The worst depression the nation had suffered shattered these hopes within weeks of the inauguration. Neither the president nor the American people were prepared for the financial panic that swept across the country in May 1837. Warnings of a major crisis had been in the air since the beginning of the campaign. Storm signals came from the nation's banking institutions and took the form of extreme pressure on the money market. Discount rates approached 25 percent. Inflation soared, fed by a marked increase in cotton prices. On the eve of the inauguration, workers in New York City rioted to protest the price of food. Newspapers contained ominous reports of potential bank closings. Van Buren was inundated with urgent requests that he act to halt the inflationary spiral. Most correspondents urged the new president to reconsider the Specie Circular of 1836.
Van Buren responded with a thorough reconsideration of Jackson's hard-money order. As he had done so often in the past, he asked his closest confidants to solicit advice from state leaders. This style of decision making was thorough but time-consuming. More than a month elapsed before replies reached Washington. All the while, the financial crisis worsened, so much so that Silas Wright contended it was "nonsense to talk any longer" of the Specie Circular "or any action of the sectional or state governments as either having occasioned the mischief, or as being able to furnish the remedy." Similar sentiments came from Cambreleng, who blamed speculators and friends of a new national bank for manufacturing the crisis. Convinced by these letters that repeal would not alleviate the emergency but would only break with previous policy, Van Buren decided to retain the circular.
On 10 May 1837 the storm struck: New York banks, unable to meet continuing demands for specie, suspended payments, and financial houses across the country quickly did the same. Debtors struggled to meet obligations with depreciated currency. Urban workers, already hurt by rising food prices, now faced the prospect of unemployment. "It would be difficult to describe, or render intelligible in Europe," wrote the British minister, Henry Fox, "the stunning effect which this sudden overthrow of the commercial credit and honor of the nation has caused. The conquest of the land by a foreign power could hardly have produced a more general sense of humiliation and grief."
Van Buren was more disoriented than grief-stricken. On 15 May, with state banks in disarray and government deposits in jeopardy, the president finally issued the call for a special session of Congress to meet in September. Throughout the steamy summer months, Van Buren made preparations for this extraordinary meeting. Never before had his party been called upon to develop a legislative program; the chief executive was accustomed to cautious, deliberate action, not to crisis management. Furthermore, he had always been able to depend upon the support of the press to clarify and explain federal policy.
In the spring and summer of 1837, Democratic newspapers were themselves in a panic. Francis P. Blair, editor of the Washington Globe , the Democrats' national newspaper, lashed out at New York merchants; Thomas Ritchie's Richmond Enquirer rushed to the defense of state banks and refused to consider the president's problems. Even the editor of the Albany Argus refrained from printing editorials supporting Van Buren, fearing that such statements would constitute an attack on New York's beleaguered banks. By his failure to restrain Blair and his inability to rally state editors, Van Buren approached this special session deprived of the normal channels of political communication and persuasion.