USA HISTORY

Detailed explanation-1: -Loose Lending by the Second Bank of the United States One cause of the Panic of 1819 was bank’s lending practices. Banks allowed too many banking notes and lines of credit to be released that were not backed by hard currency.

Detailed explanation-2: -The Second Bank of the United States (SBUS), itself deeply enmeshed in these inflationary practices, sought to compensate for its laxness in regulating the state bank credit market by initiating a sharp curtailment in loans by its western branches, beginning in 1818.

Detailed explanation-3: -As the economy ground to a halt in 1819, many Americans did not have the money to pay off their loans. The Bank of the United States, as well as state and private banks, began recalling loans, demanding immediate payment. The banks’ actions resulted in the Banking Crisis of 1819 and helped lead to the Panic of 1819.

Detailed explanation-4: -The Panic of 1819 was the first major financial crisis in the United States. It featured widespread foreclosures, bank failures, unemployment, and a slump in agriculture and manufacturing. It marked the end of the economic expansion that had followed the War of 1812.