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The Panic of 1857 was a sudden downturn in the economy of the United States
United States

The United States of America is a Federal government constitutional republic comprising U.S. state and a federal district. The country is situated mostly in central North America, where its Contiguous United States and Washington, D.C., the Capital districts and territories, lie between the Pacific Ocean and Atlantic Oceans, Borders of the U...
 that occurred in 1857. A general recession first emerged late in 1856, but the successive failure of banks and businesses that characterized the panic began in mid-1857. While the overall economic downturn was brief, the recovery was unequal, and the lasting impact was more political than economic. The panic began with a loss of confidence in an Ohio bank, but spread as railroads failed, and fears that the US Federal Government would be unable to pay obligations in specie
Specie

Specie may refer to:* Coins or other metal money in mass circulation* Bullion coins* Hard money * Commodity money...
 mounted.






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The Panic of 1857 was a sudden downturn in the economy of the United States
United States

The United States of America is a Federal government constitutional republic comprising U.S. state and a federal district. The country is situated mostly in central North America, where its Contiguous United States and Washington, D.C., the Capital districts and territories, lie between the Pacific Ocean and Atlantic Oceans, Borders of the U...
 that occurred in 1857. A general recession first emerged late in 1856, but the successive failure of banks and businesses that characterized the panic began in mid-1857. While the overall economic downturn was brief, the recovery was unequal, and the lasting impact was more political than economic. The panic began with a loss of confidence in an Ohio bank, but spread as railroads failed, and fears that the US Federal Government would be unable to pay obligations in specie
Specie

Specie may refer to:* Coins or other metal money in mass circulation* Bullion coins* Hard money * Commodity money...
 mounted. More than 5,000 American businesses failed within a year, and unemployment was accompanied by protest meetings in urban areas. Eventually the panic and depression spread to Europe
Europe

Europe is, conventionally, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally divided from Asia to its east by the water divide of the Ural Mountains, the Ural , the Caspian Sea, and by the Caucasus Mountains to the southeast....
, South America
South America

South America is the southern continent of the Americas, situated entirely in the Western Hemisphere and mostly in the Southern Hemisphere, with a relatively small portion in the Northern Hemisphere....
 and the Far East
Far East

The Far East is a term current in English language to refer to the countries of East Asia. The term is often expanded to also include Southeast Asia and South Asia, for economic and cultural reasons, for example because Buddhism is common to East Asia, Southeast Asia and South Asia....
. No recovery was evident in the northern parts of the United States for a year and a half, and the full impact did not dissipate until the American Civil War
American Civil War

The American Civil War , also known as the War Between the States and several Naming the American Civil War, was a civil war in the United States....
.

Causes

The recession ended a period of prosperity and speculation that had followed the Mexican-American War and the discovery of gold
California Gold Rush

The California Gold Rush began on January 24, 1848, when gold was discovered by James W. Marshall at Sutter's Mill, in Coloma, California, California....
 in California
California

California is a U.S. state on the West Coast of the United States of the United States, along the Pacific Ocean. It is bordered by Oregon to the north, Nevada to the east, Arizona to the southeast, and to the south the Mexico state of Baja California....
 in the late 1840s. Gold
Gold

Gold is a chemical element with the symbol Au and atomic number 79. It is a highly sought-after precious metal, having been used as money, as a store of value, in jewelry, in sculpture, and for ornamentation since the beginning of recorded history....
 pouring into the American economy played its part by helping inflate the currency. Changes in worldwide economic trade, caused by the Crimean War
Crimean War

The Crimean War, also known in Russia as the Oriental War was fought between the Russian Empire on one side and an alliance of France, the United Kingdom of Great Britain and Ireland, the Kingdom of Sardinia, and the Ottoman Empire on the other....
 between Britain and Russia, had pushed American firms into a precarious worldwide market. (McPherson, p. 189) The immediate event that touched off the panic was the failure on August 24 of the New York City
New York City

The City of New York is the List of United States cities by population in the United States, while the New York metropolitan area ranks among the List of urban areas by population....
 branch of the Ohio Life Insurance and Trust Co., a major financial force that collapsed following widespread embezzlement
Embezzlement

Embezzlement is the act of dishonestly appropriating or secreting assets, usually financial in nature, by one or more individuals to whom such assets have been entrusted....
. In the wake of this event, a series of other setbacks shook the public's confidence, including:

  • The decision of British investors to remove funds from U.S. banks, which raised questions about overall U.S. economic soundness
  • The fall of grain
    Cereal

    Cereals, or cereal grains, are mostly Poaceae cultivated for their edible brans or fruit seeds . Cereal grains are grown in greater quantities and provide more energy worldwide than any other type of crop; they are therefore staple foods....
     prices, which spread economic misery into rural areas, because of the end of the Crimean War
    Crimean War

    The Crimean War, also known in Russia as the Oriental War was fought between the Russian Empire on one side and an alliance of France, the United Kingdom of Great Britain and Ireland, the Kingdom of Sardinia, and the Ottoman Empire on the other....
     and Russia
    Russia

    Russia , or the Russian Federation , is a list of countries spanning more than one continent country extending over much of northern Eurasia....
    n re-entry into global markets
  • The collapse of land speculation programs that depended on new rail routes, ruining thousands of investors


These triggers lowered the value of stocks and bonds
Bond (finance)

In finance, a bond is a debt security , in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest and/or to repay the principal at a later date, termed Maturity ....
 held by American banks, further reducing their investment assets.

Investor confidence was further shaken in mid-September when of gold were lost at sea in a shipment from the San Francisco Mint
United States Mint

The United States Mint primarily produces circulating currency for the United States to conduct its trade and commerce. The main Mint facility is located in Philadelphia, Pennsylvania, and branch mint are located in Denver, Colorado; San Francisco, California; and West Point, New York....
 to eastern banks. The gold and more than 400 lives were lost when the SS Central America
SS Central America

SS Central America, sometimes called the Ship of Gold, was a 280-foot sidewheel steamship that steamed between Central America and the eastern coast of the United States during the 1850s....
 sank during the North Carolina Hurricane of 1857. Public confidence in the government's ability to back its paper currency with specie
Currency

A currency is a Medium of exchange, facilitating the trade of goods and/or Service s. It is coins and paper bills used as money. It is one form of money, where money is anything that serves as a medium of exchange, a store of value, and a standard of value....
 was shaken as well.

Charles Calomiris and Larry Schweikart suggest that "the political struggle between 'free soil' and slavery in the territories", beginning with the Supreme Court's ruling in the 1857 Dred Scott v. Sandford
Dred Scott v. Sandford

Dred Scott v. Sandford, , was a decision by the United States Supreme Court that ruled that people of African descent Slavery in the United States and held as History of slavery in the United States, or their descendants?whether or not they were slaves?were not legal persons and could never be citizens of the United States, and that the U...
 case, may have helped bring about the Panic. The Court's decision threatened to open up all western territories to slavery, prompting the bonds of east-west running railroads to plummet in value, which in turn helped motivate a run on the major New York banks.

Remedies

At the suggestion of Howell Cobb
Howell Cobb

Howell Cobb was an United States political figure. A Southern Democrat, Cobb was a five-term member of the United States House of Representatives and Speaker of the United States House of Representatives from 1849 to 1851....
, Secretary of the Treasury
United States Secretary of the Treasury

The United States Secretary of the Treasury is the head of the United States Department of the Treasury, concerned with finance and monetary matters, and, until 2003, some issues of national security and defense....
, President James Buchanan
James Buchanan

James Buchanan, Jr. was the List of Presidents of the United States President of the United States and the last to be born in the 18th century....
 proposed to Congress
United States Congress

The United States Congress is the Bicameralism legislature of the Federal government of the United States of the United States of America, consisting of two houses, the United States Senate and the United States House of Representatives....
 that the Treasury be authorized to sell revenue bonds for the first time since the Mexican-American War.

In October, a bank holiday
Bank Holiday

A bank holiday is a public holiday in the United Kingdom and the Republic of Ireland. There is no automatic right to time off on these days, although the majority of the population not employed in essential services receive them as holidays; those employed in essential services usually receive extra pay for working on these days....
 was declared in New England
New England

New England is a region of the United States located in the northeastern corner of the country, bounded by the Atlantic Ocean, Canada and New York State, and consisting of the modern U.S....
 and New York
New York

The State of New York is a U.S. state in the Mid-Atlantic States and Northeastern United States regions of the United States and is the nation's List of U.S....
 in a vain effort to avert runs on those institutions.

The Tariff Act of 1857
Tariff of 1857

The Tariff of 1857 was a major tax reduction in the United States, creating a mid-century lowpoint for tariffs. It amended the Walker Tariff of 1846 by lowering rates to around 17% on average....
 reduced the average tariff
Tariff

A tariff is a tax imposed on goods when they are moved across a political boundary. They are usually associated with protectionism, the economic policy of restraining trade between nations....
 rate to about 20%. The reduction was written by Southerners in Congress and supported by most economic interests nationwide with the exception of sheep farmers and some iron companies in Pennsyslvania. It had the effect of removing the tariff issue as a major source of North-South contention.

The South was much less hard-hit than other regions because of the stability of the cotton market.

See also

  • Wildcat bank
  • Bank of Florence
    Bank of Florence

    The Bank of Florence was an early wildcat bank located at 8502 North 30th Street in Florence, Nebraska. After originally opening in the 1850s, it closed and reopened in 1904....
  • History of Omaha, Nebraska
    History of Omaha, Nebraska

    The history of Omaha, Nebraska began before the settlement of the city, with speculators from neighboring Council Bluffs, Iowa staking land across the Missouri River illegally as early as the 1840s....


Bibliography