The 1857 financial crisis that caused a major U.S. stock-market collapse was the Panic of 1857.
The panic followed the failure of the Ohio Life Insurance and Trust Company in August 1857. The institution’s collapse exposed fraudulent loans and weakened confidence in banks and businesses. A separate shock came when the SS Central America sank while carrying gold from California, reducing confidence in available financial reserves.
The resulting turmoil spread through banks, railroads, and commodity markets. Railroad securities were especially vulnerable because investors had financed rapid expansion with heavy borrowing. The crisis contributed to a severe recession in the United States, although the disruption was shorter than the later Great Depression.
The Panic of 1857 occurred before the Civil War and is sometimes confused with the Panic of 1837 or the Panic of 1873. Its distinctive starting point was the Ohio Life failure, combined with broader weaknesses in credit and railroad finance.