The Panic of 1792: The History and Legacy of America’s First Financial Crisis

In 1783, the last British troops left the American East Coast port cities of Savannah, Charleston, and New York. The War of Independence was over, and the United States of America finally emerged as an independent nation free from British rule. It was a stunning defeat for the British, but it was no less surprising to the victors – in fact, the man who would become the first president of the new nation, George Washington, described the outcome of the war as 'little short of a standing miracle.'

In many ways, America was unready for self-rule, as many institutions characterizing other nations were either entirely absent or existed only in their infancy. A part of the issue was the way in which the new nation had been created, not as a single entity but as a collection of 13 independent “United Colonies,” each with its own government, laws, and customs. It would not be until almost 100 years later that the people of America would refer to themselves as belonging to a single nation rather than a particular state within a larger union.

It was clear that the “hands-off” policy Congress initially tried to implement simply would not work in terms of the new nation’s finances. Some means had to be found to limit imports, encourage exports, deal with the country’s massive debt, and establish a national bank and sound fiscal policies that would apply to every part of the new union, not just to individual states. Much of that would fall on Alexander Hamilton and Robert Morris, who helped create the financial institutions that would become the heart of the United States' economy, but the story would also be incomplete without a former Continental Congressman named William Duer, who almost destroyed these same institutions through the Panic of 1792.