by Ted Widmer
The Panic spread with a remarkable contagion (it was likened to the cholera epidemic that had just attacked New York) and soon overwhelmed Philadelphia, Baltimore, New Orleans, and every other commercial city. Its effects would ultimately spread around the world—to the great financial institutions of Europe, heavily invested in the explosive American economy, and to little communities in the remotest hinterland of Africa, where tiny U.S. missionary establishments were forced to shutter themselves for lack of funding. The British minister wrote that there was so much “terror” that Van Buren would soon be overthrown. One observer expected to see tumbrels and guillotines soon.1 Finally, on May 15, the president called a special session of Congress to deal with the crisis.
What exactly had caused the Panic? That question continues to challenge historians. Economic history often takes a backseat to the more interesting stories of clashing personalities, and that may be especially true in the Jacksonian period, when the personalities were unusually lively and the money issues conspicuously less so. But of course financial decisions matter a great deal to the people who are affected by them at the time. Emerson conveyed some of the desperation of those weeks in a journal entry: “Cold April; hard times; men breaking who ought not to break; banks bullied into the bolstering of desperate speculators; all the newspapers a chorus of owls.”
Van Buren’s rise to power had coincided with an orgy of growth and speculation, beginning on Wall Street but fanning out to the four corners of North America and hardly stopping there. A huge amount of wealth was accumulated through traditional means—John Jacob Astor’s fur empire in the West, and real estate tycoons grabbing up land wherever they could find it. But there was also a rage for novelty—new inventions, new clothing styles, new toys for the leisure time that Americans were discovering for the first time. Technological advances in printing allowed newspapers to flourish as never before, intensifying America’s zeal for political gossip, fashion, and whatever bits of knowledge might be turned to competitive advantage in the brawling marketplace. The great Charles River Bridge case, argued before the Supreme Court throughout the 1830s, was resolved in 1837, liberating the corporation from its earlier constricting definition and dealing another Jacksonian blow to special privilege.
Perhaps nothing symbolized this unprecedented churning economy better than the railroad itself, the Internet of its day—fantastically high-tech, symbolizing speed, connectedness, and information. Tracks were laid as fast and as far as it was humanly possible to do, and for every railroad successfully built in the 1830s, there were a dozen more planned. It is difficult, in a short space, to encapsulate all that the railroad conjured in Van Buren’s time, but the great range of emotions expressed on the subject, from astonishment to alienation, accurately conveys the size of the imaginative leap taking place. Emerson called the train whistle the voice of the nineteenth century. Hawthorne, whose first book came out in 1837, captured its excitement and dissonance:
But hark! There is the whistle of the locomotive—the long shriek, harsh, above all other harshness, for the space of a mile cannot mollify it into harmony. It tells a story of busy men, citizens, from the hot street, who have come to spend a day in a country village, men of business; in short of all unquietness; and no wonder that it gives such a startling shriek, since it brings the noisy world into the midst of our slumberous peace.
To put it bluntly, people who had followed certain kinds of agrarian folkways for a millennium, in America and the Europe of their ancestors, were now feeling, for the first time, the mighty effects of unrestrained capitalism. Iron, steel, cloth, leather, and shipbuilding were especially strong—and all were located in the surging North. In 1835, New York City was by far the first commercial city in the United States—and it is a little astonishing to know that it was second in the world after London.
Like all great shifts, this had good and bad effects. Americans reveled in their new wealth, and much of it trickled down to ordinary families, but there was also a disturbing sense that something precious in the simple republican past was being thrown away, or worse, sold. As more and more goods moved from warehouses to stores to parlors around the nation, Americans could be counted on to devise tacky slogans to sell them. In the 1830s, Independence Hall in Philadelphia became a clothing store, with a sign that read, WE HOLD THESE TRUTHS TO BE SELF-EVIDENT, THAT ALL MEN ARE CREATED EQUAL—THAT THEY CAN OBTAIN CLOTHING AS RICH, AS CHEAP AND AS DURABLE AS AT ANY OTHER ESTABLISHMENT IN THE NATION.
Tocqueville noted our stunning acquisitiveness, and, like so much of what he wrote, his words ring true today. Leave it to a Frenchman to find the existential dread that still haunts a nation of Kmart shoppers:
A native of the United States clings to this world’s goods as if he were certain never to die; and he is so hasty in grasping at all within his reach that one would suppose he was constantly afraid of not living long enough to enjoy them. He clutches everything, he holds nothing fast, but soon loosens his grip to pursue fresh gratifications. In the United States a man builds a house in which to spend his old age, and he sells it before the roof is on; he plants a garden and lets it just as the trees are coming into bearing; he brings a field into tillage and leave no other men to gather the crops; he embraces a profession and gives it up; he settles in a place, which he soon afterwards leaves to carry his changeable longings elsewhere. If his private affairs leave him any leisure, he instantly plunges into the vortex of politics; and if at the end of a year of unremitting labor he finds he has a few days’ vacation, his eager curiosity whirls him over the vast extent of the United States, and he will travel fifteen hundred miles in a few days to shake off his unhappiness. Death at last overtakes him, but it is before he is weary of his bootless chase of that complete felicity which forever escapes him.
No one could exactly arrest this commercial zeal, but the climate of speculation raised hackles inside a Democratic Party that still clung to a Jeffersonian creed—a creed that was increasingly irrelevant to an economy that was obviously Hamiltonian, and then some. Many Democrats, especially from the West, complained about Wall Street and the invisible money changers who bought and sold their land before anyone had a chance to settle it. Western land sales rose from 1.9 million acres in 1830 to 12.5 million acres in 1837. To finance these sales, a huge number of shaky banks and shadowy middlemen came into existence (347 banks were chartered between 1830 and 1837 alone). As with the 1920s and 1990s, there was astonishment at how much wealth could be created through a few simple maneuvers on paper. Van Buren’s lieutenant, Silas Wright, had a nightmare that the Bank had literally turned into a monster. Jackson’s farewell address, the greatest between Washington’s and Eisenhower’s, pulled no punches as it attacked “the money power” in American life.
But the Democratic response was inconsistent. Predictably, Jackson agreed with the prevailing Western feeling that there was too much loose money in the economy and that speculators should be brought down a notch. Hence the infamous Specie Circular, a presidential directive in 1836 that forced all land to be purchased in hard currency, and Jackson’s bitter war against Nicholas Biddle and the Bank of the United States (which may have restrained irresponsible speculation, despite Jackson’s arguments). But many other Democrats felt uncomfortable with Jackson’s simple hard-money remedies and worried about the constriction of credit that would follow. Unlike him, they felt that banks—especially state banks—were useful if they did their jobs properly, and they saw no need to impose eighteenth-century solutions on a booming nineteenth-century economy. To add to the confusion, the Democrats pursued a number of policies that fueled the very speculation they disliked, including the conversion of a federal deficit into a $28 million surplus, all of which was sent back directly to the states.
To sum up the situation, then, Van Buren inherited a superheated economy that was completely unregulated in some ways and draconically controlled in others. Even among his closest supporters, there was deep division over what the government should
do to stimulate or suppress growth. The Whig opposition, on the other hand, felt cynicism toward anyone who claimed to be the heir of Jackson, and argued that the destruction of the Bank had eliminated what might have been a useful instrument of fiscal control (that point is still disputed by historians). There was too much loose credit and inflation in an economy that had become badly overextended through greed and speculation, and an unfavorable balance of trade with England deepened instability. All this added up to a tinderbox waiting for a match. The match was lit when a number of problems in England and Ireland forced a demand for payments from American bankers, who were unable to find the money to fulfill their obligations. To make matters worse, the price of cotton fell, and other crop failures further reduced the shrinking amount of credit available on Wall Street. Van Buren never knew what hit him.
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Once confidence is lost, of course, it is nearly impossible to restore. The Congressional Globe recorded that “distrust seized upon the public mind like fire in the great prairies.” Across the nation, a dark shroud now fell across what had seemed like a limitless future. With no credit available, no business could be started. Bankruptcies were recorded in huge numbers. Massive unemployment resulted (twenty thousand out of work in New York City), and almshouses had to turn away hundreds of deserving families. Ships listed idly in their berths. Breadwinners became beggars. Many died of starvation. Herman Melville’s older brother Gansevoort lost his business, leaving the fatherless family penniless. Herman’s decision to go to sea was a direct result of his poverty, so the cosmic rage of Moby-Dick is also traceable to the Panic of 1837.
This economic disaster soon became a political disaster as well. It took no time at all for the Whigs to blame President Van Buren, of course. He was guilty by association with Jackson, and he was also vulnerable to the charge that the government did little to relieve popular misery. A Whig paper pointed out the melancholy truth, the awful truth, that the administration did nothing to relieve the distress.” Things got so bad that Van Buren began drinking a potion of soot and water to calm his dyspepsia.
But there was only so much Van Buren could do. It was hard to know where to begin—like the cholera epidemic, the Panic seemed to have no beginning, middle, or end. Worse, he had no tools to work with, and, to some extent, that was his own doing. Since he had entered politics, Van Buren had called for less government and the dismantling of Hamilton’s financial apparatus. In fact, he had personally supervised much of it. But now, with a sudden thud, he had reached the limits of Jeffersonian doctrine. What could he do to restore credit? How could he make money appear where there was none? What agency could he ask to feed the hungry and clothe the poor?
In this unenviable position, he did what most of us would have done—he arranged for a Panic session. Specifically, he called for Congress to meet in September to take special measures to alleviate the crisis. It was the first special session ever called that did not address a military crisis. All summer, he consulted with leading Democrats, which did not exactly solve matters, since they were badly divided. Some, like Jackson (still peppering Van Buren with angry letters about the Bank), wanted the government to maintain hard money and keep its distance from the financial world. Other influential leaders, especially in the crucial states of Virginia and New York, wanted him to ease credit with paper money and support state banks.
When Congress reassembled, Van Buren was ready. As usual, he had a little something for everybody. His message, delivered on September 5, was an impressive document, clear and concise. For the hard-money people, he offered to postpone the final distribution of the surplus and proposed that an independent Treasury be created for federal deposits—separate from the banks. This was a momentous step, one that had been discussed in the most anti-bank fringes of the Democracy, but never put into motion. For bankers, he offered to delay federal lawsuits against those that had suspended payments and urged that Treasury notes be created to get more money into circulation. All in all, it was an attractive proposal—perhaps a little short of what the Washington Globe called it (“the boldest and highest stand ever taken by a chief magistrate … the second declaration of independence”), but eminently practical.
Most of Van Buren’s program sailed through Congress without significant opposition. But the most important proposal, the creation of an independent Treasury, caused consternation and brought out the underlying anxieties about money policy that had already released so much hot air into the House and Senate. Van Buren must have been gratified to see Calhoun come back into the fold and support his plan, but the speeches given by Calhoun and his fellow South Carolinians revived the specter of nullification and did more harm than good. After narrowly passing the Senate, the independent Treasury was defeated in the House.
Nor did Van Buren’s problems end there. Bad luck always seems to attract more bad luck, and the Panic weakened him in two particular ways. It brought the Whigs exactly what they had been lacking—a unifying idea (that the Democrats had ruined the economy). And it chipped away at the adhesion that was so important to the Democratic cause. When Henry Clay came to a White House reception on New Year’s Day, 1838, he complimented the president on having so many friends around him—to which Van Buren replied, sardonically, “The weather is very fine.” The Panic exposed a fact that was not exactly Van Buren’s fault, but which hurt him anyway—that try as he might, he was no Andrew Jackson when it came to inspiring people and uniting Americans from different backgrounds. Nearly every one of his steps brought criticism from one side or the other of the party he had founded (when you’re on the left to begin with, there’s always someone a little further to the left to make your life miserable).
Even in New York, he was hurting. A number of new political groups had sprung up in New York City in the 1830s, including the legendary Locofocos, a group of radicals who hated special privilege and supported hard money, the Bank war, and equal rights (their name came from a kind of match they used to illuminate a meeting one night when their opponents tried to keep them in darkness). Their ideas would flavor some of Van Buren’s proposals, though he was never entirely one of them. At the same time, the Albany Regency upstate was worried about the anti-bank tenor of Van Buren’s proposals. Even Van Buren’s old friend Washington Irving felt “a strong distaste for some of those loco-foco luminaries who have of late been urging strong and sweeping measures.” Unsurprisingly, the Panic weighed heavily on voters in the fall of 1837, and they sent the divided Democracy a dour message by voting heavily for the rising Whigs. The victors taunted Van Buren on election night by shooting off cannons near the White House. The Democrats would claw back over Van Buren’s tenure, but the Panic had balanced the scales. A revealing encounter between presidents occurred in September 1837, when John Quincy Adams visited the White House to see how his old adversary and occasional friend was doing. Adams was impressed by his “composure and tranquility,” but recorded Van Buren’s heartfelt description of the “cares and afflictions” of the presidency and his wonder at “how universal the delusion was that anyone could be happy in it.” One suspects that he was telling the truth.
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No depression lasts forever, of course, and over his tenure as president, Van Buren would see the economic picture improve in a number of ways. By the spring of 1839, prices had almost regained their 1837 levels. But a second, smaller depression in the fall of 1839 sent the markets tumbling again and underscored how powerless Van Buren was to fix a financial system that had broken, with no repair manual inside Jackson’s desk. The Independent Treasury bill finally passed in 1840, but it did not represent the great breakthrough that Van Buren had hoped for—and on which he had spent too much political capital. For all of Van Buren’s political skill, his wizardry did not extend to Wall Street. It was not until his ideological descendant, Franklin Roosevelt, entered the White House that a modern system of regulation would bring the same economic balance that the founders had created in the political realm when th
ey delicately calibrated every check and balance in the Constitution.
Every cloud has a silver lining, and a few aspects of the great Panic of 1837 are worth mentioning for historical interest, even if they did not exactly alleviate the nation’s suffering or reverse Van Buren’s plummeting fortunes. Sometimes a crisis can crystallize a feeling that is already in the air, and the Panic emphasized to Americans that, like Rip Van Winkle, they no longer lived in the familiar nation they had grown up with. In place of the sleepy agricultural republic that Jefferson had invented stood an economic colossus whose coughs and throat clearings sent shudders through counting-houses around the world. Van Buren had reorganized politics, but almost every other category of life was changing as quickly.
Another bright spot was how well Van Buren handled the press. In this regard, he was truly visionary. As he was preparing to inherit the presidency, Van Buren steered some money to a young Irish-American journalist, John Louis O’Sullivan, seeking to start an ambitious new magazine. The United States Magazine and Democratic Review became the liveliest monthly of its day, mixing Democratic political commentary with the freshest cultural writing available in the United States (Hawthorne published his stories there, as did a very young Walter Whitman, not yet Walt). Throughout the Van Buren era, if it can be called such, the Democratic Review took the lead in defending the new president, and defending him well. In issue after issue, O’Sullivan offered an eloquent defense of Van Buren and the Democracy, and did what partisan journals do best: shifted blame for the Panic to the other side (in this case, the late Bank of the United States).
