The Panic of 1837 and the Market Revolution in America (a) and (B) (Abridged)

Abstract

In 1837, President Martin Van Buren confronted a dilemma over the appropriate federal response to the recent panic of 1837 that seemed to undercut the policies and power of Andrew Jackson's “Democracy.” Now, Van Buren must decide how best to harness the civic reaction in stabilizing the financial system and returning the American economy to growth.Van Buren's dilemma occurs in the midst of a dramatic regime shift in American politics. The rise of Whig politicians in reaction to the populist policies of Andrew Jackson marked 1837 as an historic pivot-point. It is useful to consider how the panic of 1837 contributed to that pivot and how the subsequent civic reaction to the panic developed. ⦁The A case recounts the policies of President Andrew Jackson and his “war” on the Second Bank of the United States, a quasi-central bank. It also describes the “market revolution” occurring in the U.S. economy and the political factions that had emerged. Finally, it summarizes the causes and story of the panic of 1837. ⦁The B case presents draft legislation for an Independent Treasury and President Van Buren's message with which he aimed to open a special session of the U.S. Congress and enact the Independent Treasury proposal. ⦁The C case describes the failures to enact the proposal in 1837, 1838, and 1839—ultimately the proposal was enacted in 1840. The case also describes other civic reactions: a new Bankruptcy Act and state-level “free banking” laws. Finally, the case describes the economic aftermath: another panic in 1839 and a long depression that ensued. Excerpt UVA-F-1806 Sept. 20, 2017 The Panic of 1837 and the Market Revolution in America (A) and (B) (Abridged) Within weeks of Martin Van Buren's inauguration as the eighth U.S. president on March 4, 1837, a bank panic broke out in New York and other eastern cities. On May 15, 1837, Van Buren called for a special session of Congress to convene in September for the purpose of addressing the crisis. Rumors circulated about what Van Buren would propose to remedy the situation. Van Buren was perplexed himself and agonized over how best to respond. Advice, much of it unsolicited, streamed in: Recharter the Second Bank of the United States (Second Bank). Some advocates, not least of them Nicholas Biddle, the former president of the bank, claimed that the panic had its origins in the lax credit standards of banks in the West and the South. After losing its national charter in 1836, the bank had lost its ability to discipline other banks in the system. Thus, the path to recovery would entail rechartering the Second Bank to provide the systemic oversight that the nation needed. Prominent members of the Whig Party supported this. . . .