The 1819 U.S. financial panic often called the first major crisis of the American economy was the Panic of 1819.
The panic followed the economic expansion that came after the War of 1812. Banks had issued abundant credit, land prices rose, and farmers and merchants took on debt. When commodity prices fell and banks tightened lending, borrowers struggled to meet payments.
The Second Bank of the United States contributed to the contraction by demanding repayment from state-chartered banks. Bank failures, foreclosures, unemployment, and falling prices spread across the country. The downturn lasted several years and caused severe hardship, especially for farmers and land speculators.
The Panic of 1819 is sometimes confused with the Panic of 1837, another major American crisis linked to credit contraction and land speculation. The earlier panic was especially important because it exposed the instability of the young nation’s banking and credit system.