Panic of 1907

The National Banking Act of 1864, which was in place during the Panic of 1907, had shortcomings that were exposed during the crisis. One major flaw was that it did not regulate all banks, contributing to the severity of the financial turmoil.

Sereno Pratt detailed the sequence of transactions involving 'daylight' loans with a maturity of one day, financing stock securities with no effective maturity, showcasing a maturity mismatch with low risk.

The Panic of 1907 started on October 9 when Heinze and Morse's manipulation and speculation of United Copper's stock price failed, leading to a financial crisis.

The Panic of 1907, also known as the 1907 Bankers' Panic or Knickerbocker Crisis, was a financial crisis in the United States triggered by the failed attempt to corner the market on stock of the United Copper Company, leading to a series of bank runs and economic instability.

On October 15, 1907, stock prices started to fall sharply, leading to intensified runs on the banks and trust. The collapse of the Knickerbocker Trust Company was triggered by banks refusing to accept checks from Knickerbocker, causing a chain reaction of financial instability.

On October 16, 1907, F. Augustus Heinze's failed attempt to corner the stock of United Copper Company triggered the Panic of 1907. This event revealed a complex web of interconnected directorates among banks, brokerage houses, and trust companies in New York City, leading to a loss of depositor confidence.

Due to the fear of the impact of their tainted reputations on the banking system, the New York Clearing House compelled F. Augustus Heinze and Charles W. Morse to resign from all banking interests on October 17, 1907. This measure aimed to restore confidence in the financial sector.

The run on Knickerbocker Trust Company started on Friday, October 18, when its president, Charles Barney, was linked to Heinze's copper corner, leading to a series of events that contributed to the Panic of 1907.

J.P. Morgan returned to Wall Street from a church convention in Richmond, Virginia, as the Panic of 1907 unfolded. He played a crucial role in stabilizing the financial system by coordinating efforts to rescue failing banks and restore public confidence.

J.P. Morgan played a crucial role in quelling the panic of 1907 by organizing collective action and instilling confidence in the market. He swiftly returned to New York City from Richmond, Virginia, convened a meeting with leading financiers, and orchestrated the rescue of major institutions over several weeks.

The Panic of 1907 began on Monday, October 21, with the crisis among trust companies and the true onset of the panic in the New York banking system.

On October 22, Knickerbocker Trust experienced a run for three hours before halting operations due to financial strain, ultimately paying out $8 million in cash. This event marked a significant moment during the Panic of 1907, reflecting the challenges faced by financial institutions during the crisis.

The New York Times article on October 23 highlighted the Trust Company of America as a 'sore point' in the panic, leading to a serious run on the institution. This was exacerbated by the fact that Barney, president of Knickerbocker Trust, was also on the board of directors of Trust Company of America.

On October 24, 1907, a financial crisis loomed as the New York Stock Exchange faced the risk of closing due to lack of funds. J.P. Morgan rallied bank presidents to raise $25 million in 10 minutes to prevent the collapse, ultimately securing $23.6 million to keep the exchange afloat.

On October 25, during the stock exchange crisis of 1907, the Morgan group provided about $10 million to stabilize the market. They imposed restrictions to prevent speculation, such as allowing only cash sales for investment and releasing funds later in the day.

During the Panic of 1907, on October 26, the Clearinghouse issued clearinghouse loan certificates as a tactic to increase the supply of currency available to the public. This was done to address the tight money and reserves at banks.

Amidst the financial turmoil, J.P. Morgan intervened to prevent a potential bankruptcy of New York City on October 28, 1907. By purchasing $30 million worth of city bonds, Morgan averted a major crisis and stabilized the city's financial situation.

Between October 21 and October 31, the U.S. Treasury deposited a total of $37.6 million in New York national banks to stabilize the financial situation during the Panic of 1907.

One of the largest brokerage firms, Moore & Schley, faced collapse due to heavy debt and declining stock value. J.P. Morgan called an emergency conference to propose that U.S. Steel Corporation acquire TC&I to save Moore & Schley.

J.P. Morgan, along with U.S. Steel executives, worked to finalize the deal for U.S. Steel to acquire TC&I. President Theodore Roosevelt reluctantly approved the acquisition to prevent a market crash.

The Panic of 1907 lasted for about one month, ending on November 4, after causing significant financial turmoil and leading to reforms in the banking system.

Various issues of the Commercial and Financial Chronicle were published between November 7, 1907, and January 8, 1908, providing insights into the economic and financial events of that period.

The Panic of 1907 concluded with a restoration of liquidity and lender confidence by the first week of January 1908, after about 90 days of turmoil. However, the recession it triggered persisted until June 1908, with full economic recovery not achieved until early 1910.

The study 'Lessons from the Panic of 1907' by Ellis W. Tallman and Jon Moen analyzed the events of the Panic of 1907 to draw insights and lessons that could be applied to future financial crises.

Moen and Tallman's study, published in the Journal of Economic History in September 1992, analyzes the Bank Panic of 1907 with a focus on the role played by trust companies during this financial crisis.

Chapter written by Ellis W. Tallman in 'The Handbook of Major Events in Economic History' discussing the Panic of 1907 and its significance.