How did the 'Distribution Act' of 1836 contribute to the financial instability leading up to the Panic of 1837?
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Correct answer: It moved the federal surplus from state banks to the states
The Distribution Act required the federal government to distribute its budget surplus to the states. This forced 'pet banks' to suddenly call in loans to find the cash for the federal government, causing a massive credit crunch.
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More Panic of 1837 questions
- Which international factor significantly worsened the American economic crisis in 1837?
- What was the purpose of the Independent Treasury (or 'Sub-Treasury') system proposed by Martin Van Buren?
- The term 'Pet Banks' refers to which of the following during the 1830s?
- What effect did the Panic of 1837 have on the American labor movement?
- Whig politicians used the economic distress of the Panic of 1837 to argue for which policy?
- Which statement best describes the impact of the Panic of 1837 on state governments?