CRISIS OF 1837
On March 4, 1837, Jackson and Van Buren rode together from the White
House to the Capitol in a "beautiful phaëton" made from the timber of
the old frigate Constitution, the gift to the general from the Democrats
of New York city. He was the third and last president who has, after
serving through his term, left office amid the same enthusiasm which
attended him when he entered it, and to whom the surrender of place has
not been full of those pangs which attend sudden loss of power, and of
which the certain anticipation ought to moderate ambition in a country
so rarely permitting a long and continuous public career. Washington,
amid an almost unanimous love and reverence, left a station of which he
was unaffectedly weary; and he was greater out of office than in it.
Jefferson and Jackson remained really powerful characters. Neither at
Monticello nor at the Hermitage, after their masters had returned, was
there any lack of the incense of sincere popular flattery or of the
appeals for the exercise of admitted and enormous influence, in which
lies much of the unspeakable fascination of a great public station.
Leaving the White House under a still and brilliant sky, the retiring
and incoming rulers had such a popular and military attendance as
without much order or splendor has usually gone up Capitol Hill with our
presidents. Van Buren's inaugural speech was heard, it is said, by
nearly twenty thousand persons; for he read it with remarkable
distinctness and in a quiet air, from the historic eastern portico. He
returned from the inauguration to his private residence; and with a fine
deference insisted upon Jackson remaining in the White House until his
departure, a few days later, for Tennessee. Van Buren in his own
carriage took Jackson to the terminus of the new railway upon which the
journey home was to begin. He bade the old man a most affectionate
farewell, and promised to visit him at the Hermitage in the summer.
The new cabinet, with a single exception, was the same as Jackson's:
John Forsyth of Georgia, secretary of state; Levi Woodbury of New
Hampshire, secretary of the treasury; Mahlon Dickerson of New Jersey,
secretary of the navy; Kendall, postmaster-general; and Butler,
attorney-general. Joel R. Poinsett, a strong union man among the
nullifiers of South Carolina, became secretary of war. Cass had left
this place in 1836 to be minister to France, and Butler had since
temporarily filled it, as well as his own post of attorney-general. The
cabinet had indeed been largely Van Buren's, two years and more before
he was president.
Van Buren's inaugural address began again with the favorite touch of
humility, but it now had an agreeable dignity. He was, he said, the
first president born after the Revolution; he belonged to a later age
than his illustrious predecessors. Nor ought he to expect his countrymen
to weigh his actions with the same kind and partial hand which they had
used towards worthies of Revolutionary times. But he piously looked for
the sustaining support of Providence, and the kindness of a people who
had never yet deserted a public servant honestly laboring in their
cause. There was the usual congratulation upon American institutions and
history. We were, he said,--and the boast though not so delightful to
the taste of a later time was perfectly true,--without a parallel
throughout the world "in all the attributes of a great, happy, and
flourishing people." Though we restrained government to the "sole
legitimate end of political institutions," we reached the Benthamite
"greatest happiness of the greatest number," and presented "an aggregate
of human prosperity surely not elsewhere to be found." We must, by
observing the limitations of government, perpetuate a condition of
things so singularly happy. Popular government, whose failure had fifty
years ago been boldly predicted, had now been found "wanting in no
element of endurance or strength." His policy should be "a strict
adherence to the letter and spirit of the constitution ... viewing it as
limited to national objects, regarding it as leaving to the people and
the States all power not explicitly parted with." Upon one question he
spoke precisely. For the first time slavery loomed up in the inaugural
of an American president. It seemed, however, at once to disappear from
politics in the practically unanimous condemnation of the abolition
agitation, an agitation which, though carried on for the noblest
purposes, seemed--for such is the march of human rights--insane and
iniquitous to most patriotic and intelligent citizens. Van Buren quoted
the explicit declaration made by him before the election against the
abolition of slavery in the District of Columbia without the consent of
the slave States, and against "the slightest interference with it in the
States where it exists." Not a word was said of the extension of slavery
in the Territories. That question still slept under the potion of the
Missouri Compromise, to wake with the acquisition of Texas. In Van
Buren's declaration there was nothing in the slightest degree
inconsistent even with the Republican platforms of 1856 and 1860.
The inaugural concluded with a fine tribute to Jackson. "I know," Van
Buren said, "that I cannot expect to perform the arduous task with equal
ability and success. But united as I have been in his counsels, a daily
witness of his exclusive and unsurpassed devotion to his country's
welfare, agreeing with him in sentiments which his countrymen have
warmly supported, and permitted to partake largely of his confidence, I
may hope that somewhat of the same cheering approbation will be found to
attend upon my path. For him I but express, with my own, the wishes of
all, that he may yet long live to enjoy the brilliant evening of his
well-spent life."
The lucid optimism of the speech was in perfect temper with this one of
those shining and mellow days, which even March now and then brings to
Washington. But there was latent in the atmosphere a storm, carrying
with it a furious and complete devastation. In the month before the
inauguration, Benton, upon whom Van Buren was pressing a seat in the
cabinet, told the President-elect that they were on the eve of an
explosion of the paper-money system. But the latter offended Benton by
saying: "Your friends think you a little exalted in the head on the
subject." And doubtless the prophecies of the Bank opponents had been
somewhat discredited by the delay of the disaster which was to justify
their denunciations. The profoundly thrilling and hidden delight which
comes with the first taste of supreme power, even to the experienced and
battered man of affairs, had been enjoyed by Van Buren only a few days,
when the air grew heavy about him, and then perturbed, and then
violently agitated, until in two months broke fiercely and beyond all
restraint the most terrific of commercial convulsions in the United
States. Since Washington began the experiment of our federal government
amid the sullen doubts of extreme Federalists and extreme Democrats, no
president, save only Abraham Lincoln, has had to face at the outset of
his presidency so appalling a political situation.
The causes of the panic of 1837 lay far deeper than in the complex
processes of banking or in the faults of federal administration of the
finances. But, as a man suddenly ill prefers to find for his ailment
some recent and obvious cause, and is not convinced by even a long and
dangerous sickness that its origin lay in old and continued habits of
life, so the greater part of the American people and of their leaders
believed this extraordinary crisis to be the result of financial
blunders of Jackson's administration. They believed that Van Buren could
with a few strokes of his pen repair, if he pleased, those blunders, and
restore commercial confidence and prosperity. The panic of 1837 became,
and has very largely remained, the subject of political and partisan
differences, which obscure its real phenomena and causes. The far-seeing
and patriotic intrepidity with which Van Buren met its almost
overwhelming difficulties is really the crown of his political career.
Fairly to appreciate the service he then rendered his country, the
causes of this famous crisis must be attentively considered.
In 1819 the United States suffered from commercial and financial
derangement, which may be assumed to have been the effect of the second
war with Great Britain. The enormous waste of a great war carried on by
a highly organized nation is apt not to become obvious in general
business distress until some time after the war has ended. A buoyant
extravagance in living and in commercial and manufacturing ventures will
continue after a peace has brought its extraordinary promises, upon the
faith of which, and in joyful ignorance, the evil and inevitable day is
postponed. All this was seen later and on a vaster scale from 1865 to
1873. In 1821 the country had quite recovered from its depression; and
from this time on to near the end of Jackson's administration the United
States saw a material prosperity, doubtless greater than any before
known. The exuberant outburst of John Quincy Adams's message of
1827,--that the productions of our soil, the exchanges of our commerce,
the vivifying labors of human industry, had combined "to mingle in our
cup a portion of enjoyment as large and liberal as the indulgence of
Heaven has perhaps ever granted to the imperfect state of man upon
earth,"--was in the usual tone of the public utterances of our
presidents from 1821 to 1837. Our harvests were always great. We were a
chosen people delighting in reminders from our rulers of our prosperity,
and not restless under their pious urgency of perennial gratitude to
Providence. In 1821 the national debt had slightly increased, reaching
upwards of $90,000,000; but from that time its steady and rapid payment
went on until it was all discharged in 1834. Our cities grew. Our
population stretched eagerly out into the rich Mississippi valley. From
a population of ten millions in 1821, we reached sixteen millions in
1837. New York from about 1,400,000 became 2,200,000; and Pennsylvania
from about 1,000,000 became 1,600,000. But the amazing growth was at
the West--Illinois from 60,000 to 400,000, Indiana from 170,000 to
600,000, Ohio from 600,000 to 1,400,000, Tennessee from 450,000 to
800,000. Missouri had increased her 70,000 five-fold; Mississippi her
80,000 four-fold; Michigan her 10,000 twenty-fold. Iowa and Wisconsin
were entirely unsettled in 1821; in 1837 the fertile lands of the former
maintained nearly forty thousand and of the latter nearly thirty
thousand hardy citizens. New towns and cities rose with magical
rapidity. With much that was unlovely there was also exhibited an
amazing energy and capacity for increase in wealth. The mountain
barriers once passed, not only by adventurous pioneers but by the
pressing throngs of settlers, there were few obstacles to the rapid
creation of comfort and wealth. Nor in the Mississippi valley and the
lands of the Northwest were the settlers met by the harsh soil, the
hostilities and reluctance of nature in whose conquest upon the Atlantic
seaboard the American people had gained some of their strongest and most
enduring characteristics. We hardly realize indeed how much better it
was for after times that our first settlements were difficult. In the
easy opening and tillage of the rich and sometimes rank lands at the
West there was an inferior, a less arduous discipline. American temper
there rushed often to speculation, rather than to toil or venture. It
did not seem necessary to create wealth by labor; the treasures lay
ready for those first reaching the doors of the treasure house. To make
easy the routes to El Dorado of prairies and river bottoms was the
quickest way to wealth.
Roads, canals, river improvements, preceded, attended, followed these
sudden settlements, this vast and jubilant movement of population. There
was an extraordinary growth of "internal improvements." In his message
of 1831, Jackson rejoiced at the high wages earned by laborers in the
construction of these works, which he truly said were "extending with
unprecedented rapidity." The constitutional power of the federal
government to promote the improvements within the States became a
serious question, because the improvements proposed were upon so vast a
scale. No single interest had for fifteen years before 1837 held so
large a part of American attention as did the making of canals and
roads. The debates of Congress and legislatures, the messages of
presidents and governors, were full of it. If the Erie Canal, finished
in 1825, had rendered vast natural resources available, and had made its
chief builder famous, why should not like schemes prosper further west?
The success of railroads was already established; and there was
indefinite promise in the extensions of them already planned. In 1830
twenty-three miles had been constructed; in 1831 ninety-four miles; and
in 1836 the total construction had risen to 1273 miles.
The Americans were then a far more homogeneous people than they are
to-day. The great Irish, German, and Scandinavian immigrations had not
taken place. Our race diversities were, with exceptions, unimportant in
extent or lost in the lapse of time, the diversities merely of British
descendants. Nor were there the extremes of fortune or the diversities
of occupation which have come with the growth of cities and
manufacturing interests. The United States were still a nation of
farmers. The compensations and balances, which in the varying habits and
prejudices of a more varied population tend to restrain and neutralize
vagaries, did not exist. One sentiment seized the whole nation far more
readily than could happen in the complexity of our modern population and
the diversity and rivalry of its strains. Not only did this homogeneity
make Americans open to single impulses; but there was little essential
difference of environment. They all, since the later days of Monroe's
presidency, had lived in the atmosphere of official delight and
congratulation over the past, and of unrestrained promise for the
future. All, whether in the grain fields at the North or the cotton
fields at the South, had behind them the Atlantic with traditions or
experiences of poverty and oppression beyond it. Every American had, in
his own latitude, since the ampler opening of roads and waterways, and
the peaceful conquest of the Appalachian mountain ranges, seen to the
west of him fertility and promise and performance. And the fertility and
promise had, since the second English war, been no longer in a land of
hardship and adventure remote and almost foreign to the seaboard. Every
American under Jackson's administration had before him, as the one
universal experience of those who had taken lands at the West, an
enormous and certain increase of value, full of enchantment to those
lately tilling the flinty soil of New England or the overused fields of
the South. If new lands at the West could be made accessible by internal
improvements, the succession of seed time and harvest had for a dozen
years seemed no more certain than that the value of those lands would at
once increase prodigiously. So the American people with one consent gave
themselves to an amazing extravagance of land speculation. The Eden
which Martin Chuzzlewit saw in later malarial decay was to be found in
the new country on almost every stream to the east of the Mississippi
and on many streams west of it, where flatboats could be floated. Frauds
there doubtless were; but they were incidental to the honest delusion of
intelligent men inspired by the most extraordinary growth the world had
seen. The often quoted illustration of Mobile, the valuation of whose
real estate rose from $1,294,810 in 1831 to $27,482,961 in 1837, to sink
again in 1846 to $8,638,250, not unfairly tells the story. In Pensacola,
lots which to-day are worth $50 each were sold for as much as lots on
Fifth Avenue in New York, which to-day are worth $100,000 apiece. Real
estate in the latter city was assessed in 1836 at more than it was in
the greatly larger and richer city of fifteen years later. From 1830 to
1837 the steamboat tonnage on the Western rivers rose from 63,053 to
253,661. From 1833 to 1837 the cotton crop of the newer slave States,
Tennessee, Alabama, Mississippi, Louisiana, Arkansas and Florida,
increased from 536,450 to 916,960 bales, while the price with
fluctuations rose from ten to twenty cents a pound. Foreign capital
naturally enough came to share in the splendid money-making. From 1821
to 1833 the annual import of specie from England had averaged about
$100,000, in the last year being only $31,903; but in 1834 it became
$5,716,253, in 1835 $914,958, and in 1836 $2,322,920, the entire export
to England of specie for all these three years being but $51,807, while
the average export from 1822 to 1830 had been about $400,000; and its
amount in 1831 had been $2,089,766, and in 1832 $1,730,571. From 1830 to
1837, both years inclusive, although the imports from all countries of
general merchandise exceeded the exports by $140,700,000, there was no
counter movement of specie. The imports of specie from all countries
during these years exceeded the exports by the comparatively enormous
sum of $44,700,000. The foreigners therefore took pay for their goods,
not only in our raw materials, but also in our investments or rather our
speculations, and sent these vast quantities of moneys besides. So our
good fortune fired the imaginations of even the dull Europeans. They
helped to feed and clothe us that we might experiment with Aladdin's
lamp.
The price of public lands was fixed by law at $1.25 an acre; and they
were open to any purchaser, without the wholesome limits of acreage and
the restraint to actual settlers which were afterwards established. Here
then was a commodity whose price to wholesale purchasers did not rise,
and the very commodity by which so many fortunes had been made. In
public lands, therefore, the fury of money-getting, the boastful
confidence in the future of the country, reached their climax. From 1820
to 1829 the annual sales had averaged less than $1,300,000, in 1829
being $1,517,175. But in 1830 they exceeded $2,300,000, in 1831
$3,200,000, in 1832 $2,600,000, in 1833 $3,900,000, and in 1834
$4,800,000. In 1835 they suddenly mounted to $14,757,600, and in 1836 to
$24,877,179. In his messages of 1829 and 1830 Jackson not unreasonably
treated the moderate increase in the sales as a proof of increasing
prosperity. In 1831 his congratulations were hushed; but in 1835 he
again fancied, even in the abnormal sales of that year, only an ampler
proof of ampler prosperity. In 1836 he at last saw that tremendous
speculation was the true significance of the enormous increase. Prices
of course went up. Everybody thought himself richer and his labor worth
more. A week after Van Buren's inauguration a meeting was held in the
City Hall Park in New York to protest against high rents and the high
prices of provisions; and with much discernment the cry went up, "No rag
money; give us gold and silver!"
There is no longer dispute that the prostration of business in 1837, and
for several years afterward, was the perfectly natural result of the
speculation which had gone before. The absurd denunciations of Van Buren
by the most eminent of the Whigs for not ending the crisis by
governmental interference are no longer respected. But it is still
fancied that the speculation itself was caused by one financial blunder,
and the crisis immediately occasioned by another financial blunder, of
Jackson. It is not improbable that the deposits of treasury moneys in
fifty state banks[12] instead of in the United States Bank and its twenty
and more branches, which began in the fall of 1833, aided the tendency
to speculation. But this aid was at the most a slight matter. The
impression has been sedulously created that these state banks, the "pet
banks," were doubtful institutions. There seems little reason to doubt
that in general they were perfectly sound and reputable institutions,
with which the government moneys would be quite as safe as with the
United States Bank. It is clear that if the latter Bank were not to be
rechartered, the deposits should, without regard to the accusations of
political meddling brought against it, have been removed some time in
advance of its death in March, 1836. At best it is matter of doubtful
speculation whether the United States Bank under Biddle's direction
would, in 1834, 1835, and 1836, while the government deposits were
enormously increasing, have behaved with much greater prudence and
foresight than did the state deposit banks. So far as actual experience
helps us, the doubt might well be solved in the negative. The United
States Bank, when its federal charter lapsed, obtained a charter from
Pennsylvania, continuing under the same management; and is said, and
possibly with truth, to have entered upon its new career with a great
surplus. But it proved no stronger than the state banks in 1837; it
obstructed resumption in 1838; it suspended again in 1839, while the
Eastern banks stood firm; and in 1841 it went to pieces in disgraceful
and complete disaster.
The enormous extension of bank credits during the three years before the
break-down in 1837 was rather the symptom than the cause of the disease.
The fever of speculation was in the veins of the community before
"kiting" began. Bank officers dwelt in the same atmosphere as did other
Americans, and their sanguine extravagance in turn stimulated the
universal temper of speculation.
When the United States Bank lost the government deposits, late in 1833,
they amounted to a little less than $10,000,000. On January 1, 1835,
more than a year after the state banks took the deposits, they had
increased to a little more than $10,000,000. But the public debt being
then paid and the outgo of money thus checked, the deposits had by
January 1, 1836, reached $25,000,000, and by June 1, 1836, $41,500,000.
This enormous advance represented the sudden increase in the sales of
public lands, which were paid for in bank paper, which in turn formed
the bulk of the government deposits. The deposits were with only a small
part of the six hundred and more state banks then in existence. But the
increase in the sales of public lands was the result of all the organic
causes and of all the long train of events which had seated the fever of
speculation so profoundly in the American character of the day. To those
causes and events must ultimately be ascribed the extension of bank
credits so far as it immediately arose out of the increase of government
deposits. Nor is there any sufficient reason to suppose that if the
deposits, instead of being in fifty state banks, had remained in the
United States Bank and its branches, the tendency to speculation would
have been less. The influences which surrounded that Bank were the very
influences most completely subject to the popular mania.
But the increase of government deposits was only fuel added to the
flames. The craze for banks and credits was unbounded before the removal
of the deposits had taken place, and before their great increase could
have had serious effect. Between 1830 and January 1, 1834, the banking
capital of the United States had risen from $61,000,000 to about
$200,000,000; the loans and discounts of the banks from $200,000,000 to
$324,000,000; and their note circulation from $61,000,000 to
$95,000,000. The increase from January 1, 1834, to January 1, 1836, was
even more rapid, the banking capital advancing in the two years to
$251,000,000, the loans and discounts to $457,000,000, and the note
circulation to $140,000,000. But there was certainty of disaster in the
abnormal growth from 1830 to 1834. The insanity of speculation was in
ample though unobserved control of the country while Nicholas Biddle
still controlled the deposits, and was certain to reach a climax whether
they stayed with him or went elsewhere.
It is difficult rightly to apportion among the statesmen and politicians
of the time so much of blame for the mania of speculation as must go to
that body of men. They had all drunk in the national intoxication over
American success and growth. But if we pass from the greater and deeper
causes to the lesser though more obvious ones, it is impossible not to
visit the greater measure of blame upon the statesmen who resisted
reduction of taxation, which would have left money in the pockets of
those who earned it, and not collected it in one great bank with many
branches or in fifty lesser banks; upon the statesmen who insisted that
the government ought to aid commercial ventures by encouraging the loans
to traders of its own moneys held in the deposit banks; upon the
statesmen who promoted the dangerous scheme of distributing the surplus
among the States instead of abolishing the surplus. As the condemnation
of public men in the wrong must be proportioned somewhat to the
distinction of their positions and the greatness of their natural gifts,
this larger share of blame must go chiefly to Daniel Webster and Henry
Clay. At the head of their associates, they had resisted the reduction
of taxation. In his speech on the tariff bill of 1832 Clay said, with
the exuberance so delightful to minds of easy discipline, that our
resources should "not be hoarded and hugged with a miser's embrace, but
liberally used." They insisted upon freely lending the public moneys. In
his speech on the distribution of the surplus, Webster urged that the
number of the deposit banks "be so far increased that each may regard
that portion of the public treasure which it may receive as an increase
of its effective deposits, to be used, like other moneys in deposit, as
a basis of discount, to a just and proper extent." The public money was
locked up, he declared, instead of aiding the general business of the
country. Nor after this was he ashamed in 1838 to condemn Jackson's
secretary of the treasury for advising the new deposit banks, as he had
himself thus advised them, "to afford increased facilities to commerce."
If, indeed, Congress would not take steps to keep a government surplus
out of the banks and in the pockets of producers, the secretary ought
not to have been harshly judged for advising that the money go out into
commerce rather than lie in bank vaults.
The distribution of the surplus among the States by the law of 1836 was
the last and in some respects the worst of the measures which aided and
exaggerated the tendency to speculation. By this bill, all the money
above $5,000,000 in the treasury on January 1, 1837, was to be
"deposited" with the States in four quarterly installments commencing on
that day. According to the law the "deposit" was but a loan to the
States; but, as Clay declared, not "a single member of either House
imagined that a dollar would ever be recalled." It was in truth a mere
gift. Clay's triumphant ridicule of the opposition to this measure has
already been mentioned. Webster in sounding periods declared his "deep
and earnest conviction" of the propriety of the stupendous folly. He did
not, indeed, defend the general system of making the federal government
a tax-gatherer for the States. But this one distribution would, he said
in his speech of May 31, 1836, "remove that severe and almost
unparalleled pressure for money which is now distressing and breaking
down the industry, the enterprise, and even the courage of the
commercial community." The Whig press declared that a congressman who
could for mere party reasons vote against a measure which would bring so
much money into his State, must be "far gone in political hardihood as
well as depravity;" and that "to the Republican-Whig party alone are the
States indebted for the benefits arising from the distribution." William
H. Seward, two years before and two years later the Whig candidate for
governor of New York, said the proposal was "noble and just." The
measure passed the Senate with six Democratic votes against it, among
them the vote of Silas Wright, then probably closer than any other
senator to Van Buren. Jackson yielded to the bill what in his message in
December of the same year he called "a reluctant approval." He then gave
at length very clear reasons for his reluctance, but none for his
approval. He declared that "improvident expenditure of money is the
parent of profligacy," and that no intelligent and virtuous community
would consent to raise a surplus for the mere purpose of dividing it. In
his first message, indeed, Jackson had called the distribution among the
States "the most safe, just, and federal disposition" of the surplus.
But his views upon this, as upon other subjects, had changed during the
composition of the Democratic creed which went on during the early years
of his administration. His second message rehearsed at length the
objections to the distribution, though affecting to meet them. In his
third message he recommended the abolition of unnecessary taxation, not
the distribution of its proceeds; and in 1832 he made his explicit
declaration that duties should be "reduced to the revenue standard."
Benton says it was understood that in 1836 some of Van Buren's friends
urged Jackson to approve the bill, lest a veto of so popular a measure
might bring a Democratic defeat. There must have been some reason
unrelated to the merit of the measure. But whatever the opinions of Van
Buren's friends, he took care before the election to make known
unequivocally, in the Sherrod Williams letter already quoted, his
dislike of this piece of demagogy. From the passage of the deposit bill
in June, 1836, until the crash in 1837, this superb donation of
thirty-seven millions was before the enraptured and deluded vision of
the country. Over nine millions a quarter to be poured into
"improvements" or loaned to the needy,--what a delightful prospect to
citizens harassed by the restraints of prudent, fruitful industry! The
lesson is striking and wholesome, and ought not to be forgotten, that it
was when the land was in the very midst of these largesses that the
universal bankruptcy set in.
During 1835 and 1836 there were omens of the coming storm. Some
perceived the rabid character of the speculative fever. William L.
Marcy, governor of New York, in his message of January, 1836, answering
the dipsomaniac cry for more banks, declared that an unregulated spirit
of speculation had taken capital out of the State; but that the amount
so transferred bore no comparison to the enormous speculations in stocks
and in real property within the State. Lands near the cities and
villages of the State had risen several hundred per cent. in value, and
were sold, not to be occupied by the buyers, but to be sold again at
higher prices. The passion for speculation prevailed to an extent before
unknown, not only among capitalists, but among merchants, who abstracted
capital from their business for land and stock speculations and then
resorted to the banks. The warning was treated contemptuously; but
before the year was out the federal administration also became anxious,
and the increase in land sales no longer signified to Jackson an
increasing prosperity. The master hand which drew the economic
disquisition in his message of 1836 pointed to these sales as the
effects of the extension of bank credit and of the over-issue of bank
paper. The banks, it was declared, had lent their notes as "mere
instruments to transfer to speculators the most valuable public land,
and pay the government by a credit on the books of the banks." Each
speculation had furnished means for another. No sooner had one purchaser
paid his debt in the notes than they were lent to another for a like
purpose. The banks had extended their business and their issues so
largely as to alarm considerate men. The spirit of expansion and
speculation had not been confined to deposit banks, but had pervaded the
whole multitude of banks throughout the Union, and had given rise to new
institutions to aggravate the evil. So Jackson proceeded with his sound
defense of the famous specie circular, long and even still denounced as
the _causa causans_ of the crisis of 1837.
By this circular, issued on July 11, 1836, the secretary of the treasury
had required payment for public lands to be made in specie, with an
exception until December 15, 1836, in favor of actual settlers and
actual residents of the State in which the lands were sold. The enormous
sales of land in this year, and the large payments required for them
under the circular, at once made the banks realize that there ought to
be an actual physical basis for their paper transactions. Gold was
called from the East to the banks at the West to make the land payments.
Into the happy exaltation of unreal transactions was now plunged that
harsh demand for real value which sooner or later must always come. The
demand was passed on from one to another, and its magnitude and
peremptoriness grew rapidly. The difference between paper and gold
became plainer and plainer. Nature's vital and often hidden truth that
value depends upon labor could no longer be kept secret by a few wise
men. The suspicion soon arose that there was not real and available
value to meet the demands of nominal value. The suspicion was soon
bruited among the less as well as the more wary. Every man rushed to his
bank or his debtor, crying, "Pay me in value, not in promises to pay;
there is, I at last see, a difference between them." But the banks and
debtors had no available value, but only its paper semblances. Every man
found that what he wanted, his neighbors did not have to give him, and
what he had, his neighbors did not want.
This is hardly an appropriate place to attempt an analysis of the
elements of a commercial crisis. But it is not possible rightly to
estimate Van Buren's moral courage and keen-sighted wisdom in meeting
the terrible pressure of 1837 without appreciating what it was which had
really happened. The din of the disputes over the refusal to re-charter
the bank, over the removal of the deposits, over the refusal to pay the
last installment of the distribution among the States, and over the
specie circular, resounds even to our own time. To many the crisis
seemed merely a financial or even a great banking episode. Many friends
of the administration loudly cried that the disaster arose from the
treachery of the banks in suspending. Many of its enemies saw only the
normal fruit of administrative blunders, first in recklessness, and last
in heartless indifference. To most Americans, whatever their
differences, the explanation of this profound and lasting disturbance
seemed to lie in the machinery of finance, rather than in the deeper
facts of the physical wealth and power of the trading classes.
Speculation is sometimes said to be universal; and it was never nearer
universality than from 1830 to 1837. But speculation affects after all
but a small part of the community,--the part engaged in trade, venture,
new settlement or new manufacture; those classes of men the form of
whose work is not established by tradition, but is changing and
improving under the spur of ingenuity and invention, and with whom
imagination is most powerful and fruitful. These men use the surplus
resources of the vastly greater number who go on through periods of high
prices and of low prices with their steady toil and unvaried production.
In our country and in all industrial communities it is to the former
comparatively small class that chiefly and characteristically belong
"good times" and "bad times," panics and crises and depressions. It is
this class which in newspapers and financial reviews becomes "the
country." It chiefly supports the more influential of the clergy, the
lawyers, the editors, and others of the professional classes. It deals
with the new uses and the accumulations of wealth; it almost monopolizes
public attention; it is chiefly and conspicuously identified with
industrial and commercial changes and progress. But if great depressions
were as nearly universal as the rhetoric of economists and historians
would literally signify, our ancestors fifty years ago must have
experienced a devastation such as Alaric is said to have brought to the
fields of Lombardy. But this was not so. The processes of general
production went on; the land was tilled; the farmer's work of the year
brought about the same amount of comfort; the ordinary mechanic was not
much worse off. If some keen observer from another planet had in 1835
and again later in 1837 looked into the dining-rooms and kitchens and
parlors of America, had seen its citizens with their families going to
church of a Sunday morning, or watched the tea-parties of their wives,
or if he had looked over the fields and into the shops, there would have
seemed to him but slight difference between the two years in the
occupations, the industry, or the comfort of the people. But if he had
stopped looking and begun to listen, he would in 1837 at once have
perceived a tremendous change. The great masses of producing men would
have been mute, as they usually are. But the capitalists, the traders,
the manufacturers, all whose skill, courage, imagination, and adventure
made them the leaders of progress, and whose voices were the only loud,
clear, intelligible voices, until there arose the modern organizations
of laboring men,--all those who in 1835 were flushed and glorious with a
royal money-getting,--he would now have heard crying in frenzy and
desperation. It is not meant to disparage the importance of this smaller
but louder body of men, or to underrate the disaster which they
suffered. In proportion to their numbers, they were vastly the most
important part of the community. If they were prostrated, there must not
only suffer the body of clerks, operatives, and laborers immediately
engaged in their enterprises, and who may for economical purposes be
ranked with them; but later on, the masses of the community must to a
real extent feel the interruption of progress which has overtaken that
section of the community to which are committed the characteristic
operations of material progress; and whether through the fault or the
misfortune of that section, the injury is alike serious. A wise ruler,
in touching the finances of his country, will forget none of this. He
will look through all the agitation of bankers and traders and
manufacturers, the well-voiced leaders of the richer classes of men, to
the far vaster processes of industry carried on by men who are silent,
and whose silent industry will go on whatever devices of currency or
banking may be adopted. This wisdom Van Buren now showed in an exalted
degree.
The disaster which in 1837 overtook so large and so important a part of
the community was, in its ultimate nature, not difficult to comprehend.
There had not been one equal and universal increase in nominal values.
Such an increase would not have produced the crisis. But while the great
mass of the national industry went on in channels and with methods and
rates substantially undisturbed, there took place an enormous and
speculative advance of prices in the cities where were carried on the
operations of important traders and the promoters of enterprises, and in
the very new country where these enterprises found their material. When
a new canal or road was built, or a new line of river steamers launched
and an unsettled country made accessible, several things inevitably
happened in the temper produced by the jubilant observation of the past.
There was not only drawn from the ordinary industry of the country the
wealth necessary to build the canal or road or steamers; but the country
thus rendered accessible seemed suddenly to gain a value measured by the
best results of former settlements, however exceptional, and by the most
sanguine hopes for the future. The owners of the prairies and woods and
river bottoms became suddenly rich, as a miner in Idaho becomes rich
when he strikes a true fissure vein. The owners of the canal or road or
line of steamers found their real investment at once multiplied in
dollars by the value of the country whose trade they were to enjoy; for,
new as that value was, it seemed assured. Like investments were made in
banks, and in every implement of direct or indirect use in the conduct
of industries which seemed to belong as a necessity to the new value of
the land. The numerous sales of lands and of stocks in roads or canals
or banks at rapidly advancing prices did not alter the nature, although
they vastly augmented the effect, of what was happening. The so-called
"business classes" throughout the country, related as they quickly
became, under the great impetus of the national hopefulness and vanity,
to the new lands, to the new cities and towns and farms, and to the
means of reaching them and of providing them with the necessities and
comforts of civilization, found their wealth rapidly and largely
increasing. Then naturally enough followed the spending of money in
personal luxury. This meant the withdrawal of labor in the older part of
the country from productive work, for which the country was fitted, to
work which, whether suitable or not, was unproductive. The unproductive
labor was paid, as the employers supposed, from the new value lately
created at the West. So capital, that is, accumulated labor, was first
spent in improvements in the new country, and then, and probably in a
far greater amount, spent in more costly food, clothes, equipage, and
other luxuries in the older country. The successive sales at advancing
prices simply increased the sense of new wealth, and augmented more and
more this destructive consumption of the products of labor, or the
destructive diversion of labor from productive to unproductive activity
at the East by the well-to-do classes.
On the eve of the panic the new wealth, whose seeming possession
apparently justified this destructive consumption or diversion to luxury
of physical value, was primarily represented by titles to lands, stocks
in land, canal, turnpike, railroad, transportation, or banking
companies, and the notes issued by banks or traders or speculators. The
value of these stocks and notes depended upon the fruitfulness of the
lands or canals or roads or steamboat lines. Prices of many commodities
had, indeed, been enhanced by speculation beyond all proper relation to
other commodities, measured by the ultimate standard of the quantity and
quality of labor. But important as was this element, it was subordinate
to the apparent creation of wealth at the West.
Before the panic broke, it began to appear that mere surveys of wild
tracts into lots made neither towns nor cities; that canals and roads
and steamboats did not hew down trees or drain morasses or open the
glebe. The basis of the operations of capitalists and promoters and
venturers in new fields, if those operations were to have real success,
must lie in the masses of strong and skillful arms of men of labor. The
operations were fruitless until there came a population well sinewed and
gladly ready for arduous toil. In 1836 and 1837 the operators found that
there was no longer a population to give enduring life to their new
operations. They had far outstripped all the immediate or even the
nearly promised movements of settlers. Men, however hardy, preferred to
work within an easier reach of the physical and social advantages of
settlements already made, until they could see the superior fruitfulness
of labor further on. The new cities and towns and farms and the means of
reaching them would be mere paper assets until an army of settlers was
ready to enter in and make them sources of actual physical wealth. But
the army stopped far short of the new Edens and metropolises. There was
no creation among them of the actual wealth, the return of physical
labor, to make good and real the popular semblances of wealth, upon the
faith of which in the older part of the country had arisen new methods
of business and habits of living. The withdrawal of actual wealth from
the multifarious treasuries of capital and industry, to meet the expense
of the improvements at the West and the increased luxury at the East,
had reached a point where the pressure caused by the deficiency of
physical wealth was too great for the hopefulness or credulity of those
who had been surrendering that wealth upon the promises of successful
and opulent settlements at the West. Nor was all this confined to
ventures in the new States. Almost every Eastern city had a suburb where
with slight differences all the phenomena of speculation were as real
and obvious as in Illinois or Mississippi.
Jackson's specie circular toppled over the house of cards, which at best
could have stood but little longer. In place of bank-notes, which
symbolized the expectations and hopes of the owners of new towns and
improvements, the United States after July, 1836, required from all but
actual settlers gold and silver for lands. An insignificant part of the
sales had been lately made to settlers. They were chiefly made to
speculators. The public lands, which sold invariably at $1.25 an acre,
were enormously magnified in nominal value the instant the speculators
owned them. Paper money was freely issued upon these estimates of value,
to be again paid to the government for more lands at $1.25. But now
gold and silver must be found; and nothing but actual labor could find
gold and silver. A further stream of true wealth was summoned from the
East, already denuded, as it was, of all the surplus it had ready to be
invested upon mere expectation. Enormous rates were now paid for real
money. But of the real money necessary to make good the paper bubble
promises of the speculators not one-tenth part really existed. Banks
could neither make their debtors pay in gold and silver, nor pay their
own notes in gold and silver. So they suspended.
The great and long concealed devastation of physical wealth and of the
accumulation of legitimate labor, by premature improvements and costly
personal living, became now quickly apparent. Fancied wealth sank out of
sight. Paper symbols of new cities and towns, canals and roads, were not
only without value, but they were now plainly seen to be so. Rich men
became poor men. The prices of articles in which there had been
speculation sank in the reaction far below their true value. The
industrious and the prudent, who had given their labor and their real
wealth for paper promises issued upon the credit of seemingly assured
fortunes, suffered at once with men whose fortunes had never been
anything better than the delusions of their hope and imagination.
It is now plain enough that to recover from this crisis was a work of
physical reparation to which must go time, industry, and frugality.
There was folly in every effort to retain and use as valuable assets
the investments in companies and banks whose usefulness, if it had ever
begun, was now ended. There was folly in every effort to conceal from
the world by words of hopefulness the fact that the imagined values in
new cities and garden lands had disappeared in a rude disenchantment as
complete as that of Abou-Hassan in the Thousand and One Nights, or that
of Sly, the tinker, left untold in the Taming of the Shrew. Their sites
were no more than wild lands, whose value must wait the march of
American progress, fast enough indeed to the rest of the world, but slow
as the snail to the wild pacing of the speculators. Every pretense of a
politician, whether in or out of the senate chamber, that the government
could by devices of financiering avoid this necessity of long physical
repair, was either folly or wickedness. And of this folly or even
wickedness there was no lack in the anxious spring and summer of 1837.
There had already occurred in many quarters that misery which is borne
by the humbler producers of wealth not for their own consumption, but
simply for exchange, whose earnings are not increased to meet the
inflation of prices upon which traders and speculators are accumulating
apparent fortunes and spending them as if they were real. On February
14, 1837, several thousand people met in front of the City Hall in New
York under a call of men whom the "Commercial Advertiser" described as
"Jackson Jacobins." The call was headed: "Bread, meat, rent, fuel!
Their prices must come down!" It invited the presence of "all friends of
humanity determined to resist monopolists and extortionists." A very
respectable meeting about high prices had been held two or three weeks
before at the Broadway Tabernacle. The meeting in the City Hall Park,
with a mixture of wisdom and folly, urged the prohibition of bank-notes
under $100, and called for gold and silver; and then denounced landlords
and dealers in provisions. The excitement of the meeting was followed by
a riot, in which a great flour warehouse was gutted. The rioters were
chiefly foreigners and few in number; nor were the promoters of the
meeting involved in the riot. The military were called out; and Eli
Hart & Co., the unfortunate flour merchants, issued a card pointing out
with grim truth "that the destruction of the article cannot have a
tendency to reduce the price."
The distribution of the treasury surplus to the States precipitated the
crash. The first quarter's payment of $9,367,000 was made on January 1,
1837. There was disturbance in taking this large sum of money from the
deposit banks. Loans had to be called in, and the accommodation to
business men lessened for the time. There was speculative disturbance in
the receipt of the moneys by the state depositories. There was
apprehension for the next payment on April 1, which was accomplished
with still greater disturbance, and after the crisis had begun. The
calls for gold and silver, begun under the specie circular, and the
disturbances caused by these distributions, were increased by financial
pressure in England, whose money aids to America were but partly shown
by the shipments of gold and silver already mentioned. The extravagance
of living had been shown in foreign importations for consumption in
luxury, to meet which there had gone varied promises to pay, and
securities whose true value depended upon the true and not the apparent
creation of wealth in America. Before the middle of March the money
excitement at Manchester was great; and to the United States alone, it
was then declared, attention was directed for larger remittances and for
specie. The merchants of Liverpool about the same time sent a memorial
to the chancellor of the exchequer saying "that the distress of the
mercantile interest is intense beyond example, and that it is rapidly
extending to all ranks and conditions of the community, so as to
threaten irretrievable ruin in all directions, involving the prudent
with the imprudent." The "London Times" on April 10, 1837, said that
great distress and pressure had been produced in every branch of
national industry, and that the calamity had never been exceeded.
The cry was quickly reëchoed from America. Commercial failures began in
New York about April 1. By April 8 nearly one hundred failures had
occurred in that city,--five of foreign and exchange brokers, thirty of
dry-goods jobbers, sixteen of commission houses, twenty-eight of
real-estate speculators, eight of stock brokers, and several others.
Three days later the failures had reached one hundred and twenty-eight.
Provisions, wages, rents, everything, as the "New York Herald" on that
day announced, were coming down. Within a few days more the failures
were too numerous to be specially noticed; and before the end of the
month the rest of the country was in a like condition. The prostration
in the newer cotton States was peculiarly complete. Their staple was now
down to ten cents a pound; within a year it had been worth twenty. All
other staples fell enormously in price.
Later in April the merchants of New York met. Instead of condemning
their own folly, they resolved, in a silly fury, that the disaster was
due to government interference with the business and commercial
operations of the country by requiring land to be paid for in specie
instead of paper, to its destruction of the Bank, and to its
substitution of a metallic for a credit currency. A committee of fifty,
including Thomas Denny, Henry Parish, Elisha Riggs, and many others
whose names are still honored in New York, was appointed to remonstrate
with the president. "What constitutional or legal justification," it was
seriously demanded, "can Martin Van Buren offer to the people of the
United States for having brought upon them all their present
difficulties?" The continuance of the specie circular, they said, was
more high-handed tyranny than that which had cost Charles I. his crown
and his head. On May 3 the committee visited Washington and told the
President that their real estate had depreciated forty millions, their
stocks twenty millions, their immense amounts of merchandise in
warehouses thirty per cent. They piteously said to him, "The noble city
which we represent lies prostrate in despair, its credit blighted, its
industry paralyzed, and without a hope beaming through the darkness,
unless"--and here we might suppose they would have added, "unless
Americans at once stop spending money which has not been earned, and
repair the ruin by years of sensible industry and strict economy." But
the conclusion of the merchants was that the darkness must continue
unless relief came from Washington. It was unjust, they said, to
attribute the evils to excessive development of mercantile enterprise;
they flowed instead from "that unwise system which aimed at the
substitution of a metallic for a paper currency." The error of their
rulers "had produced a wider desolation than the pestilence which
depopulated our streets, or the conflagration which laid them in ashes."
In the opinion of these sapient gentlemen of business, it was the
requirement that the United States, in selling Western lands to
speculators, should be paid in real and not in nominal money, which had
prostrated in despair the metropolis of the country. They asked for a
withdrawal of the specie circular, for a suspension of government suits
against importers on bonds given for duties, for an extra session of
Congress to pass Clay's bill for the distribution of the land revenue
among the States, and for the re-chartering of the Bank. Never did men
out of their heads with fright propose more foolish attempts at relief
than some of these. But the folly, as will be seen, seized statesmen of
the widest experience as well as frenzied merchants. The President's
answer was dignified, but "brief and explicit." To the insolent
suggestion that Jackson's financial measures had been more destructive
than fire or pestilence, he calmly reminded them that he had made fully
known, before he was elected, his own approval of those measures; that
knowing this the people had deliberately chosen him; and that he would
still adhere to those measures. The specie circular should be neither
repealed nor modified. Such indulgence in enforcing custom-house bonds
would be allowed as the law permitted. The emergency did not, he
thought, justify an extra session. Nicholas Biddle called on Van Buren;
and many were disgusted that in the presence of this arch enemy the
president remained "profoundly silent upon the great and interesting
topics of the day."
Van Buren's resolution to face the storm without either the aid or the
embarrassment of the early presence of Congress he was soon compelled to
abandon. Within a few days of the return of the merchants to New York,
that city sent the President an appalling reply. On May 10 its banks
suspended payment of their notes in coin. A few days before some banks
in lesser cities of the Southwest had stopped. On the day after the New
York suspension, the banks of Philadelphia, Baltimore, Albany, Hartford,
New Haven, and Providence followed. On the 12th the banks of Boston and
Mobile, on the 13th those of New Orleans, and on the 17th those of
Charleston and Cincinnati fell in the same crash. There was now simply a
general bankruptcy. Men would no longer meet their promises to pay,
because no longer could new paper promises pay off old ones. No longer
would men surrender physical wealth safely in their hands for the
expectation of wealth to be created by the future progress of the
country. But men with perfectly real physical wealth in their
storehouses, which they could not themselves use, were also in practical
bankruptcy because of their commercial debts most prudently incurred.
The natural exchange of their own goods for goods which they or their
creditors might use was obstructed by the utter discredit of paper
money, and by the almost complete disappearance of gold and silver.
Extra sessions of state legislatures were called to devise relief. The
banks' suspension of specie payment in New York was within a few days
legalized by the legislature of that State. On May 12 the secretary of
the treasury directed government collectors themselves to keep public
moneys where the deposit banks had suspended.
For banks holding the public moneys sank with the others. And it was
this which compelled Van Buren in one matter to yield to the storm. On
May 15 he issued a proclamation for an extra session of Congress to meet
on the first Monday of September. It would meet, the proclamation said,
to consider "great and weighty matters." No scheme of relief was
suggested. The locking up of public moneys in suspended banks made
necessary some relief to the government itself. It was, perhaps, well
enough that excited and terrified people, casting about for a remedy,
should, until their wits were somewhat restored, be soothed by assurance
that the great council of the nation would, at any rate, discuss the
situation. Moreover, it was wise to secure time, that most potent ally
of the statesman. Within the three months and a half to elapse, Van
Buren, like a wise ruler, thought the true nature of the calamity would
become more apparent; proposals of remedies might be scrutinized; and
thoughtless or superficial men might weary of their own absurd
proposals, or the people might fully perceive their absurdity.
During the summer popular excitement ran very high against the
administration. The Whig papers declared it to be "the melancholy truth,
the awful truth," that the administration did nothing to relieve, but
everything to distress the commercial community. Abbot Lawrence, one of
the richest and most influential citizens of Boston, told a great
meeting, on May 17, that there was no other people on the face of God's
earth that were so abused, cheated, plundered, and trampled on by their
rulers; that the government exacted impossibilities. No overt act, he
said, with almost a sinister suggestion, ought to be committed until the
laws of self-preservation compelled a forcible resistance; but the time
might come when the crew must seize the ship. The friends of the
administration sought, indeed, to stem the tide; and a series of
skillfully devised popular gatherings was held, very probably inspired
by Van Buren, who highly estimated such organized appeals to popular
sentiment. In Philadelphia a great meeting denounced the bank
suspensions and the issue of small notes as devices in the interest of a
foreign conspiracy to throw silver coin out of circulation and export it
to Europe, to raise the prices of necessaries, and recommence a course
of gambling under the name of speculation and trade, in which the people
must be the victims, and "the foreign and home desperadoes" the gainers.
The meeting declared for a metallic currency. "We hereby pledge our
lives, if necessary," they said, "for the support of the same." Later,
on May 22, there was in the same city a large gathering at Independence
Square, which solemnly called upon the administration "manfully,
fearlessly, and at all hazards to go on collecting the public revenues
and paying the public dues in gold and silver." Their forefathers, who
fought for their liberties, the framers of our Constitution, the
patriarchs whose memory they revered, were, with a funny mixture of
truth and falsehood, declared to have been hard-money men. A week later,
a great meeting in Baltimore approved the specie circular, and urged its
fearless execution, "notwithstanding the senseless clamors of the
British party;" for the crisis, they said, was "a struggle of the
virtuous and industrious portions of the community against bank
advocates and the enemies to good morals and republicanism." Protests
were elsewhere made against forcing small notes into circulation. Paper
had, however, to be used, for there was nothing else. Barter must go on,
even upon the most flimsy tokens. In New York one saw, as were seen
twenty-four years later, bits of paper like this: "The bearer will be
entitled to fifty cents' value in refreshments at the Auction Hotel, 123
and 125 Water Street. New York, May, 1837. Charles Redabock." In
Tallahassee a committee of citizens was appointed to print bank tickets
for purposes of change. In Easton the currency had a more specific
basis. One of the tokens read: "This ticket will hold good for a sheep's
tongue, two crackers, and a glass of red-eye."
When Congress assembled, the country had cried itself, if not to sleep,
at least to seeming quiet. The sun had not ceased to rise and set.
Although merchants and bankers were prostrate with anxiety or even in
irremediable ruin; although thousands of clerks and laborers were out of
employment or earning absurdly low wages,--for near New York hundreds
of laborers were rejected who applied for work at four dollars a month
and board; although honest frontiersmen found themselves hopelessly
isolated in a wilderness,--for the frontier had suddenly shrunk far
behind them,--still the harvest had been good, the masses of men had
been at work, and economy had prevailed. The desperation was over. But
there was a profound melancholy, from which a recovery was to come only
too soon to be lasting.