The Panic of 1837 was brought about by U.S. president Andrew Jackson’s attempts to control runaway land speculation. It affected the American economy over the next six years, resulted in the failure of many banks, and caused extensive unemployment throughout the country.
Andrew Jackson was president of the United States from 1829 until 1837. The so-called Jacksonian Democracy attracted the masses because of its emphasis on improving the lot of working people. Jackson, who practiced law in western North Carolina in the late eighteenth century, was ruined financially by the Panic of 1795, but he recovered sufficiently to become a force in American politics. His personal difficulties resulting from this panic, however, shaped forever his views of the economic and business cycles of the United States.
A number of personal animosities among Jackson and several prominent politicians and businessmen preceded and contributed to the Panic of 1837. John C. Calhoun
Contemporary cartoon depicting the problems caused by the Panic of 1837, while implicitly laying blame on the treasury policies of President Andrew Jackson, whose hat, glasses, and clay pipe appear in the sky, along with the word “Glory.”
Upon resigning his vice presidency in protest against this proclamation, Calhoun was elected to the United States Senate, where he joined with Henry Clay
The 1830’s had begun in the United States as a prosperous decade. Land speculators made a great deal of money purchasing government land that they were able to resell within a short time for much more than their purchase price. Inflation was evident, as the government printed increasing amounts of paper money, which was presumed to be backed by hard metal reserves in gold and silver.
Nicholas Biddle of Philadelphia, the leading American banker and president of the Second Bank of the United States, was riding on the crest of a financial wave that was quickly reaching its apogee. The influence that the banking industry appeared to be gaining alarmed Jackson, because it concentrated enormous economic power in the hands of nongovernmental agencies, notably the all-powerful private banks. To limit this perceived threat, Jackson took punitive action against Biddle’s bank, using the excuse that the bank was not establishing a solid paper currency
After Jackson refused to renew the bank’s charter when it came up for renewal in 1836, Biddle reacted by moving his operation to the Commonwealth of Pennsylvania,
Jackson took two decisive actions that brought Biddle’s retaliatory efforts to a screeching halt. As currency
To counteract this increasing dilution of the value of currency notes alongside increasing debt, Jackson issued a proclamation in 1836. He proclaimed that future purchases of government land could be made only in hard currency or in currency notes that were backed one hundred percent by hard currency. This decision had a profound effect on the entire nation, although the area west of the Allegheny Mountains was more severely affected by it than was the eastern seaboard, where hard currency was still more readily available than in the west. Much of the land speculation, however, was centered in the very areas where hard currency was in the shortest supply.
In the same year, Jackson also barred the deposit of federal money in Biddle’s bank. He further decreed that federal funds should be deposited in state banks that supported his efforts. These banks were dubbed “pet” banks. A further complication occurred when, late in 1836, several major mercantile companies in Great Britain declared bankruptcy, thereby reducing the market for American cotton abroad. The final blow was struck on March 17, 1837, a Friday, when it became clear that a number of the most influential cotton merchants in New Orleans, saddled with huge indebtedness and a rapidly declining foreign market for their goods, were faced with bankruptcy. As a result, banks soon were unable to meet their obligations and inevitably failed.
The reaction on Wall Street was immediate. The stock
The Panic of 1837 was probably not inevitable. Andrew Jackson’s personal animus against Nicholas Biddle drew the two into a conflict of egos that might have been resolved through negotiation and compromise rather than through Jackson’s imposition of draconian restrictions upon the banking industry that resulted in a national economic crisis.
The land speculation of the early 1830’s needed to be curbed, possibly with some sort of modified plan to bring the borrowing of money for land speculation under greater control. Jackson’s decision to demand payment in hard currency
The losers in the whole affair, as so often happens, were America’s working people, the very people who put Jackson into office for two terms as president based on his expressions of populism. Jackson very nearly brought the nation to its knees. Through his actions, he split his own Democratic Party and deepened irrevocably the breach between North and South.
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Eichengreen, Barry J. Capital Flows and Crises. Cambridge, Mass.: MIT Press, 2003. This theoretical study provides penetrating insights into recurrent financial cycles in the United States. -
Gilbart, James William. The History of American Banking. New York: A. M. Kelley, 1967. This somewhat dated book offers considerable information about the financial cycles that resulted in several financial panics in the United States during the nineteenth century. -
Kaplan, Edward S. The Bank of the United States and the American Economy. Westport, Conn.: Greenwood Press, 1999. Broad economic study of the role of the Bank of the United States in American economic history. -
McGrane, Reginald Charles. The Panic of 1837: Some Financial Problems of the Jacksonian Era. 1924. Reprint. New York: Russell & Russell, 1965. Among the most fruitful accounts of the Panic of 1837 and of the political motivations behind it. -
Mullineux, A. W. Business Cycles and Financial Crises. Ann Arbor: University of Michigan Press, 1990. In this largely theoretical study, Mullineux examines trends in business cycles and links them to the predictability of some financial crises. -
Schultz, Harry D. Panics and Crashes and How You Can Make Money Out of Them. New Rochelle, N.Y.: Arlington House, 1972. Although this is essentially a self-help book, its review of the financial panics that have afflicted the United States for more than two centuries offers valuable information about the Panic of 1837. -
Temin, Peter. The Jacksonian Economy. New York: W. W. Norton, 1969. Despite its age, this is one of the clearest accounts of the Panic of 1837 and of the economy of the Jacksonian era. Strongly recommended. -
Watson, Harry L. Andrew Jackson vs. Henry Clay: Democracy and Development in Antebellum America. Boston: Bedford/St. Martin’s, 1998. Dual biography, describing the two men’s conflicting visions for the future of the United States. Includes reprints of twenty-five primary documents, including speeches and letters.
Second Bank of the United States Is Chartered
U.S. Election of 1824
U.S. Election of 1828
Webster and Hayne Debate Slavery and Westward Expansion
Turner Launches Slave Insurrection
Jackson Vetoes Rechartering of the Bank of the United States
Nullification Controversy
Clay Begins American Whig Party
U.S. Election of 1840
Webster-Ashburton Treaty Settles Maine’s Canadian Border
Establishment of Independent U.S. Treasury
Congress Passes the National Bank Acts
Nicholas Biddle; John C. Calhoun; Henry Clay; Andrew Jackson; Zachary Taylor; Daniel Webster.