Mission Accomplished? All too often presidents, prematurely declare victory. In 1838, Martin Van Buren prematurely declared victory over the economic collapse caused by the Panic of 1837.
In 1837, a financial crisis swept across the United States fueled by unregulated banks giving out too many loans and printing too much paper money known as species. That May, when banks in New York city ran out of gold and silver, they immediately suspended specie payments resulting in a run on the bank leading to an economic collapse. What originally started in the South in Natchez Mississippi on May 4 and in Montgomery Alabama on May 9 had now reached the nation's financial capital. By the end of May almost every bank in the country had suspended species payments and "The Panic of 1837" was pushing the United States into a major depression that would last until the mid-1840s.
In 1838, the country was experiencing a brief recovery, and President Martin Van Buren was ready to declare victory prematurely. In his 1838 State of the Union address, he proudly announced that the economy was "reviving with additional vigor" and by fulfilling obligations, confidence had been restored both at home and abroad. Moreover, Van Buren announced that by taking bold actions, "specie payments in our great commercial capital" had resumed. Van Buren shared with Congress the actions that he took.
- He used executive action to remove the government deposit from state banks that had suspended specie payments.
- He distributed funds by leaving several millions at long credit in one region and postponing the payment of bonds in other regions.
- He issued additional Treasury notes to enable the Government to meet its needs.
- He steered government business away from banks which refused to redeem them with specie.
- He curried the favor of the banks who gave him support and the cooperation of a large portion of the community.
Apparently, because of these actions on April 16, 1838, two prominent Boston banks resumed specie payments and by the end of May, banks in New England and the commercial capital or New York resumed payments. Most other banks followed suit later that fall.
Here is the excerpt from President Martin Van Buren's second State of the Union Address where he announced that specie payments had resumed.
"When we call to mind the recent and extreme embarrassments produced by excessive issues of bank paper, aggravated by the unforeseen withdrawal of much foreign capital and the inevitable derangement arising from the distribution of the surplus revenue among the States as required by Congress, and consider the heavy expenses incurred by the removal of Indian tribes, by the military operations in Florida, and on account of the unusually large appropriations made at the last two annual sessions of Congress for other objects, we have striking evidence in the present efficient state of our finances of the abundant resources of the country to fulfill all its obligations. Nor is it less gratifying to find that the general business of the community, deeply affected as it has been, is reviving with additional vigor, chastened by the lessons of the past and animated by the hopes of the future. By the curtailment of paper issues, by curbing the sanguine and adventurous spirit of speculation, and by the honorable application of all available means to the fulfillment of obligations, confidence has been restored both at home and abroad, and ease and facility secured to all the operations of trade.
The agency of the Government in producing these results has been as efficient as its powers and means permitted. By withholding from the States the deposit of the fourth installment, and leaving several millions at long credits with the banks, principally in one section of the country, and more immediately beneficial to it, and at the same time aiding the banks and commercial communities in other sections by postponing the payment of bonds for duties to the amount of between four and five millions of dollars; by an issue of Treasury notes as a means to enable the Government to meet the consequences of their indulgences, but affording at the same time facilities for remittance and exchange; and by steadily declining to employ as general depositories of the public revenues, or receive the notes of, all banks which refused to redeem them with specie--by these measures, aided by the favorable action of some of the banks and by the support and cooperation of a large portion of the community, we have witnessed an early resumption of specie payments in our great commercial capital, promptly followed in almost every part of the United States. This result has been alike salutary to the true interests of agriculture, commerce, and manufactures; to public morals, respect for the laws, and that confidence between man and man which is so essential in all our social relations."
Resources
"Second Annual Message." Second Annual Message | The American Presidency Project, 3 Dec. 1838, https://www.presidency.ucsb.edu/documents/second-annual-message-4
The Suffolk Bank and the Panic of 1837, Quarterly Review 2421 | Spring 2000, Arthur J. Rolnick, 3 Dec. 1838, https://www.minneapolisfed.org/research/quarterly-review/the-suffolk-bank-and-the-panic-of-1837
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