The U.S. stock-market crash associated with the failure of Knickerbocker Trust Company in 1907 was the Panic of 1907. The trust company suspended operations on October 22 after a failed attempt to corner the stock of United Copper.
The failed speculation damaged confidence in trust companies, which were important financial institutions but held fewer cash reserves than commercial banks. Depositors began withdrawing funds, and the panic spread through banks, trusts, and the New York Stock Exchange. The exchange experienced severe pressure as credit became scarce.
Financier J. P. Morgan organized private rescue efforts, gathering bankers and arranging funds to support institutions considered necessary to the financial system. His intervention helped stop the immediate panic, but the crisis exposed weaknesses in the U.S. banking structure.
The Panic of 1907 helped build political support for monetary reform. The Federal Reserve System was created in 1913, providing a central institution intended to supply emergency liquidity and make the financial system less dependent on private coordination during crises.