During the Panic of 1907, which New York trust company’s failure intensified the financial crisis?

During the Panic of 1907, the failure of the Knickerbocker Trust Company intensified the financial crisis.

The Knickerbocker Trust Company was one of New York’s largest trust companies. On October 22, 1907, it suspended operations after a failed attempt by its president, Charles T. Barney, to support speculator F. Augustus Heinze. Depositors rushed to withdraw their money, creating a bank run.

The collapse deepened public fear because trust companies held deposits and made investments but generally kept smaller cash reserves than commercial banks. Runs spread to other institutions, including the Trust Company of America. Financier J. P. Morgan then organized private emergency loans and helped stabilize the banking system.

A common mix-up is to identify the Knickerbocker Trust Company as a commercial bank; it was a trust company. The Panic of 1907 later influenced U.S. monetary reform and helped build support for creating the Federal Reserve System in 1913.