Panic of 1857
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.
