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CHAPTER XXVII

VAN BUREN'S ADMINISTRATION: THE PANIC OF 1837

1837-1841

271. Election of President Van Buren. Had he wished it, Jackson could have been reëlected in 1836; but he preferred to follow the now well-established tradition that our

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Presidents should remain in office no more than two terms. He was succeeded in 1837 by Martin Van Buren of New York.1

272. A period of reckless speculation. From quite early

1 Van Buren was born in a village in the State of New York in 1782, and died there in 1862. He was a lawyer by profession. He became a member of the United States Senate in 1821 and next served as governor of New York. He was for a time Secretary of State in Jackson's Cabinet, then minister to Great Britain, and in 1832 became Vice-President.

days in the history of our country there had been a widespread demand from the people for paper money. During the Revolutionary War each State had issued so much of this, and its effect on business had been so disastrous,1 that the Constitution forbade the States to issue any more. But this provision was soon evaded. The States granted charters to numerous small banks and these printed and circulated large quantities of bank bills. The competition among the banks was very great, and they were so eager to lend their bills that borrowers could obtain them with but little security.

2

The result was most unfortunate. So long as money could be got easily, thousands of persons went into all manner of reckless speculations. One of the favorite methods of speculation was to buy lands in the fast-growing West, with the hope of selling them at high prices. As usual when money seems to be plenty and people are spending it freely, prices rose rapidly. This was especially bad for people living on salaries or wages that increased slowly or not at all, for with the increased cost of everything they found it hard to get along.

273. The panic of 1837. President Van Buren felt very uneasy over this situation. A large part of the receipts of the Federal treasury now came in the form of bills from the State banks, and many of these were worth much less than the number of dollars printed on them. The President feared that the Government would suffer great loss if the banks failed, as many wise business men prophesied that they soon would do. Moreover, he wanted to discourage the use among

1 See page 197.

2 In 1831 the sales of Western public lands brought in only $2,300,000 to the Federal Government; in 1836 they amounted to $24,900,000.

Ordinarily an acre is cut up into five house lots; but some of the speculators of 1836-37, who had paid to the Government only $1.25 an acre, made their lots as small as the tenth of an acre; and these were sold for from $10 to $20 each. The maps of this land often showed courthouses, city halls, churches, schools, factories, and public parks that existed only in the imagination of some dishonest speculator, for not a tree had been cut or a prairie sod turned in that locality. Some of the so-called "cities" were situated in great swamps and other impossible places. In Charles Dickens's novel, Martin Chuzzlewit, the hero visits "Eden," one of these much-advertised Western cities, and finds it to consist of a score of wretched log cabins, half of them empty, situated in a malarial swamp.

the people of so much paper money. Accordingly he issued an order, called the "specie circular," that the Government would henceforth receive only specie-gold and silver-in payment for Federal lands. The circular at once had two important effects:

(a) It alarmed the bankers. If, after this, land buyers would not take bank bills, but insisted on drawing only specie for their pay

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ments to the Government, the banks would have little coin left to loan to anybody else or to redeem their bills. Therefore, many banks refused to lend any more specie to land speculators; some banks, indeed, would pay out no more specie to anybody.1

From a contemporary lithograph

WALL STREET, NEW YORK, IN 1837

The building at the right is the Custom House. Trinity Church is seen at the end of the street

(b) Cautious people felt that if the bank bills were not good enough for the Government, they were not good enough for them. They therefore would not accept for their property or for their labor any such bills at the full value printed on their face; as for the bills of weak banks, they would not take them at all. Much of this paper money, therefore, became almost worthless.

1 There was another source of trouble. The Federal Government was now out of debt, but it still collected a great deal of revenue at custom-houses, under the high tariff laws, and from the rapid sale of public lands. Thus it had more money than it could use. Congress therefore in 1837 loaned to the several States nearly $30,000,000 of the accumulated surplus. The various banks throughout the country, in which the Government's surplus was deposited, had suddenly to surrender this vast amount and pay it out in specie to the States, which would not accept bank bills. These banks had been badly enough hurt by the specie circular, but to have it soon followed up by this new order, which took from them about all of the coin they had left, was more than most of them could stand.

It now seemed to men engaged in commerce or manufacturing as though the country were going to pieces. They had traded their goods for bank notes that now nobody seemed to want, even at a great depreciation in value; they owed large sums of money, but found it almost impossible to get loans from the banks to pay their creditors. Yet they must have money with which to meet their expenses and pay their employees. In order to raise means for this purpose thousands of men began, all at the same time, to offer for sale their houses, stores, factories, bonds, and other property. But whenever there are more goods offered for sale than the people want, prices are sure to drop suddenly. That is what then happened. Nearly everybody was eager to sell, and very few wished to buy. Banks, fearful that depositors would draw out all their money, now closed their doors, and refused to pay even what they owed to the Government; factories, mines, and stores shut down because there was no market for their wares; and tens of thousands of wage-earners were suddenly thrown out of work, with no money to purchase food and clothing.1 Consternation seized the American people. No man had confidence in his neighbor, for credit was now entirely destroyed. The day of reckless speculation was followed by a night of black despair. The panic of 1837 will long be remembered in our history. It was several years before business men began again to have courage to enter upon new enterprises, and before prosperity returned to the United States. 2

1 During the height of the speculation, or "boom," described in paragraph 272, some of the States had been engaged in building railways, canals, and highways at public expense, and for this purpose had borrowed enormous sums of money in Europe, and especially in England nearly $200,000,000 all told. 2 Up to this time the Federal Government had kept its money in banks, and it frequently lost much by failures of these institutions. In 1840, however, Congress established a national treasury at Washington, with subtreasuries or branches in a number of other cities. The Government itself does not, therefore, now suffer loss when the banks meet with disaster.

QUESTIONS AND SUGGESTIONS

1. Summarize the chief causes that led to the panic of 1837.

2. Contrast "speculation" and "investment."

3. Meaning of the term "currency"; "specie payment." Read carefully the statements on a one-dollar or a five-dollar bill. Discuss the meaning of paper currency. How do our bills differ from the paper currency issued by the State banks previous to the panic of 1837?

4. What did the Government learn from the panic of 1837?
5. What security have depositors against bank failures to-day?
6. Make an outline of the chapter.

COMPOSITION SUBJECTS

I. Look at the view of Wall Street, New York, in 1837 (page 283); compare this with the pictures on pages 96, 97, and 438. In view of the growth of the city since 1664, write a prophecy as to its extent, population, and conditions of life in the year 2000.

2. A man buys land at high prices in the boom of 1836 and is ruined by the crash of 1837. After years of poverty he strikes oil in his land and makes a fortune. Introduce the characters and tell the story.

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