Chapter 9

Federalist policy – sell land in 640 acres lots 1796 – at $2.00/acre w/ 1 year to complete

payment Attractive to speculators

Jefferson/Republicans – sought to get the land in the hands of real farmers 1800: 320 acres at $2/acres; 4 years to pay 1804: 160 acres at $1.64; 1820:80 acres at

$1.25; 1832: 40 acres Most land bought originally by speculators

Second Bank of U.S. Added to money supply Stimulated private bank creation

Farmers borrowed to purchase land from speculators Crew cash crops to pay off debts Often exhausted the soil, and had to move

on

Issued bank notes redeemable for specie (gold and silver coins) Issued more notes than deposits of specie

Collapse of British cotton market 33 cents/pound to 14 cents/pound Merchants couldn’t pay their debt, b/c Britain

demanded specie Merchants sought to exchange bank notes for

specie led to a run on the banks

State banks called in loans to obtain specie National Bank also called in loans in specie and

sought redemption of bank notes Banks collapsed; foreclosures; lawsuits for debt

payment

Debtor relief laws (almost all were unconstitutional)

Western states Postponed foreclosures Restricted liquidation sales Closed state banks to creditors Forced creditors to accept bank notes

Some states outlawed all but state controlled banks

The crisis led to demands for expansion of voting rights * voter participation rose from 27%

(1824) to 80 % (1840)

In contrast to Jeffersonian resistance to the risks of capitalism, the court sided with capitalistic commerce Dartmouth v. Woodward – inviolability of

contracts (charters) Sturgis v. Crowninshield – struck down very

liberal bankruptcy laws Gibbons v. Ogden – prevented states from

interfering in competitive elements of the market

Increase in voters Increase in participation in elections Movement toward national conventions

for picking candidates “Jeffersonian” Republicans found their

own candidate – Andrew Jackson

1825 – Treaty of Indian Springs – Creek lands in Georgia and Alabama

Southern states pressured Indians to move

1830 – Indian Removal Act

1831 – Cherokee Nation v. Georgia

1832 – Worcester v. Georgia

1838 – Trail of Tears