Reasons:

1. European market for goods from America started to decline in the start of 1857. This is mainly because of the conclusion of Crimean War where soldiers returned to their daily activities there by reducing dependency on American markets.

2. Parallel to this, reluctance to migrate west started to crop in due to which railroad business took a hit. This led to the reduction in railroad bonds and the investors started to face pressure. Many rail roads either shutdown or declared bankrupt. Pay of workers was also cut. Land speculations were also seriously disturbed.

3. Farmers began to default on their loans due to lack of market and this added to the pressure as well.

4. Supreme Court declared that Scott was not a US citizen as he is a black and hence cannot argue his case for independence from slavery in the Dredd Scott vs Sanford Case. This means even less settlers and the security values fell down and started the debate between slavery and freedom.

5. 1857 rebellion in India due to which the British had to empty other areas to send forces to India required heavy amounts of money. In the summer of 1857, Britain discreetly withdrew large amounts from American firms to support the war effort in India

6. SS Central America sank with 30,000 pounds of gold destined for Eastern Banks from San Fransisco

These events, all occurring at the same time created a massive disruption in the American economy. On 24 Aug 1857, Ohio Life Insurance and Trust Co filed for bankruptcy starting the Panic of 1857.

Added to this, India stopped supplying cotton to Britain due to which it had to look at markets elsewhere. The main one was Southern parts of USA which needed extensive slave workforce. This meant more money for the South while North reeled under economic pressure and the South was not ready to lose in the name of freedom for slaves. The ensuing profits culminated in the American Civil War

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