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Panic of
1857
The Panic of 1857
was a notable sudden collapse in the economy of the United States that
occurred in 1857. The collapse ended a period of prosperity and
speculation that had followed the Mexican War and the discovery of
gold in California in the 1840s.
Causes
The immediate event that
touched off the panic was the failure on August 24 of the New York
City branch of the Ohio Life Insurance and Trust Co., a major
financial force that collapsed following massive embezzlement. In the
wake of this event, a series of other setbacks shook the public's
confidence, including:
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The
decision of British investors to remove funds from U.S. banks, which
raised questions about overall soundness
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The fall
of grain prices, which spread economic misery into rural areas.
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Russia's
underselling of U.S. cotton on the open market;
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The piling
up of manufactured goods in warehouses, leading to massive layoffs
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Widespread
railroad failures, indicating an over-built status of the American
railroad system
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The
collapse of land speculation programs which depended on new rail
routes, ruining thousands of investors
Investor confidence was
further shaken in mid-September when 30,000 pounds of gold were lost
at sea in a shipment from the San Francisco
Mint to eastern banks. More than 400 lives were lost when the SS
Central America sank. Public confidence in the government's
ability to back its paper currency with
specie was shaken as well.
Remedies
At the suggestion of Howell
Cobb,
Secretary of the Treasury, President James Buchanan proposed to
Congress that the
Treasury be authorized to sell revenue bonds for the first time
since the Mexican War.
In October, a bank holiday
was declared in New England and New York in a vain effort to avert
runs on those institutions. Eventually the panic and depression spread
to Europe, South America and the Far East. No recovery was evident in
the United States for a year and a half and the full impact did not
dissipate until the American Civil War.
The U.S. South was hurt
less than the other regions of the country and many there concluded
that the superiority of their economic system had been vindicated.
The
Tariff Act of 1857 that followed reduced the average rate to about
20 percent -- another reduction that was warmly greeted in the South
and roundly derided in the North. The tariff was one of a number of
major issues that was dangerously increasing the tension between the
two regions.
See also
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