In the 1820s and 1830s, state governments acted decisively in the face of federal paralysis to build their own transportation and communication networks. Because they possessed legal and political sovereignty, states could create the institutional blueprints for development by legislative fiat, capitalizing on their unique charter powers to establish a financial-infrastructure complex whose reach extended to global capital markets. Moreover, infrastructure promised to underwrite the political dream of a world without taxes. After all, if infrastructure could be debt financed with little up-front cost and creditors paid from the proceeds, then unpopular property taxes might be avoided altogether. But the debt-fueled infrastructure plan was precarious; the debt-fueled infrastructure boom of the 1830s precipitated a financial panic in 1837. Although the flow of credit resumed soon after the Panic, there was soon a wave of sovereign debt defaults and several outright repudiations. This led to legal reforms at the state level meant to curtail government involvement in infrastructure. For several decades, state courts were left to sort out the appropriate scope of public action in the infrastructure field by deciding whether governments were taxing for a truly “public purpose” when they invested in for-profit infrastructure ventures.

William H. Williams arrived in Washington, D.C., and set up his own, independent slave–trading operations in the mid–1830s, shortly before the Panic of 1837 brought an abrupt end to the "flush times" of the preceding years. Slave narratives and travelers’ accounts document the visibility of Williams’ slave pen, dubbed the Yellow House, and the horrors experienced by those held captive inside.