Panic of 1907
The Panic of 1907 – also known as the 1907 Bankers’ Panic or Knickerbocker Crisis – was a financial crisis that took place in the United States. The panic was triggered by the failed attempt in October 1907 to corner the market on stock of the United Copper Company. The 1907 panic eventually spread throughout the nation when many state and local banks and businesses entered bankruptcy. It is the 9th largest decline in U.S. stock market history.
About Panic of 1907 in brief
The Panic of 1907 – also known as the 1907 Bankers’ Panic or Knickerbocker Crisis – was a financial crisis that took place in the United States over a three-week period starting in mid-October. The panic was triggered by the failed attempt in October 1907 to corner the market on stock of the United Copper Company. Primary causes of the run included a retraction of market liquidity by a number of New York City banks and a loss of confidence among depositors, exacerbated by unregulated side bets at bucket shops. The 1907 panic eventually spread throughout the nation when many state and local banks and businesses entered bankruptcy. It is the 9th largest decline in U.S. stock market history. The following year, Senator Nelson W. Aldrich, father-in-law of John D. Rockefeller Jr., established and chaired a commission to investigate the crisis and propose future solutions, leading to the creation of the Federal Reserve System. The fall was always a vulnerable time for the market, but the fall of 1907 was especially so. The stock market slid, losing 7. 7% of its capitalization. Between March 9 and 26, stocks fell a further 9. 8%. The economy remained volatile through the summer. A number of shocks hit the system: the stock of Union Pacific—among most common stocks—fell 50 points; that June an offering of NY City bonds collapsed; the Standard Oil Company was fined 29 million for antitrust violations. In the first nine months of 1907, stocks were lower by 9%. On July 24, Commercial & Commercial Financial Chronicle noted that “the market keeps unstable…
no sooner are these signs of new life in evidence than something like a suggestion of a new flow of gold out of Paris sends a tremble through the list of gold-rich countries” The Standard Standard failed in July in August in August the USD in the copper market collapsed; that August the New York Stock Exchange collapsed; and in September the Standard & Poor’s stock market collapsed. In October, the first bank runs occurred outside the US in Egypt in April and May; in May and June in June in Japan; in October in Chile in October for the early October season for early October for early November for the fall season for the spring season in the UK and Australia. The Panic might have deepened if not for the intervention of financier J. P. Morgan, who pledged large sums of his own money, and convinced other New York bankers to do the same, to shore up the banking system. By November, the financial contagion had largely ended, only to be replaced by a further crisis. This was due to the heavy borrowing of a large brokerage firm that used Tennessee Coal, Iron and Railroad Company as collateral. By late September, stocks had recovered about half of their losses, and the market began a modest correction that would continue throughout the year. The April 1906 earthquake that devastated San Francisco contributed to the market instability, prompting an even greater flood of money from New York to San Francisco to aid reconstruction.