The U.S. wasn’t 50 years old when the 1837 money panic hit the nation. The national debt had been paid, and the Second National Bank and other banks were overflowing with reserves. These funds were squandered during the Panic of 1837 because of distrust in the Second National Bank, ignorance of paper money and opinions based on regional differences.
Chicagoans adopted a survival mode. They pooled their resources, assessed their skills and found ways to survive. Families worked together and sought assistance from relatives and religious institutions. But, the poor, weak and helpless suffered because they lacked resources and couldn’t help themselves. They starved to death or froze to death during the winter months.
Chicago businessmen frequently diversified their business endeavors. If one business failed, other businesses carried them through difficult times. Private loans from friends or family helped them meet obligations. The Suffolk Bank of Boston and other local banks helped by acting like central banks. Still, many businesses and banks failed.
When Illinois and Michigan Canal bonds nearly defaulted, Justin Butterfield proposed a one-fifth of a penny tax to pay the interest on old bonds and allow investors to purchase the new issue. Workers flocked to Illinois, and the canal project was completed in 1848.
In Washington, opposition to the Second National Bank included Democrats and Whigs. Southern congressmen wanted federal money to flow into unregulated state banks because those banks funded their state’s improvements. Other officials wanted a national bank. Succeeding presidential administrations failed to renew the national bank charter. Congress repealed the Specie Circular in 1838, which eased the crisis, and Americans could pay their debts. The Distribution Preemption Act (Log Cabin Bill) aided land sales.
But, the depression lingered through the1840s.
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