ID: Panic of 1819 ## When: 1819 (economic downturn lasting until about 1821)
Who:
- Affected: Farmers, land speculators, banks, and average citizens across the United States.
- Key Figures: President James Monroe (his policies indirectly contributed to the Panic)
What:
The first major financial crisis in the United States, characterized by widespread bank failures, foreclosures, unemployment, and a sharp economic downturn.
- Causes:
- Overspeculation in Western land fueled by easy credit from state banks.
- A decline in European demand for American agricultural goods (especially cotton) after the Napoleonic Wars ended.
- The Second Bank of the United States tightened credit policies to control inflation, leading to loan defaults.
Impact? Why Significant?:
- Exposed weaknesses in the banking system: Highlighted the dangers of unregulated state banks and unsound lending practices.
- Fueled resentment against the national bank: Many blamed the Second Bank of the United States for its role in the crisis, strengthening opposition to a strong national bank. This sentiment would later contribute to Andrew Jackson’s successful campaign against the Bank.
- Contributed to sectionalism : The Panic hit different regions unevenly, with the South experiencing a more severe and prolonged downturn. This intensified sectional tensions over economic issues like tariffs and internal improvements.
- Marked a shift in American economic life: The Panic marked a transition from a period of rapid expansion and speculation to one of greater economic uncertainty and caution.