James Monroe and a Nation’s Call to Greatness (2009)
But in early-1819, the Panic of 1819 ushered in America's first economic crisis of the century. The Panic of 1819 was caused by the super-inflated prices of Western land speculation combined with shady bank practices, which led to hundreds of banks shutting down. As a result, the largest number of depositors to that point in US History lost their money. One bank in Rhode Island was initially capitalized at $45, yet the bank issued $800,000. Due to such unscrupulous practices, Congress passed a law requiring banks to literally back up their money with specie (coin) or precious metals such as gold.
The "Era of Good Feelings" took another hit when the territory of Missouri applied for statehood in 1819. Secretary of State John Quincy Adams stated that President Monroe believed the crisis could be "winked away with compromise" . . . JQA did not share Monroe's perspective on the matter. The House and Senate, divided due to sectionalism, delayed any decision on adding Missouri as a state to 1820. Monroe was not as unconcerned as JQA believed; the President saw the slavery debate as "menacing" to the tranquility of the nation.
Missouri was added as a "Slave State" without a Northern "Free State" to maintain equilibrium in the U.S. Senate. The South saw that development as long-delayed justice, in that votes in the Senate that ended in a tie were broken by a Northern Vice-President in favor of the North, and in the House, the South was a 105-81 minority to the North. Monroe ordered his Cabinet to avoid engaging in the debate over Missouri with each other in order to try and keep a semblance of equilibrium among its members. Before the end of 1820, Maine petitioned to become a "Free State", and with the
Missouri Compromise (1820), balance returned to the Senate, and the "36 degree 30 minute North" line of latitude was drawn as far west as America's border reached.
By Monroe's 2nd Inauguration on 4 March 1821, time had seemed to pass by the President, in that as the last Founding Father, Monroe was viewed in an increasingly antiquated fashion. In the view of more-and-more Americans, the work of the Founding Fathers was complete, and it seemed that America was looking to the future for their leaders. As 1821 unfolded, Monroe had to deal increasing disappointments, such as Secretary of the Treasury William H. Crawford claiming the federal government had a $7 million surplus, but the reality was a $5 million deficit.
Congress responded by slashing military spending by 75% (from $800k to $200k). Crawford's "mistake" was intentional, in that he wanted to embarrass and discredit Monroe during his 2nd term. In Crawford's mind, a "Zero-Sum Game" existed between him and Monroe, in that a gain by Monroe was perceived as a corresponding loss by Crawford, and vice-versa. In a way, Monroe was a victim of his own political success, in that he had forced the demise of the Federalist Party. With no rival party on which to focus, prominent politicians such as Crawford started to attack others in their own party that were seen as obstacles to their path of towards the Presidency.
Among SecTreas Crawford's goals with his various shenanigans was to also discredit SecWar Calhoun as a potential rival. Monroe stubbornly refused to involve himself in the rivalries in his Cabinet. Monroe became an early "Lame Duck" (a British metaphor for "defaulter") during his 2nd term in many ways. Ironically, by 1821, Monroe was in the same situation as was Madison during his second term, except that Monroe didn't have a "Go-To Guy", as Madison had with James Monroe coming to his (and the nation's) rescue during the War of 1812.