Which U.S. financial institution's failure in 1907 helped prompt the creation of the Federal Reserve System?

The failure of the Knickerbocker Trust Company in 1907 helped prompt the creation of the Federal Reserve System.

Knickerbocker Trust, then one of New York's largest trust companies, suspended operations on October 22, 1907. The failure followed a failed attempt to corner the stock of United Copper Company and a loss of public confidence in institutions connected to the scheme.

Depositors withdrew money from other trust companies, producing a severe liquidity crisis. J. P. Morgan organized private support for banks and trust companies, while the U.S. Treasury supplied funds. The panic eventually eased, but it exposed the weakness of a financial system without a permanent central bank able to act as lender of last resort.

Congress later created the National Monetary Commission to study reform. Its work contributed to the Federal Reserve Act of 1913. Knickerbocker Trust did not itself cause every part of the panic, but its collapse became the crisis's most visible early failure.