On this day in 1857, the New York branch of the Ohio Life Insurance and Trust Company (OLITC) failed, an event often (dis)credited with starting the Panic of 1857. But of course the Panic didn’t really begin there; as with all major financial catastrophes the story is more complicated than it initially appears.

For the origins of the 1857 meltdown, one might look abroad, to the Crimean War, which, starting in 1854, cut European markets off from Russian grain. American exporters rushed to fill the gap, leading to a speculative frenzy in Western lands. By 1856, a brewing specie crisis began causing profound unease in American markets. Summing up the mood of the day, a writer at the New York Tribune asked, “What can be the end of all this but another general collapse like that of 1837?”

Against that backdrop, on August 24, 1857 word spread that a cashier had embezzled money from the OLITC, and that the investment house, lacking funds, would have to suspend payments. With telegraph wires crisscrossing the United States, panic soon gripped the nation, and depositors made runs on banks throughout the country. Those banks had to call in loans to obtain hard currency. Then, shortly after a sell-off devastated Wall Street in September, a ship carrying $2 million from the California gold fields sank in a storm. By October, banks nationwide had suspended specie payments. Commodity prices plummeted, factories shut their doors, railroads declared bankruptcy, hundreds of thousands of people lost their jobs, and land prices deflated. As the economy ground to a halt, immigration dropped in 1858 to its lowest level in more than a decade.

In the end, the Panic of 1857 didn’t last long. By early 1858, the economy had begun to recover. But the political implications of the downturn endured. Republicans tarred Democratic opponents with the Panic brush. It seemed like an odd charge. Democrats, historically, had opposed banking interests — most notably during Andrew Jackson’s assault on the Bank of the United States. But Republicans turned the tables, arguing that a central bank would have kept local banks on a shorter leash, cooling speculative fires in the West. Republicans also insisted that Democrats opposed a variety of policies that would have either helped avoid the Panic or aided its victims — higher tariffs, a homestead act, a Pacific railroad act, and land grants to states that hoped to establish public universities — because they were beholden to the Slave Power. In the conspiratorial political culture of the day, the Panic of 1857 thus moved the nation one step closer to civil war.