Financial crises are nothing new in American history. The Panic of 1819 was the first of them, and it was one about which Jefferson had strong feelings. For several years, he had been watching the unregulated banking system of the time careen wildly out of control and predicted that sooner or later there would be a crash that would drag down both the guilty and the innocent. He was right about that, of course, but being right did not mean that he escaped the effects of the Panic. He had made what turned out to be the mistake of endorsing the note of his grandson’s father-in-law, Wilson Cary Nicholas, and when Nicolas’s web of speculations collapsed in the Panic, Jefferson was left to pay the bank from which Nicholas had borrowed. He could not and, that was a major reason he died insolvent. None of this sounds unfamiliar to us — it’s the sort of thing we read about all too frequently these days.
What is different is that Jefferson did not expect the federal government to step in and relieve the suffering the Panic had brought. Nor did it. Time and the workings of the business cycle produced a return to prosperity — and another bubble, the one that burst in 1837. That was the pattern that repeated itself for the rest of the century and on into the next. Jefferson would not have been surprised by that, though he would have deplored the consequences. One suspects he would not have approved the solutions the twentieth century finally adopted, Keynesianism and big government, just as one suspects that he found have found the role of financial institutions in our latest difficulties all too predictable.
Herb Sloan is professor of history at Barnard College.