J. P. Morgan organized the private rescue effort surrounding the Knickerbocker Trust Company during the Panic of 1907.
The crisis began after a failed attempt to corner the shares of United Copper Company. The collapse damaged confidence in trust companies, which accepted deposits and made investments but were subject to less restrictive reserve rules than commercial banks. Knickerbocker Trust, then one of New York’s largest trust companies, experienced a run and suspended operations on October 22, 1907.
J. P. Morgan convened bankers, examined institutions’ finances, and helped decide which firms could receive emergency support. His intervention included arranging funds for solvent institutions and helping stabilize the wider banking system. The rescue was not a simple bailout of every troubled company; some institutions were allowed to fail.
The Panic of 1907 exposed the weakness of the United States’ fragmented banking system. Its aftermath helped inspire the creation of the Federal Reserve System in 1913, which became the country’s central bank.