North Carolina - Antebellum Key Events - The Panic of 1837

The Panic of 1837 triggered a severe national depression blamed in part on the economic policies of President Andrew Jackson's administration. After months of growing uneasiness in the financial world, the banks in New York City, followed by many others across the nation, halted specie payments on May 10, 1837. Economic chaos spread, causing widespread bankruptcy and unemployment.

With the demise of the Second Bank of the United States in 1837, only state-chartered banks existed. During this period, known as the Free Banking Era, state chartering standards often were not very stringent, and many new banks were formed. Large numbers of them would fail. The era ended with the passage of the National Currency Act in 1863.

The mid-1830s witnessed an economic boom, characterized by inflation and speculation in public land sales and road and canal projects. The speculation was fueled, in part, by the following three policies:

- The removal of federal funds from the Bank of the United States and from other banks.
- A distribution of the federal surplus from these banks to state banks.
- A requirement that only specie be used to buy public lands, which led to falling land sales and specie shortages.

The pressure on many banks increased and a lack of confidence in the state banks abounded. The resulting bank panic in 1837 caused many banks to fail over several years. This panic was followed by a sharp depression, tied to a general downturn in the business cycle that lasted until 1841.

The Raleigh Register reported on May 2, 1837 that "great embarrassment" was already being felt in New Bern, Fayetteville, and Wilmington, the states largest city, "on account of the Northern failures." The Bank of North Carolina suspended specie payments on May 18th. Falling prices and high emigration lowered the value of farm property in North Carolina and other Southeastern states. Farmers forced to sell their property because of debts recovered only a fraction of their pre-1837 value; some North Carolinians reportededly received a little as two percent of the former value of their farms.


 


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