The Panic of 1857
The major financial catalyst for the panic of 1857 was the August 24, 1857, failure of the New York branch of the Ohio Life Insurance and Trust Company.
It was soon reported that the entire capital of the Trust's home office had been embezzled. What followed was one of the most severe economic crises in U.S. history.
Almost immediately, New York bankers put severe restrictions on even the most routine transactions. In turn, many people interpreted these restrictions as a sign of impending financial collapse and panicked. Individual holders of stock and of commercial paper rushed to their brokers and eagerly made deals that "a week before they would have shunned as a ruinous sacrifice." As the September 12, 1857, Harper's Weekly described the scene on the New York Stock Exchange, "…prominent stocks fell eight or ten per cent in a day, and fortunes were made and lost between ten o'clock in the morning and four of the afternoon."
The Panic of 1857 was a nation economic depression caused, principally, by Europe's declining purchase of American agricultural products.
During the Crimean War in Europe, many European men left their lives as farmers to enlist in the military. This resulted in many European countries depending upon American crops to feed their people. With the end of the Crimean War, agricultural production in Europe increased dramatically, as former soldiers returned to their lives as farmers.
A financial panic in the fall of 1857 brought on what turned out to be a short-lived but intense depression. Causes of the panic stemmed partly from the international economy and partly from domestic overexpansion…This speculative house of cards came crashing down in September 1857. The failure of one banking house sent a wave of panic through the financial community. Banks suspended specie payments, businesses failed, railroads went bankrupt, construction halted, factories shut down. Hundreds of thousands of workers were laid off, and others went on part-time schedules or took wage cutes, just as the cold winter months were arriving.