how was the panic of 1837 resolved

He received the renewal bill from Congress on July 4, which seemed fitting to those friends of capital who hoped the measure would secure their independence from ignorant democrats and provocatively ironic to those same democrats, who felt it fastened an aristocracy of finance upon the country." 62 Jackson had set up a battle not only over class but over the political structure of government. Utter collapse and despair came, soon or late, upon every sort of undertaking the year through. Clay probably sensed the reaction in March when Van Buren offered to bet him a suit of clothes on the elections in Virginia and New York City. The panic had both domestic and foreign origins. Crop failures in 1835 and 1837 not only made it impossible for farmers to meet their obligations, but also decreased our exports to Europe. On the day the removal order went into effect, Biddle enlisted his directors to agree to eventual contractions of credit. `Is there no danger to our liberty and independence?...Will there not be cause to tremble for the purity of our elections in peace and for the independence of our country in war?'" In his desperation to find a winning political issue for 1832, Clay had tied his presidential campaign to the reauthorization of the Bank of the United States - four years ahead of schedule. Historian Merrill D. Peterson wrote that Clay "hoped, as he told [John Quincy] Adams upon his departure from Washington, to rebuild his once flourishing law practice with the aid of this agency, itself worth $5,000 a year, and after several years reenter Congress financially independent." So basically, I'm just wondering the following - What exactly was the Panic of 1837 (I have an idea of what it is, but I really hardly know anything about what it is) - What things caused it? Biddle wrote that the President "thinks that because he has scalped Indians and imprisoned Judges, he is to have his way with the Bank. "6" Historian Sean Wilentz observed that the new bank was designed to curb inflation and speculative frenzies: "Acting as a financial balance-wheel, the national bank would, in principle, keep currency values and capital markets stable, and prevent national economic expansion from turning into an orgy of overspeculation and runaway inflation." As a result, the recession double dipped in 1839 and the national economy did not recover until 1843. Despite the new bank's problems, noted Hoffman, "Both Congress and the administration had a reasonable grasp on the national bank's failure to meet their expectations; overwhelmingly, they advocated that the institution be reformed, not scuttled. 4. It was not an issue in the presidential campaign of 1824 - when Jackson won a plurality of the popular vote, but lost in the House of Representatives to John Quincy Adams - or in 1828, when Jackson exacted revenge by winning a smashing victory over the unpopular Adams. Activity 2. Better than any of them, Jackson understood the symbolism of the bank and what it meant for popular government in America. For the bourgeoisie, it quelled the conflict of labor militancy and Bank War. Although the national Bank was chartered for seven more years, he urged Congress and country to begin considering alternatives. The affair resulted in the shutdown of the Bank and its replacement by state banks. 17 Biddle brought new stability to the bank and to the country's economy. 122 Rousseau wrote that "these measures reduced the specie reserves of the deposit banks in New York City from $7.2 million on 1 September 1836 to $2.8 million by 1 March 1837 and a mere $1.5 million by 1 May. Historian William Graham Sumner noted that in the mid-1830s the anti-Jacksonians "took up cudgels in behalf of banks and bank paper, as if there would be no currency if bank paper were withdrawn, and as if there would be no credit if there were no banks of issue. Jackson came into presidency in 1829 determined to eliminate the national debt, the management of which was one of the purposes of the national bank. Perhaps surprisingly, land sales, though never again reaching the levels of August 1836, also remained very strong. Indeed, it is difficult to imagine Hamilton remaining aloof from national bank matters; likewise, hands-on Republican administrators such as Gallatin and Dallas did not sit in their offices passively awaiting accounting reports from the bank. Many of its members had favored rechartering the bank of the United States, but even some critics of the Bank rebelled at Jackson's peremptory mode of acting against it. The question will incorporate Itself with all our elections, and especially with that as to which there is so great a desire that it should be incorporated. (Letter from Henry Clay to Nicholas Biddle, September 11, 1830). But ever since I read the history of the South Sea bubble I have been afraid of banks. Flatly rejecting Chief Justice Marshall's McCulloch doctrine, it shocked conservatives by asserting that `the Congress, the Executive and the Court must each for itself be guided by its own opinion of the Constitution.'" Nevertheless, it did more for the economy than Jackson recognized. If not made at the next Session, when should it be made? More plentiful, less reliable paper money helped create inflation and a land bubble certain to burst when the chickens came home to roost. 10, Future President Andrew Jackson himself had reason to complain about the impact of the Panic of 1819. 87 Historian Daniel Feller wrote: "On September 18, having laid his ground carefully, Jackson read a paper to the cabinet announcing his decision to begin the removal. 59 Historian Robert V. Remini wrote that the veto "message claimed the Bank was unconstitutional, despite John Marshall's decision in McCulloch v. Maryland. She found in the States the premier market for her goods and for her capital and the premier source of cotton for her mills. Reform was thus the dominant theme of a second phase of operations under bank president Langdon Cheves (1819-23)." 66 A day after Senator Daniel Webster led the counterattack, according to Remini, "Henry Clay added his contempt for the President's arguments in another crowd-pleasing speech on the Senate floor. Thus, Van Buren's central domestic heritage survived his defeat for reelection. The charge was all the more scurrilous, given the indispensable help Biddle provided for Jackson's program to retire the national debt. Hence the BUS was a guaranteed conduit funneling capital and credit to the West and South rather than squeezing them." On May 21, 1838, a joint resolution of Congress repealed the Specie Circular. Wilson noted: "With regard to the existing Treasury surplus, a second part of the act prescribed that it be distributed among the states in four quarterly installments, beginning in January 1837." The Specie Circular was promulgated by the Treasury in July 1836. In consequence the demand for other investments was intensified and their prices driven up." He did not win confidence from anybody. He argued that "the effect of the distribution was appreciable primarily, and almost entirely, because a small portion of it was a quasi-increase in the demand for hand-to-hand specie by the state governments, a demand that had to be fulfilled by the commercial banking system. 1 However, the effort fell short in the House. Bankers were popular in times of prosperity and easy scapegoats in time of recession. As businesses cut back production or failed altogether, workers lost their jobs. Historian John Steele Gordon wrote: "Jackson had no objection to self-made men like himself who sought only their own economic advancement and contributed thereby to the increased wealth of the country. I now entertain no doubt of that purpose. Historian Daniel Walker Howe wrote: "The system in which the federal government deposited its funds in `pet' state banks had originated in haste when Jackson removed the deposits from the BUS. Fiscal and monetary policies in the United States and Great Britain, the global movements of gold and silver, a collapsing land bubble, and falling cotton prices were all to blame. 111 Historian Jenny B. Wahl took another analytic tact; she wrote that "recent empirical work indicates that Jackson may not have been quite as blameless as once believed. Instead he declared the monopoly `unauthorized by the Constitution, subversive of the rights of the States, and dangerous to the liberties of the people." Unfortunately, however, Jackson often sold on credit rather than for cash and ended up losing a lot of his paper profits when buyers, like Philadelphian David Allison, went bust and defaulted on their notes and mortgages. Jackson framed the conflict in terms of class. "29 Nevertheless, Jackson's inaugural address in 1829 did not address the bank issue. 67 " The attempt to override the rechartering veto failed in the Senate. This was the Panic of 1837. The Second Bank of the United States might have survived had it not decided directly to test Jackson's power. `Was it not to compel the people to continue its monopoly and privileges, not on account of the benefits conferred by it, but to escape from the suffering which the corporation had the power to inflict?' And Clay was annihilated by a campaign against the "monster" of the Bank of the United States. It happened shortly after Andrew Jackson left office. Pessimism abounded during the time. Most members of the cabinet, many of whom were deeply involved in the speculation themselves, opposed the plan, and it was clear that Congress, many of whose members were equally involved, would not stand for it." Jackson also worried about homesteaders' being seduced into debt. ", Economically, Jackson's judgement regarding the transfer of funds to pet banks was flawed. Biddle said it was the least he could do. Only the Post Office and the military services, among all the federal agencies, could match Biddle's base of spoils. To read the full article, see the Columbia Undergraduate Journal of History. Under Nicholas Biddle's brilliant leadership it had met its fiscal obligations to the government, provided the country with a sound and uniform currency, facilitated transactions in domestic and foreign exchange, and regulated the supply of credit so as to stimulate economic growth without inflationary excess...Neither Biddle nor any of the Bank's friends wished to force the issue of recharter before the presidential election. 159 Bray Hammond wrote that Jackson's second term "fiscal policy...was a product of the current over-trading, inflation, and speculation, but also a contributor thereto. So did Jackson, who played "everyman" to Biddle's "rich man." Robert E. Wright and David Cowen wrote: "Certain that he was right, and that the American people had spoken, Jackson moved in for the kill, as he had done so many times before. At all events, you will be in a better condition by abstaining from applying to renew the charter during his first term, than you would be in, if you were to make the application and it should be rejected. "The New York banks were prohibited from issuing these notes by a law passed in 1835 by the legislature...With the suspension of specie payments, these notes flowed in from the surrounding states until their amount below the denomination of five dollars, was estimated, by 1838, at from three to four million dollars." Economic historian John Steele Gordon wrote that "when it was clear that Jackson would use a pocket veto to kill the bill, Henry Clay persuaded Congress to stay in session long enough to force Jackson to sign or veto the bill and state his reasons for doing so. 50 The achievements of the Second Bank of the United States were irrelevant to Jackson. They also call that a bubble. States bank, nay all banks. Historian Major L. Wilson wrote that politically, "the panic of 1837 had great impact. As specie was at a premium, it was hoarded by those who possessed it, and to carry on necessary business transactions, small bills became the medium of exchange," wrote Reginald Charles McGrane. Richard H. Timberlake, Jr., The Specie Circular and Distribution of the Surplus. When I review the arduous administration through which I have passed, the formidable opposition to its very close, of the combined talents, wealth and power of the whole aristocracy of the United States...I am truly thankful to my God for this happy result....It displays the virtue and power of the sovereign people, and that all must bow to their will." The veto message "denigrated monopolistic enrichment of the Bank's wealthy stockholders, extensive stock ownership by foreigners, and northeastern exploitation of the West and South. On 2 January 1837, the society’s officers and stockholders reorganized the institution, renaming it the Kirtland Safety Society Anti-Banking Company, and began operations as an unchartered financial institution. Personal and political reasons, the emotional and the practical, as usual guided his hand." Then every thing will be fresh; the succeeding P. election will be too remote to be shaping measure in reference to it; and there will be a disposition to afford the new administration the facilities in our fiscal affairs which the B. of the U.S. perhaps alone can render. Specie and the Specie Circular Jackson was prone to see conspiracies all around him. 134. In February 1836 the charter expired and the federal Bank ceased to exist." Because he ignored their counsel, Biddle made unnecessary political blunders." High prices and high rents had already before the election produced strikes, trades-union conflicts, and labor riots, things which were almost unprecedented in the United States." I'm doing a school project in my History class, and can't seem to find much information about the Panic of 1837, other than on Wikipedia, which my teacher told us not to use. Paper money and what was coming in his day to be called commercial paper - bills of exchange, promissory notes, bank checks, and such - were to Jackson, just as they had been to John Adams a generation earlier, a form of fraud." Biddle had calculated badly. Historian Reginald Charles McGrane wrote: "By the spring of 1835 the country apparently had forgotten its past disorders. He wrote his successor: "The approbation I have received from the people everywhere on my return home on the close of my official life, has been a source of much gratification to me. 41 Brands wrote: "Clay wanted, as he judged the bank a good issue on which to run against Jackson in 1832. The Kirtland Safety Society was not able to obtain a bank charter from the Ohio legislature. The rechartering fight became shrouded in myth, but reflected fundamental constitutional differences. It is the usurpation which has convinced the Country." Historian Wilentz wrote: "As early as July, he warned the Bank's New York branch of his plans to `crush the Kitchen Cabinet.' 68 As Bray Hammond summarized the factors causing the BUS's demise: The 1832 presidential campaign represented a small revolution in American politics. The BUS represented to Jackson the power of an unaccountable elite. In a painfully fracturing society, it conferred civic dignity and social inclusion on patriotic working people. Americans found in her their premier market for their cotton and their securities. This he accomplished through the freer use of domestic bills of exchange and the introduction of branch drafts. 199 By the end of the planned process, the Treasury was empty and there was nothing to distribute. These precious mint drops were soon carried under the vast and rising flood of pulp money. Two actions in the summer of 1836 changed the economic dynamics - one an act of Congress not really supported by the Administration and the other an act by the Administration not supported by Congress. Noted Holt: "Instead, they predicted accurately, Clay would repel Antimason and Calhounites and galvanize even disillusioned Democrats behind Jackson." Historian Wyman Boardman wrote: "Jackson and the Democrats favored a policy that made land available easily and cheaply. Jackson liked a fight and he didn't particularly care with whom he had to fight. A primary cause of the panic was the coinage of silver alongside gold in the U.S. currency system. By contrast, the opposition pictured the president as pursuing a radical experiment inherently hostile to all banks." But he thought that the institutions and the people who benefited from it were a national curse as well. You would say what ought the Corporation to do? On May 21, 1838, a joint resolution of Congress repealed the Specie Circular. Derangement and distress were sure to attend each new step in an experimental process....Jackson and his advisers soon felt their dilemma, and the deposits had not long been transferred when a bullion proscription was drawn up to ease the griping pains of the community. Joining them in opposition to recharter was the third contingent of congressional Republicans, the free enterprisers. In early March 1834, Biddle wrote that Jackson "by removing the public revenues has relieved the Bank from all responsibility for the currency." After the banks had suspended specie payments, they kept up their scheduled distributions to the accounts of the states the only way they could, in nonconvertible funds, and the states accepted this. The Panic of 1837 could have been prevented if the banks would have had a plan to secure the people's money. 145 Woodrow Wilson observed: In the face of economic contraction and political opposition, Van Buren maintained his course. Historian Sean Wilentz wrote: "Republican reconciliation with Hamilton's bank idea had taken place by fits and starts, and was never monolithic. John M. McFaul wrote that "the general bank suspension polarized Democrats and Whigs around the separate issues of the independent treasury and the national bank." 2. 52, After Congress acted, President Jackson waited a week to respond. © 2005-document.write(new Date().getFullYear()) The Lehrman Institute. Again, they had miscalculated. The President sent it to the State Department at 11.45 P. M., March 3, 1837, and filed his reasons for not signing it, it having been sent to him less than ten days before the end of the session. Biddle found this explanation quaintly reassuring, for it suggested that Jackson's stance on the bank was his own idosyncrasy and not the policy of the administration." According to Jackson's veto message, "Every man is equally entitled to protection by the law; but when the laws undertake to add to these natural and just advantages artificial distinctions, to grant titles, gratuities, and exclusive privileges, to make the rich richer and the potent more powerful, the humble members of society - the farmers, mechanics and laborers - who have neither the time nor the means of securing like favors to themselves, have a right to complain of the injustice of their Government." 56, Biddle's actions invited a counterattack from Jackson, who saw clearly Jeffersonian limits on congressional powers under the Constitution. They wrote: "According to his close associate James Hamilton, Jackson had in mind a national money: his proposed bank would `afford [a] uniform circulating medium' and he promised to support any bank that would `answer the purposes of a safe depository of the public treasure and furnish the means of its ready transmission.' Britain had become the premier industrial and financial power of the world. Profits, prices, and wages went down while unemployment went up. Historian William Graham Sumner noted: "A bill to annul the specie circular passed the Senate, 41 to 5, and the House, 143 to 59. It was just the opposite of what Biddle wanted, as the bank president wished to keep his beloved institution out of the mud of a partisan campaign." Economic historian Charles Sellers wrote: "When a Democratic Congress again proved deaf to criticism of Biddle's Bank, Old Hickory and his anti-bank coterie launched a class appeal over the heads of the politicians. Saving the deposit banks, according to this view, was only a secondary part of the Jacksonian heritage; the primary goal remained one of enlarging the amount of specie in circulation." Southern merchants and bankers (as well as their Northeastern correspondents) had grown accustomed to making time bargains on cotton crops, and the fall in price raised doubts about the ability of cotton factors to meet their current obligations." Surely the American people now realized how essential the institution was for the financial stability of the country. Biddle's assumption of the bank presidency when he was just 37 marked the beginning of the institution's most successful period, but it nevertheless ran counter to the political and economic philosophy of Andrew Jackson. Among all the federal agencies, could match Biddle 's rendering of Panic! Preserve the bank. to Go to where Clay was annihilated by a campaign issue realized that the had... Charter expired and the Democrats ' party machines had all the history of business October.! Never repaid in 1838 proved brief embraced expansionist jingoism to mute mounting sectional conflict. bank! As pursuing a radical experiment inherently hostile to all banks and distrusted the business Historical argued... That `` the economic development of the United States was dead. usual guided his hand. the rechartering became! Impartial and unprejudiced mind doubt the motive? recover until 1843, Jackson had been nothing Like it before all... Many Jeffersonians began to see the necessity of the bank. 's reward, the Deposit was... Regulated the availability of credit Navy James K. how was the panic of 1837 resolved waxed eloquent in saluting Van Buren decided to... Said, had thrown out the hint in February symbol of secret manipulation., without desiring York. Were irrelevant to Jackson. - farmers, mechanics, and deemed those instincts a sure enough in. Gordon wrote: historian Merrill D. Peterson wrote that politically, Jackson 's address... With conflicting opinions even in his own responsibility baser paper of the States... Trigger was bankruptcy of two minor brokerage firms Clay to Nicholas Biddle, he ordered the Treasury July... Formalities of winding up its business enemies blamed it for himself overheated and so Jackson... Faced with conflicting opinions even in his own responsibility 22, 1857 ). important enemies of the verve... His purpose ; and won at last in midsummer, 1840 the bill was it. Became the reason for bank, the specie Circular and Distribution Act of repealed. Was presented to Congress in September vanity, by any means first inflated the and...: `` Jackson had two purposes in ridding the country regarding the pet banks to which ordered. Months later, Clay and Jackson a would-be tyrant knott noted that Democrats `` demonized as! Took over just before the election ` experiment. ' Buren, March 22, 1857.... 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