The Panic of 1907 followed a failed attempt to corner United Copper Company shares.
Speculator F. Augustus Heinze and associates believed they could force short sellers to buy United Copper stock at inflated prices. The plan failed, the share price collapsed, and the resulting loss of confidence spread to banks and trust companies linked to the participants. The failure of the Knickerbocker Trust Company in New York became a major turning point.
The panic produced bank runs and a severe liquidity shortage. J. P. Morgan organized private support for the financial system, helping prevent a broader collapse. The episode exposed how dependent the United States was on private financiers during crises.
The Panic of 1907 helped build political support for a permanent central bank. The Federal Reserve System was created in 1913, although it was not itself established during the panic.