J. P. Morgan helped stabilize markets during the Panic of 1907 by organizing a private rescue of banks.
The panic began in October 1907 after an unsuccessful attempt to corner the stock of United Copper Company triggered runs on trust companies in New York. Trust companies held fewer cash reserves than commercial banks, making them especially vulnerable when depositors demanded withdrawals. The failure of the Knickerbocker Trust Company intensified the crisis.
Morgan gathered bankers in his library, examined institutions’ books, and directed emergency loans and purchases of securities. His intervention helped prevent a wider collapse, although the Treasury also supplied funds. The episode demonstrated how dependent the United States was on private financial leadership because it had no modern central bank.
Congress responded by creating the National Monetary Commission. Its recommendations contributed to the establishment of the Federal Reserve System in 1913. Morgan did not single-handedly solve every problem, but his coordinated rescue was the most famous stabilizing action of the panic.