending on these banks began to fail as well. The dramatic deflation in prices that results when there are mass layoffs and fire sale prices for assets caused a deflation that threatened the remaining banks and borrowers alike. Because of President Jackson’s failure to recognize the consequences of a broken banking system, and Van Buren’s unwillingness to create institutions for lending of last resort, the deflation and the resulting depression held the nation down for another five years. The Panic of 1857 While not quite as severe as the Crash of 1837, the Crash of 1857 nonetheless managed to become the first global financial contagion. As with all other panics, it began with the dramatic failure of some bank and created a domino effect that could not be contained. As with past U.S. panics, the federal government still lacked the sophistication and the lender of last resort to prevent a small problem from becoming a big one. This crash was initiated by a spectacular case of embezzlement at the Ohio Life Insurance and Trust Company. The crisis of confidence in this major com- pany and shifting patterns in world trade induced some large international accounts to repatriate their funds away from the United States. These shifting A Brief History of the Fear-Gripped Market 143 trade patterns deflated commodity prices in the United States. Finally, the loss of hard money in the coffers of the U.S. Treasury created additional lack of con- fidence in the U.S. currency. While each of these instances should not have, in themselves, caused a crisis in confidence that forces a major recession that persisted until the U.S. Civil War in 1861, it was the inability of the emergence of economic leadership to avert a crisis that was ultimately to blame.

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  The Panic of 1857 and the Coming of the Civil War

  • James L. Huston(Author)
  • 1999(Publication Date)
  • LSU Press

    (Publisher)

  It was not, however, in the business press or in the pamphlets that the important debate between free traders and protectionists over the Panic of 1857 took place. This more bitter controversy occurred in the halls of Congress. Not only did congressmen and administration officials reiterate the nostrums that the economic theorists had devised, they also recited in significant detail the analysis by which the protectionists and free traders had arrived at their conclusions. The political debate over the Panic of 1857 manifested a concern that was not evident in the academic one: the question of high or low tariffs awoke the instincts of sectional self-interest among the congressmen, and that in its turn thrust the question of slavery into the controversy. The Panic of 1857 reawakened the economic question of free trade or protectionism at a time when the furor over the extension of slavery was reaching its climax.

  There was an odd quality to the southern reaction to the Panic of 1857, particularly in regard to the concepts by which southerners evaluated economic phenomena. Much of their response was limited to complaining about the price drop their staples had suffered due to the Panic, and then later to exulting over the South’s swift return to prosperity while the North was mired in the swamp of unemployment and business failure. But one event associated with the financial collapse drew considerable southern comment: the northern bread riots. Southerners did not, in general, engage in the national debate over banking policies and tariff rates. They did, however, see in the workers’ demonstrations a means of justifying slavery. They therefore thrust into the debate over the Panic of 1857 the subject of the relative merits of a slave labor system as compared to a free labor system.

  Southerners gleefully contrasted the fate of the slave in the South with that of the free white worker in the North. While northern laborers were shaking the pillars of northern civilization, related the Richmond South, the southern laboring class was “content and quiet, because secure against want and suffering.” The old-line Whig editor of Tennessee, “Parson” William G. Brownlow, caustically commented that northern philanthropists would have to cease sermonizing about the fate of slaves and attend to the “ragged starving poor, and devise ways and means for furnishing them bread.” Upon receiving news of the northern labor riots, William W. Holden of North Carolina exclaimed, “How eagerly would these poor wretches devour what our well fed slaves waste!”31

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  Samuel Sloan

  Architect of Philadelphia, 1815-1884

  • Harold N. Cooledge, Jr.(Authors)
  • 2016(Publication Date)
  • University of Pennsylvania Press Anniversary Collection

    (Publisher)

  C H A P T E R V I I From the Panic of 1857 to the Outbreak of the Civil War For four decades prior to the Civil War, the fiscal stability of the United States was disturbed by a nationwide optimism among its citizens which manifested itself in increasingly reckless speculation. The effect of this attitude on the nation's social values was not gener-ally recognized in the euphoria of the time, and those few who had fears did not voice them publicly until shortly before the Panic of 1857 brought the period to a disastrous close. Despite warnings that financial crises in 1836 and 1847 had given, the speculative mania continued to grow, until by 1850 it influenced every economic class, even planters and farmers in the agricultural backwaters of the South and West. 1 It was encouraged and sustained by a rapidly changing economy. Between 1817 and 1857, the United States underwent the greatest economic transformation in its history. 2 Its agriculture shifted from self-sustaining household production to commercial production, it became one of the leading manufacturing nations in the world, and its export-import trade increased sevenfold. Despite constant increases in general production, the country could not supply the demands of its expanding population, and for-eign imports rose steadily throughout the period. A major part of the import trade was financed by European investors, who by 1851 held over $250 million in American long-term securities. Capital was increasingly concentrated at a few centers, such as Philadelphia and New York, whose banks were deeply involved in the speculative fi-nancing of commerce, industry, agriculture, land development, and especially the railroads, which tied all these sectors of the American economy together. 3 Mutual indebtedness among these banks became 62 Samuel Sloan dangerous in a crisis, as the panics of 1836 and 1847 had demon-strated, and conditions in 1857 were more extreme than ever before.

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  The Bank of the United States and the American Economy

  • Edward Kaplan(Author)
  • 1999(Publication Date)
  • Praeger

    (Publisher)

  5 The Second Bank and the Panic of 1819 THE PANIC OF 1819 In 1819, 3 million people or one-third ofthe population were directly affected by the Panic of 1819. Samuel Hopkins, the president ofthe Genesee Agricultural Society, declared at its annual meeting in October 1820 that "myfirstwish would be to speak in a tone that should rouse the tenants of every log-house in these counties, and make them stand aghast at the prospect of families naked—children freezing in the winter's storm—and the fathers without coats or shoes to enable them to perform the necessary labours ofthe inclement season." 1 The harshness of the depression affected both urban and rural areas. In Philadelphia, an investigating committee was formed in August 1819 to study the effects ofthe panic in thirty industries and found that employment had decreased in those industries from 9,672 in 1816 to 2,137 in 1819, a seventy-eight percent decline. Propertied classes also suffered as real estate values declined rapidly along with earnings capacity. In Baltimore, rents had fallen from forty to fifty percent, and a third of the property was held by the banks. In Richmond, real estate values declined by seventy-five percent and half of it was mortgaged to the banks. 2 The Second Bank also experienced losses in capital due to the Panic. The Baltimore office lost about $1.6 million, and the branches located in Norfolk, Charleston, Washington, and Savannah also took heavy hits. The estimated capital loss in the South was $2,234,000. 3 Though the bank also suffered losses in western states such as Ohio and Kentucky, it proved less severe due to the western real estate which the bank took in liquidation of its debts in 1819. The Second Bank acquired this land when real estate values had plummeted to their lowest levels. But after the Panic, the land values would dramatically increase in the west mostly due to the growth in Cincinnati.

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  Contagion of Bank Failures (RLE Banking & Finance)

  The Relation to Deposit Insurance and Information

  • Sangkyun Park(Author)
  • 2014(Publication Date)
  • Routledge

    (Publisher)

  71 This analysis explains the rather unique case in terms of information costs. The failures of major banks resulted in the panic on a minor scale only because the public distinguished between failed banks and other banks. The banks that failed in 1884 had problems specific to those banks, and the problems were easily noticeable. The unique nature of those problems substantially reduced the cost of bank-specific information and hence made the information available to the public. As a result, depositors were better informed, and did not panic.

  3.a. Description of the Panic

  The panic of 1873 was followed by a prolonged period of low activity in the stock market and in other branches of the economy. It was not until the beginning of the 1880’s that the economy started expanding. Economic activity peaked in 1882, and then declined slowly. Hence, economic conditions preceding the panic of 1884 were characterized by declining economic activity and moderate deflation which had lasted for two years (See Table 5 ).

  As were other financial crises, the panic of 1884 was ignited by failures of major financial institutions. On May 6, 1884, the Marine National Bank of New York City having a capital of $400,000 and deposits of about $5,000,000 closed its doors. The immediate cause of the failure of the bank was the illegal certification of a check for $750,000 for a brokerage firm, Grant & Ward, which had speculated in the stock market. This failure was followed by the failure of Grant & Ward two days later. Due to its reckless speculation, the brokerage firm had a severely impaired capital structure. At the time of its failure, it was estimated that Grant & Ward had assets of less than $700,000 and liabilities of more than $16,000,000. Later, a careful examination by accountants revealed that the firm had assets of $67,174 and liabilities of $16,792,640.72 The president of the Marine National Bank, James D. Fish, was also a partner of Grant & Ward. Thus, the two financial institutions were very closely connected to each other. Fish's illegal manipulation with bank money was soon learned by bank examiners, and he was sent to the Ludlow Street Jail.73

  These events undermined the confidence in the financial market and resulted in a severe decline of the stock market. There were growing suspicions and rumors circulating that officers of other banks might be involved in fraudulent banking practices.74 This suspicion was soon confirmed by another fraud case revealed on May 13. It became known that the president of the Second National Bank of New York City, James C. Eno, had embezzled $3,185,000 of the bank's money and fled to Canada. The directors of the bank immediately replenished the embezzled amount, and the bank managed to avoid suspension or failure. Yet the news was powerful enough to ruin the already shaken confidence in the financial market. The impaired confidence resulted in collapse of stock prices and runs on the banks in New York City.75

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  The People’s Courts

  Pursuing Judicial Independence in America

  • Jed Handelsman Shugerman(Author)
  • 2012(Publication Date)
  • Harvard University Press

    (Publisher)

  Four states defaulted on their debts in 1841, and five more defaulted in 1842. Unemployment rates soared, food riots erupted in many cities, and a recession lasted until 1843. 2 The crisis doomed Martin Van Buren’s presidency, and many other po-litical leaders took a fall after the Panics. The reputations of the legisla-tures around the country took an enormous and long-lasting hit after they had banked so heavily on new banks and expensive internal improve-ments. The push for internal improvements and state spending had, in-terestingly, been the overreaction to an earlier economic crisis, the Panic of 1819. Internal improvements were the craze and the fix-all for both Whigs (on the national and state levels) and Democrats (on the state level), building from the 1820s into the 1830s. New York’s legislative energy began successfully with the Erie Canal. Initially, Governor DeWitt Clinton’s plan for a 350-mile canal between Lake Erie and the Hudson River was mocked as “Clinton’s Folly” or “Clinton’s Ditch.” However, it quickly drew enormous revenue and captured the public imagination for a transportation revolution. 3 Drunk with the success of the Erie Canal, New Yorkers went on a binge of internal improvements. In 1825, the New York legislature authorized seventeen new canals, and many were completed at great expense. Other states around the country followed, all promising that the projects would bring great riches and that tolls would pay off the massive debts. State 8 6 T H E P E O P L E ’ S C O U R T S legislatures dramatically increased the number of special incorporations to accelerate economic growth and build infrastructure. In many states, the choice of where to build new canals and roads sparked bitter fights be-tween regions and between towns within those regions. Designs failed and costs skyrocketed. The Panics of 1837 and 1839 further dashed those hopes. A severe depression stretched into the 1840s, with record lows in 1842.

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  Manias, Panics, and Crashes

  A History of Financial Crises, Seventh Edition

  • Robert Z. Aliber, Charles P. Kindleberger(Authors)
  • 2017(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  32 The year 1819 was marked by the resumption of specie payments and by the Peterloo massacre, when protesting Manchester workers and their families were charged by cavalry who killed at least eight individuals; Smart called it a ‘disastrous year’. 33 In America, the Second Bank of the United States precipitated a panic by having its branches call on state banks to redeem large balances and notes that it owned. The purpose was to assemble $4 million in specie to repay the bor- rowing undertaken in Europe in 1803 to pay for the Louisiana Purchase. 34 But the Second Bank itself was a bubble, having been re-established in 1817 after the dissolution of the First Bank in 1811. The bank was run by greedy and corrupt directors who accepted promissory notes in payment of stock, registered stock in different names to get around the law limiting concentration of ownership, voted loans on the security of bank stock, permitted other loans without collat- eral, and allowed accounts to be overdrawn. Hammond observed that the sober pace of eighteenth-century business had given way to a democratic passion to get rich quick, and that men imbued with this passion and unscrupulousness had gained control of the Second Bank. 35 INTERNATIONAL CONTAGION 1618–1930 191 1825 TO 1896 The 1825 crisis involved Britain and South America, although there was a dis- tinct spillover to Paris that stretched until panic struck there in January 1828. With the panic in London in December 1825, continental sales halted, which impacted the banks in Paris, Lyon, Leipzig, and Vienna and obliged Italy and other markets that depended on these centers for finance to reduce their pur- chases. Distress from burdensome inventories in the textile-producing area of Alsace was general; firms were low on money and circulated between 9 mil- lion francs and 16 million francs of their own IOUs as a substitute for money.

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  Transatlantic Speculations

  Globalization and the Panics of 1873

  • Hannah Catherine Davies(Author)
  • 2018(Publication Date)
  • Columbia University Press

    (Publisher)

  134 In this case, however, integration was spurred on not during a time of economic growth but of stagnation.

  Conclusion

  When Jay Cooke’s bank failed in September 1873, commentators on both sides of the Atlantic had been debating the possibility of a panic for several months. European demand for American railroad securities had been falling since the first half of 1872, a fact that did not go unnoticed in American financial circles but did not prompt fears of an imminent crisis. In New York, although the usual autumn stringency had still not subsided by the beginning of 1873, the stock market for many months saw neither a panic nor was there a significant failure. In Berlin, the stock market had been on a downward trajectory since December 1872. There, too, this did not at first translate into a major crisis. In Vienna, things happened faster, and a major panic erupted—the first of that year—immediately after the Vienna exchange had registered an all time high. For a while, the decline on German stock markets accelerated, though by summer, they seemed to have regained some of their composure. In New York meanwhile, most people seemed confident that the Viennese panic would not spread across the ocean. While, during these months, there was a pronounced awareness of transnational economic connections, people on both sides of the Atlantic were reluctant to imagine the outbreak of a transatlantic crisis. Observers frequently discussed the possibility of a national panic but rarely considered the likelihood of transnational contagion; by imagining a panic as originating from within their country’s borders, financial markets were discursively endowed with a national structure, making them easier to conceptualize and contain. Well before the advent of “the economy” as a theoretical concept denoting an “emphatically national” circular flow of production and consumption, then, popular economic discourse in the 1870s imagined national borders an obstacle to the expansive nature of markets.135

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