Democracy's Lawyer: Felix Grundy of the Old Southwest

15. The Panic of 1819

15 The Panic of  1819 He is solicitous of popularity.    —John H. Eaton he postwar Era of Good Feelings came to an abrupt end with the Panic of 1819. Economic distress led to a dizzying series of initiatives to minimize financial distress. Grundy, at the forefront of the political awakening in 1819, dominated the Tennessee state legislature until the end of his term in 1825. Grundy’s mastery gave him a reputation for legislative wizardry and management and provided an invaluable lesson for his protégé James K. Polk. Factional divisions over banking marked Grundy’s legislative reemergence in 1819, emphasizing again the centrality of access to land and capital in earlynineteenth -century politics. Judge John Overton, cagey, wealthy, and Jackson’s oldest and closest friend, now led what we still call the Blount faction. John H. Eaton and William B. Lewis, Jackson favorites, assisted Overton in West Tennessee , and Hugh Lawson White, Overton’s brother-in-law, and Pleasant M. Miller, Blount’s son-in-law, provided powerful support in East Tennessee. Although Andrew Jackson no longer played the active role of earlier days, he maintained close relationships with the Blount leaders. Andrew Erwin, of Bedford County, another land speculator, by 1819 headed the leading opposition group, whose members were generally united by their hostility to Jackson. Erwin and Jackson had a history of bitter enmity, and the merchant John P. Erwin continued the family’s quarrel from Nashville. The Williams brothers, from East Tennessee, John a U.S. senator and Thomas a state senator, supported Erwin, as did Congressman Newton Cannon, from Middle Tennessee. In an essentially one-party state, where all followed Jeffersonian Republicanism and their own self-interest, factions coalesced behind particular individuals, and personal loyalties and relationships were deter­ minative. T 131 132 � Tennessee In 1815 the Blount faction controlled Tennessee’s two banks. Stephen Cantrell , an ally of John Overton’s, led the Nashville Bank, chartered in 1807. Hugh Lawson White, in Knoxville, founded the Bank of the State of Tennessee in 1811, and Overton served as president of the Nashville branch. Although small, these banks assumed importance when the infusion of federal dollars for equipping troops in the War of 1812 and the expansion of cotton lands called attention to their financing capacity.1 The Blount faction’s control of the two state-chartered banks irked many, particularly in Nashville, a merchant’s town. The mercantile community saw an expanding need for credit, as the fast-growing population wanted to purchase more land and slaves, as well as luxury goods. Accordingly, after Congress chartered the Second Bank of the United States for twenty years in 1816, Nashvillians petitioned for a branch in Nashville. The application, submitted in 1817, included the signatures of sixty influential citizens, headed by Felix Grundy and William Carroll. Grundy and Carroll introduced new elements to the struggles of the Blount and Erwin factions. Neither was identified with any political group, but both lived in Nashville, knew the various faction players , and had significant popularity. Grundy had emerged as the eloquent voice of the West during the War of 1812. Carroll, who had arrived in Nashville in 1810 at the age of twenty-two, operated a successful hardware store and nail factory. Carroll took over as commander of the Tennessee militia upon Jackson ’s promotion to the Regular Army, and after New Orleans he enjoyed a military reputation second only to that of the Hero. Grundy had a professional relationship with Jackson but definitely was not a Jackson intimate; many in the Blount group regarded him with suspicion. Carroll had quarreled with the New Orleans victor.2 The Blount faction effectively opposed the branch bank. After his election to the state legislature, Hugh Lawson White persuaded his colleagues to assess a fifty-thousand-dollar annual tax on any bank in Tennessee not chartered by the state. To achieve this result, he agreed to the chartering of ten new banks in small towns. Since these institutions could become branches of the older banks, and quickly did so, the legislation increased both the capital and the political influence of the old banks and laid the groundwork for a powerful, unified state banking interest.3 Grundy and Carroll fumed. At a public meeting on January 31, 1818, Grundy presented the benefits of having a branch in Nashville, after which attendees adopted resolutions to that effect and declared the taxation law “impolitic and unconstitutional.” A committee made up of Grundy, O. B. Hayes, John...