Which of the following was a primary cause of the panic of 1837?

• Source Set
• Additional Resources
• Teaching Guide

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  A letter from the cashier at Mohawk Bank in Schenectady, New York to William Hayes about a deposit to his account, 1834.

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  A five-dollar bill issued by Kirtland Safety Society Bank of Kirtland, Ohio, 1837.

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  A revolving table tool designed to calculate interest rates, 1839.

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  An excerpt from Sylvester's Bank Note and Exchange Manual, 1833

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  Excerpts from The Pocket Cambist, a guide for exchanging currency between countries, 1836.

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  A political cartoon representing negative public opinion and political opposition to the agenda of President Andrew Jackson, circa 1832.

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  A political cartoon issued in July 1837 that depicts a New York City street scene demonstrating the impact of the Panic of 1837.

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  An excerpt from an 1834 pamphlet with arguments from New York businessmen about effects of removing federal money from the national bank.

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  An 1841 token alluding to “hard times,” or the Panic of 1837, and targeting the policies of President Van Buren.

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  A receipt for the sale of twenty four bales of cotton sold on behalf of Aaron Spell, March 25, 1836.

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  A receipt for the sale of thirty bales of cotton sold on behalf of Aaron Spell, February 9, 1840.

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  A court document recording the settlement of a debt owed by Lancaster McNay through the transfer of five enslaved women and girls, 1839.

Panic of 1837: the economic situation that resulted from reckless speculation that led to bank failures and dissatisfactoin with the use of state banks as depositories for public funds

speculation: purchasing risky investments that could possibly result in large profits, but have an even greater possibility of resulting in loss

Source 1:

          In May of 1837, every bank in New York City stopped using money in specie (gold and silver coinage). The Panic was followed by a five-year depression, with the failure of banks and record high unemployment levels.

        Causes of the Panic of 1837 include the economic policies of President Andrew Jackson who ordered the Specie Circular, which required the payments for government lands to be paid in gold or silver. Jackson also refused to renew the charter of Second Bank of the United States, resulting in the withdrawal of government funds from the National Bank.  Of course, the initial government intervention in the market had inadvertently been part of the cause of the problem. Jacksonian Democrats blamed bank irresponsibility, both in funding excessive risky speculation and by introducing paper money inflation. This was caused by banks issuing excessive paper money (unbacked by gold or silver), leading to inflation (or an increase in the general price of goods, because there is so much money available to be spent).

Source 2:

         The financial panic of 1837 was a result of the unbounded speculation and the executive experiments on the country’s finances, done during Jackson’s presidency. When Jackson became President, in 1829, he very quickly became an enemy of the National Bank, which he declared to be corrupt, dangerous, and unconstitutional. His first angry measure was to remove from it the government deposits, which he distributed among the State banks. This measure produced a storm of opposition, greatly disturbed the conditions of business, and caused general distress in the industrial community. But Jackson was stubborn in his opinions, and his hostility to the bank was next displayed in a veto of the bill to renew its charter, which would expire on March 3, 1836. The State banks took advantage of this condition of affairs to expand greatly their discounts, new banks came rapidly into existence, and the banking facilities were enormously increased. 
        A series of wild speculations occurred at this time, and people used paper money to make their transactions. To check these operations a "specie circular" was issued, which required payment for government lands to be made in gold and silver. The effect of this series of executive actions, and of the fever of speculation which existed, was disastrous. The gold and silver which was expected to flow into the treasury in payment for public lands failed to appear. The banks could not back up their money spent with gold and silver, so they called in their loans. Property was everywhere sacrificed, and prices generally declined. This resulted in the financial ruin of thousands.

Source 3:

Pro-Bank men Henry Clay, Daniel Webster, and John Calhoun are consulting on the grave illness that is causing Mother Bank to cough up her deposits. Andrew Jackson is looking on with pleasure. This is a political commentary on the impact of Jackson's 1833 order for the withdrawal of federal funds from the Second Bank of the United States and their distribution among state banks.

This political cartoon criticizes President Martin Van Buren for continuing the economic policies of former president Andrew Jackson during the Panic of 1837. Van Buren is portrayed as a king about to be crowned by a demon. He is standing on several documents including the Specie Circular and bank petitions to revoke the circular. His cloak is trimmed with "shinplasters," the slang term for the often worthless bank notes issued during the 1837 crisis.

The vfinancial panic induced by a reduction in the flow of British capital investment triggered an extended economic depression, lasting from 1837 to 1843. The Whig Party made its greatest political gains campaigning for more active government programs to stimulate the economy. This satirical cartoon balmes the Democratic Party for the Panic of 1837 and subsequent depression. 

An example of the various state banknotes created after the demise of the National Bank, this banknote from Omaha, Nebraska reflects the hodgepodge of state-chartered banks without federal regulation or uniformity in currency. Had you lived between 1836 and 1866, during the Free Banking Era, your wallet would have been filled with State Bank notes of different sizes, shapes, and designs.