What was the 1907 U.S. financial panic also known as the Knickerbocker Crisis?

The 1907 U.S. financial panic also known as the Knickerbocker Crisis was the Panic of 1907.

The panic began after a failed attempt to corner the stock of United Copper Company. The failure damaged confidence in the Knickerbocker Trust Company, then one of New York’s largest trust companies. A run followed, and the institution suspended operations in October 1907.

Fear spread through banks and financial markets as depositors demanded cash. J. Pierpont Morgan organized private support and persuaded other financiers to help stabilize institutions and markets. The episode demonstrated how dependent the United States was on private banking leadership because it had no modern central bank at the time.

The Panic of 1907 helped build political support for monetary reform. The Federal Reserve System was created in 1913, partly in response to weaknesses exposed by earlier panics. A common mix-up is calling the episode the Knickerbocker Crash; Knickerbocker refers to the trust company whose failure became a major trigger, not the formal name of the nationwide panic.