During the Panic of 1907, which U.S. trust company’s failure helped trigger the crisis?

During the Panic of 1907, the failure of the Knickerbocker Trust Company helped trigger the crisis.

The New York institution collapsed on October 22, 1907, after a run by depositors. Its failure intensified fear across the financial system because trust companies held deposits and made loans but operated with fewer reserves and weaker access to emergency support than commercial banks.

The panic followed a failed attempt to corner the stock of United Copper Company. When that scheme unraveled, related banks and brokerage firms faced withdrawals. The Knickerbocker’s president, Charles T. Barney, had connections to the failed operation, which further damaged public confidence.

J. P. Morgan organized private-sector support to stabilize banks and the stock exchange. The episode helped persuade American policymakers that the country needed a central banking system; the Federal Reserve was created in 1913. Knickerbocker Trust is sometimes confused with the Knickerbocker Hotel, but they were separate institutions.