The U.S. financial crisis and stock-market collapse that began in 1857 was called the Panic of 1857.
The panic followed the failure of the Ohio Life Insurance and Trust Company in August 1857. The company’s collapse exposed problems in railroad financing and speculation. Railroads had expanded rapidly, and their securities were widely held by banks and investors. When confidence weakened, railroad shares and other assets fell sharply.
The crisis spread beyond the United States. The failure of the New York branch of the Ohio Life company damaged confidence, while the loss of the ship SS Central America worsened financial anxiety by carrying gold from California that could have supported eastern banks. Banks suspended specie payments, meaning they temporarily stopped exchanging paper notes for gold or silver.
The Panic of 1857 occurred during a tense political period before the American Civil War, but it was not caused by the war. It also differed from the later Panic of 1873, whose principal financial shock was associated with railroad investment and the failure of Jay Cooke & Company.