The Panic of 1857 was a notable sudden collapse in the economy of the United States that occurred in 1857. The collapse ended a period of prosperity and speculation that had followed the Mexican War and the discovery of gold in California in the 1840s.

The immediate event that touched off the panic was the failure on August 24 of the New York City branch of the Ohio Life Insurance and Trust Co., a major financial force that collapsed following massive embezzlement. In the wake of this event, a series of other setbacks shook the public's confidence, including:

• The decision of British investors to remove funds from U.S. banks, which raised questions about overall soundness
• The fall of grain prices, which spread economic misery into rural areas.
• Russia's underselling of U.S. cotton on the open market;
• The piling up of manufactured goods in warehouses, leading to massive layoffs
• Widespread railroad failures, indicating an over-built status of the American railroad system
• The collapse of land speculation programs which depended on new rail routes, ruining thousands of investors

Investor onfidence was further shaken in mid-September when 30,000 pounds of gold were lost at sea in a shipment from the San Francisco Mint to eastern banks. More than 400 lives were lost as well as public confidence in the government's ability to back its paper currency with specie. The ship, SS Central America, had been commanded by William Herndon.

At the suggestion of Howell Cobb, Secretary of the Treasury, President James Buchanan proposed to Congress that the Treasury be authorized to sell revenue bonds for the first time since the Mexican War.

In October, a bank holiday was declared in New England and New York in a vain effort to avert runs on those institutions. Eventually the panic and depression spread to Europe, South America and the Far East. No recovery was evident in the United States for a year and a half and the full impact did not dissipate until the American Civil War.

The U.S. South was hurt less than the other regions of the country and many there concluded that the superiority of their economic system had been vindicated.

The Tariff Act of 1857 that followed reduced the average rate to about 20 percent -- another reduction that was warmly greeted in the South and roundly derided in the North. The tariff was one of a number of major issues that was dangerously increasing the tension between the two regions.