Panic of 1907

The panic of 1907 (English: known Panic of 1907, also known as 1907 Bankers' Panic ) was a financial crisis in the U.S. in 1907, the prices on the New York Stock Exchange fell there by almost half from their peak in 1906 this. . triggered a panic, as the country was already in recession, and led to numerous bank runs. The crisis quickly spread all over the country and had the bankruptcy of many smaller banks and companies result. The bank runs caused by the low liquidity of a number of New York banks and the loss of confidence on the part of savers. Some followers of the Austrian School also argue that the crisis was due to the triggered by the Treasury in the previous two years inflation.

Causes and History

The financial crisis was triggered in October 1907 by the failed attempt to cornern the shares of United Copper Company. The banks that had this experiment funded by the granting of loans, now looked forward to a rush of depositors who withdrew their deposits en masse. The rush spread to affiliated banks and held a week later, the collapse of the Knickerbocker Trust Company, the third largest trust company in New York. Their insolvency in turn alerted regional banks, which now withdrew their reserves of New York banks, and numerous people across the country began with their respective regional banks withdraw their deposits. At that time there were in the United States no central bank, which would have more liquidity in the market can perform, so that the panic without the intervention of the banker JP Morgan may be significantly larger proportions would have been adopted. In order to support the market, Morgan brought a large sum of his own money and convinced other New York bankers to do the same to him.

The seemingly been averted crisis in early November worsened again when a large New York brokerage house had massive borrowing. As collateral used it shares the Tennessee Coal, Iron and Railroad Company ( TC & I), and thus brought the market price of the company under pressure. Morgan convinced the known for his fight against trusts U.S. President Theodore Roosevelt from the seriousness of the situation and got the approval, the TC & I to take over with his U.S. Steel Corporation in a cloak-and - dagger operation.

In the Senate of the financial expert Nelson W. Aldrich established a commission called " National Monetary Commission " to investigate the origin of the crisis and to make suggestions for improving the financial system. This eventually led to the establishment of private U.S. Federal Reserve in 1913.

Perception in the media

" A few years ago in the news from the United States, a panic was a panic and nothing more; Reasons for now and details of crises enable thoughtful persons to differentiate in between runs on banks by ignorant foreigners and withdrawals by sober-minded investors. "

An interesting feature of the panic of 1907 is just the contemporary perception of crisis and criticism in the newspapers in Europe and the United States. Compared with the current crisis can be so already Konfltiktlinien between "Old " and " New " world recognize that are relevant to this day. So writes the New York Times not without self-criticism: "these, Jointly, create a disposition to run Risks in the ordinary course of business Which We in this ' effete old country ' would not dare to take - partly for our own peace of mind, partly, it 'may be Claimed, on account of genuine respect for the welfare of others, and partly Because bankruptcy is a much more serious thing in Europe than in a new country. "

The Times of London hits a day also familiar breach if they criticized the circumvention of regulation that already by a simple renaming of the actors, in this case " trusts " instead of " bank", is possible: curious " It is a mystery did the United States, having laid down stringent rules for bankers and the amount of cash thatthey have to keep in proportion to deposits, shoulderstand allow a large group of companies to conduct banking business and evade the law by calling Themselves something else. "

From the German Press in turn can be more resentment over the U.S. read out, which should come to its full development only a few years later in the First World War. Perhaps it is also the German origin of the crisis ultimately triggering actors which this can be rather appear as victims.

"The name of F. Augustus Heinze is now in America in all people 's lips, because by him, albeit indirectly, the great crisis, which now moves the world has been caused. Heinze had borrowed large sums from the New York banks and trust companies, but by the enormous fall in copper prices, it has become impossible for him to fulfill his obligations. Thus, the avalanche began to roll. "