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Panic of 1907 and J.P. Morgan's rescue
Oct 1907· Crisis or event
Fact, law or dataA rule, statute, definition or measured number.
An October 1907 financial panic in New York, halted largely by banker J.P. Morgan because the US had no central bank.
See it on the Money & Finance map →How it works
A failed attempt to corner United Copper stock in mid-October ruined speculators tied to several banks. Depositors ran on the Knickerbocker Trust, a large, lightly regulated trust company, which suspended payments on October 22; runs spread to others, and overnight call-loan rates on the stock exchange topped 100%. Backed by Treasury deposits and money pooled from other bankers and John D. Rockefeller, Morgan, aged 70, chose which firms to save, and in November locked bankers in his library until they agreed on a rescue fund.
Why it matters
One private banker acting as lender of last resort convinced Congress the country needed a public one, leading to the Federal Reserve in 1913.
Facts, rules and data
Newspapers of the day, bank records and later congressional testimony; Robert Bruner and Sean Carr's The Panic of 1907 (2007) reconstructs it day by day.
Debates and risks
Whether Morgan simply rescued the system or also served his own interests, such as US Steel's purchase of a rival firm during the crisis, is debated.
Connections (2)
▸Panic of 1907 and J.P. Morgan's rescue led directly to Federal Reserve Act (1913): Board and 12 regional banksFact, law or data
The connection
The panic showed the US had no lender of last resort; a 70-year-old private banker had to play the role. Congress responded with the 1908 Aldrich–Vreeland Act and a National Monetary Commission, whose studies and a 1910 draft plan fed into the Federal Reserve Act of 1913.
When and why
Washington and New York, 1908–1913: Senator Nelson Aldrich's commission, the secret Jekyll Island meeting in Georgia, and the final bill by Carter Glass and Robert Owen.
How we know
The National Monetary Commission's published reports and the congressional debates cite 1907 directly; historians broadly agree it was the catalyst.
Debates and risks
How much the final Fed design owed to Aldrich's banker-friendly plan versus Woodrow Wilson's push for public control is debated by historians.
▸Panic of 1907 and J.P. Morgan's rescue spread as a wave of Bank runs: when depositors all want out at onceFact, law or data
The connection
The 1907 panic spread through runs. Once Knickerbocker Trust stopped paying, depositors lined up at other trust companies, fearing they were next, and banks hoarded cash. Each withdrawal forced more selling, pushing up loan rates and freezing credit nationwide, until Morgan's group stopped the runs by supplying cash to sound firms.
When and why
New York City, October 18 to early November 1907: Knickerbocker Trust, then the Trust Company of America, with runs and cash hoarding spreading to other cities.
How we know
Newspapers of the day photographed lines of depositors; bank records and the Comptroller of the Currency's reports document withdrawals and suspensions.
Debates and risks
Why trust companies were hit hardest, and whether access to the bankers' clearinghouse would have stopped the runs, is debated by economic historians.