5 Worst Financial Panics in U.S. History


The Panic of 1819

Modern headlines aren't always as unique as they sometimes seem.
Modern headlines aren't always as unique as they sometimes seem.

The United States' economy had already gone through a few little hiccups in the decades following the nation's founding, but the Panic of 1819 was the first broad-scale financial crisis Americans would weather.

The United States had been a major exporter of agricultural products and importer of manufactured products before the War of 1812. During the war, imports were greatly diminished and as a result, the manufacturing sector exploded to meet the new demand. This overzealous expansion, coupled with lax banking practices, government overborrowing, returning international competition, a lack of hard currency, increased credit lending, a surging real estate boom and the widespread growth of speculation and development of public land, all helped set the stage for disaster. Sound familiar?

In response, the nation's banks entered a stiff contractionary period, calling in their vast network of loans and setting off shockwaves of bankruptcies and bank runs as people scrambled for cash. Prices of U.S.-made goods crumpled, property values plummeted and unemployment abounded in record numbers.

After a couple of rough years, things finally started to turn around, but as we'll see, the economy wouldn't stay sound for long.