“On August 24, 1857, a cashier in the New York office of the Ohio Life Insurance and Trust Company was revealed to have embezzled almost all the assets of that highly reputed enterprise to sustain his stock market operations,” says MIT economist Charles Kindleberger, “a revelation that ignited a series of failures reverberating to Liverpool, London, Paris, Hamburg, and Stockholm.” 1
The economic displacement that led to the Panic of 1857 was related to effects from the Crimean War. Global speculation for price increases in railroads was added to problems associated with public land speculation in the United States. American gold discoveries and clearinghouses contributed to monetary expansion that culminated in financial distress, with a speculative peak at the end of 1856.2
In spite of a cascade of business failures during what was later described by economists as “the first worldwide crisis,” President James Buchanan was largely unable to intervene in the Panic of 1857. It was an era in which the American president still had little influence to improve the nation’s economic affairs. “With this the Government can not fail deeply to sympathize,” Buchanan said in his First Annual Message to Congress on the State of the Union, “though it may be without the power to extend relief.” 3
1. Charles P. Kindleberger, Manias, Panics, and Crashes: A History of Financial Crises (New York: Basic Books, 1989), 92.
2. Ibid., 253.
3. Ibid., 143. Jean H. Baker, James Buchanan (New York: Times Books, 2004), 89-90. Daniel C. Diller and Dean J. Peterson, “Chief Economist,” in Guide to the Presidency, 2 vols., ed. Michael Nelson (Washington: CQ Press, 1996), 1:705. The American Presidency Project, “James Buchanan, First Annual Message to Congress on the State of the Union, December 8, 1857,” University of California at Santa Barbara, http://www.presidency.ucsb.edu/ws/index.php?pid=29498&st=Buchanan&st1=annual.