J. P. Morgan helped stabilize New York’s financial system during the Panic of 1907. The financier organized private support for troubled trust companies and banks when no U.S. central bank existed to provide emergency liquidity.
The panic began after an unsuccessful attempt to corner shares of United Copper Company caused depositors and investors to lose confidence in related financial institutions. Runs spread to Knickerbocker Trust Company and other firms, while the New York Stock Exchange faced severe pressure.
Morgan convened bankers in his library and helped determine which institutions could be supported. He also persuaded banks to provide funds and worked with government officials, including Treasury Secretary George B. Cortelyou. His role showed how dependent the financial system was on a single powerful private banker.
The crisis helped build support for creating the Federal Reserve System. Congress established the Federal Reserve in 1913, giving the United States a permanent central banking structure intended to reduce reliance on improvised private rescues during future panics.