Which trust company’s 1907 failure helped trigger the Panic of 1907 and a severe U.S. stock-market sell-off?

The Knickerbocker Trust Company’s failure helped trigger the Panic of 1907 and a severe U.S. stock-market sell-off.

On October 22, 1907, depositors withdrew millions of dollars from Knickerbocker Trust after its president, Charles T. Barney, was linked to a failed attempt to corner shares of the copper company United Copper. The run quickly exhausted the institution’s available cash, and the company suspended operations.

Knickerbocker was one of New York’s largest trust companies, so its collapse damaged confidence in similar institutions. Banks and investors began hoarding cash, credit tightened, and stock prices fell sharply. The panic spread beyond New York through withdrawals and forced asset sales.

A common mix-up is to call Knickerbocker a bank. It was a trust company, a financial institution that performed banking-like functions but operated under different regulations. The crisis ultimately encouraged creation of the Federal Reserve System in 1913.