Martin Van Buren: Domestic Affairs: Economic Panic of 1837

The inauguration of Martin Van Buren in 1837, was less a celebration of the incoming president than a tribute to the outgoing one, Andrew Jackson. The new administration retained Jackson's cabinet, and Van Buren pledged to "tread generally in the footsteps of President Jackson."

There was a severe downturn in the American economy that began in 1836, and was Van Buren’s primary concern during his presidency. Historians have identified three main reasons for the depression that wrecked the economy during the late 1930s.

  1. The English banks stopped pumping money into the American economy, due to their own financial troubles at home. This was a big blow as the funds had financed much of the nation’s economic growth over the preceding two decades.
  2. The U.S Banks began to call in loans, after British banks cut their money supply.
  3. President Andrew Jackson’s “hard” money policies, especially the 1836 Specie Circular that aimed to stabilize what Jacksonians saw as an-out-of-control economy by requiring that all purchases of federal land be made with precious metal rather than paper money.

Two months into Van Buren’s presidency, the roof fell in. On May 10, 1837, some important state banks in New York, running out of hard currency reserves, refused to convert paper money into gold or silver. Other financial institutions quickly followed suit. This financial crisis would become known as the Panic of 1837. Many Americans went unemployed and others began to go hungry.

Van Buren responded by following a course of action consistent with his Jacksonian belief in the limited powers of the federal government and a suspicion of paper money and easy credit. The President announced a proposal to establish an independent treasury system, in which the federal government would deposit its funds in a series of subtreasuries. Van Buren hoped that an independent treasury would stabilize the American financial system.

Congressional resistance to the independent treasury proposal proved difficult to overcome. Not until the summer of 1840 did Congress pass an independent treasury bill. By then, despite a recovery in 1839, the nation's economy had been mired in a depression for nearly four years; the problems would continue into the early 1840s. More important for Van Buren's immediate future, the depression would be a major issue in the 1840 presidential election.

Source: Martin Van Buren: Domestic Affairs: Economic Panic of 1837
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