The 1907 US financial crisis that prompted the creation of the Federal Reserve was the Panic of 1907.
The panic began after an unsuccessful attempt to corner the stock of United Copper Company. When the scheme failed, depositors withdrew money from banks connected to the speculators, and fear spread through trust companies and financial markets. The Knickerbocker Trust Company’s failure in October 1907 intensified the run and helped turn a localized problem into a national crisis.
J. P. Morgan organized private emergency lending and persuaded banks to cooperate, helping stabilize the system. The episode showed how dependent the United States was on private financiers because it had no central bank capable of acting as a lender of last resort. Congress later established the Federal Reserve System in 1913. The panic therefore links a stock-market crisis to a major institutional change in US finance.