Panic of 1907 Banking
About Panic of 1907 Banking
The Panic of 1907 began when the Knickerbocker Trust Company, the third largest trust company in New York, failed on October 22. Trust companies were unregulated banks that took deposits and made investments. Knickerbocker had financed speculator F. Heinze, whose copper scheme collapsed. Panic spread. J. P. Morgan organized a consortium of bankers to rescue weaker trust companies and prevent systemic collapse. Morgan personally examined the books of trust companies and decided which to save and which to let fail. The crisis led to the creation of the Federal Reserve System in 1913. Without Morgans intervention, the entire US financial system might have collapsed. The crisis showed that no single individual should be the financial systems backstop.
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