J. P. Morgan helped stop the Panic of 1907 by organizing a private rescue of banks and trusts.
The panic began in October 1907 after an unsuccessful attempt to corner the stock of United Copper Company triggered runs on trust companies. The crisis spread through New York’s financial system, and the Knickerbocker Trust Company failed on October 22.
Morgan gathered bankers in his library and pressed them to provide emergency funds and coordinate support. He also used his influence to secure liquidity for solvent institutions and to help arrange the rescue of the city of New York, which faced difficulty refinancing its debts.
The episode demonstrated the weakness of relying on one private financier as a lender of last resort. The United States created the Federal Reserve System in 1913, partly in response to the instability revealed by the panic. Morgan’s role is sometimes confused with causing the crisis; his best-known role in 1907 was coordinating the response.