Floor of the New York Stock Exchange in 1907. Photo: Helen D. Van Eaton
Background:
Background:
At the time, the young US stock market was in a decline - it was off 25% since the beginning of the year and Wall Street was jittery over the tight money supply.
Trigger: Then along came Otto Heinze with his get-(even)-rich(er)-quick scheme. In October of 1907, Otto, along with his brother, a copper magnate named Augustus Heinze, and the ice king (yup, he sold ice - remember, this was before the age of household refrigerators) Charles W. Morse, aggressively bought shares of United Copper, thinking that they could corner the market on the stock. Their plan failed spectacularly, and immediately bankrupted the trust companies and banks that provided the financing.
Runs on banks immediately ensued as depositors pulled their money from banks that had dealings (or rumored to have dealings) with the trio. In a little less than two weeks in the Panic of 1907, a chain reaction had left 9 trust companies and banks bankrupt.
The Solution: At the time, the United States had no central bank (President Andrew Jackson had abolished the Second Bank of the United States some 6 decades earlier), but we had J.P. Morgan.
Trigger: Then along came Otto Heinze with his get-(even)-rich(er)-quick scheme. In October of 1907, Otto, along with his brother, a copper magnate named Augustus Heinze, and the ice king (yup, he sold ice - remember, this was before the age of household refrigerators) Charles W. Morse, aggressively bought shares of United Copper, thinking that they could corner the market on the stock. Their plan failed spectacularly, and immediately bankrupted the trust companies and banks that provided the financing.
Runs on banks immediately ensued as depositors pulled their money from banks that had dealings (or rumored to have dealings) with the trio. In a little less than two weeks in the Panic of 1907, a chain reaction had left 9 trust companies and banks bankrupt.
The Solution: At the time, the United States had no central bank (President Andrew Jackson had abolished the Second Bank of the United States some 6 decades earlier), but we had J.P. Morgan.
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