Which New York bank's failure helped spark the Panic of 1907?

The Knickerbocker Trust Company’s failure helped spark the Panic of 1907.

The trust company became central to the crisis after a failed attempt to corner the stock of United Copper Company. When the scheme collapsed in October 1907, depositors rushed to withdraw funds from Knickerbocker Trust. The institution suspended operations on October 22, and fear spread to other banks and trust companies in New York.

J. P. Morgan then organized private support for threatened institutions and helped coordinate emergency lending. The panic exposed the United States’ lack of a central bank capable of supplying elastic emergency liquidity. Congress later created the National Monetary Commission, whose work contributed to the establishment of the Federal Reserve System in 1913.

A common mistake is to name Morgan as the failed bank. Morgan was a financier who helped contain the crisis; Knickerbocker Trust was the major institution whose suspension became the panic’s immediate trigger. The episode also showed how rapidly rumors and withdrawals could destabilize trust companies that held fewer cash reserves than conventional commercial banks.