l. They had
been using this government money for the discount of loans to business
men, and were not in condition instantly to pay it back. Hence the panic
of 1837. First the New York City banks suspended, soon followed by the
others throughout that State, all sustained in their course by an act of
the Legislature. Suspension presently occurred everywhere else. The
financial pressure continued through the entire summer of 1837, banks,
corporations, and business men going to the wall, and all values greatly
sinking. Boston suffered one hundred and sixty-eight business failures
in six months.

[Illustration: Portrait.]
Martin Van Buren.
From a photograph by Brady.

One of Van Buren's earliest acts after assuming office was to call an
extra session of Congress for September 4, 1837, to consider the
financial condition of the country. When it convened, an increase of the
whig vote was apparent, though the Democrats were still in the majority.
On the President's recommendation, agitation now began in favor of the
sub-treasury or independent treasury plan, still in use to-day, of
keeping the government moneys. This had been first broached in 1834-35
by Whigs. The Democrats then opposed it; but now they took it up as a
means of counteracting the whig purpose to revive a national bank.

There was soon less need of any such special arrangement, as the
treasury was swiftly running dry. In June of the preceding year, 1836,
both parties concurring, an act had passed providing that after January
1, 1837, all surplus revenue should be distributed to the States in
proportion to their electoral votes. It was meant to be a loan, to be
recalled, however, only by vote of Congress, but it proved a donation.
Twenty-eight millions were thus paid in all, never to return. Such a
disposition of the revenue had now to be stopped and reverse action
instituted. Importers called for time on their revenue bonds, which had
to be allowed, and this checked income. This special session was needed
to authorize an issue of ten millions in treasury notes to tide the
Government over the crisis.

[1840]

Another influence which now worked powerfully against the Democracy was
hostility to slavery. This campaign--it was the first--saw a "Liberty
Party" in the field, with its own candidates, Birney and Earle. The
abolition sentiment, of which more will be said in a subsequent chapter,
was growing day by day, and little as the Whigs could be called an