Because of the invention of the telegraph by Samuel F. Morse in 1844, the Panic of 1857 was the first financial crisis to spread rapidly throughout the United States.
[3] Beginning in September 1857, the financial downturn did not last long, but a proper recovery was not seen until the onset of the American Civil War in 1861.
[4] The sinking of SS Central America in September 1857 contributed to the panic, since New York City banks were waiting on a much-needed shipment of gold that was being transported by the ship.
Many of the companies never made it past the stage of a paper railroad and never owned the physical assets necessary to run a real one.
[12] On the morning of August 24, 1857, the president of Ohio Life Insurance and Trust Company announced that its New York branch had suspended payments.
[15] The banks connected to Ohio Life were reimbursed and "avoided suspending convertibility by credibly coinsuring one another against runs".
[17] By the spring of 1858, "commercial credit had dried up, forcing already debt-ridden merchants of the West to curtail new purchases of inventory".
The Illinois Central; Erie; Pittsburgh, Fort Wayne and Chicago; and Reading Railroad lines were all forced to shut down by the financial downturn.
[20] In addition to the decreasing value of railroad securities, farmers began to default on payments on their mortgaged lands in the West, which put even more financial pressure on banks.
[21]As a result of such a decrease of prices, land sales declined dramatically and westward expansion essentially halted until the Panic ended.
President James Buchanan announced that the paper-money system seemed to be the root cause of the Panic and then decided to withdraw the usage of all bank notes under twenty dollars.
[18] In his State of the Union message December 7, 1857, Buchanan said: Thanks to the independent treasury, the government has not suspended [specie] payments, as it was compelled to do by the failure of the banks in 1837.
[23]He revealed the new strategy of "reform not relief" and expressed his feeling that "the government sympathized but could do nothing to alleviate the suffering individuals.
[25] According to Kathryn Teresa Long, the religious revival of 1857–1858 led by Jeremiah Lanphier began among New York City businessmen in the early months of the Panic.
[27][page needed] News of the crisis in America caused runs on the banks in Glasgow, Liverpool, and London.