The Panic of 1907

The Panic of 1907 was a banking crisis that nearly brought down the American financial system. A failed scheme to corner a copper stock triggered runs on the banks and trust companies that had funded it, and the panic spread rapidly through New York and beyond as depositors rushed to pull out their money.

With no central bank to stop the collapse, the crisis was halted by the personal action of the financier J. P. Morgan. He locked bankers in his library until they agreed to pool their money to rescue the failing institutions, and his prestige and will steadied the system where no public body could.

It was a remarkable rescue — and a deeply unsettling one. That the stability of the entire nation's economy had depended on the judgment of a single private banker convinced many Americans that the country could no longer do without a central institution to manage such crises.

The Panic of 1907 thus led directly to the creation of the Federal Reserve in 1913. It was the last great American banking panic of the era before a central bank existed — and the crisis that finally produced one.