The U.S. stock-market crash that followed the October 1907 failure of Knickerbocker Trust was the Panic of 1907.
The panic began after an unsuccessful attempt to corner shares of United Copper Company. When the scheme failed, depositors rushed to withdraw money from institutions connected to the speculators, including Knickerbocker Trust. The resulting loss of confidence spread through New York’s financial system and into stock and credit markets.
The United States had no central bank at the time, leaving private financiers and clearinghouses to provide emergency support. J. P. Morgan played a prominent role in coordinating loans and persuading banks to maintain liquidity. The crisis exposed weaknesses in the country’s fragmented banking structure. In response, Congress created the National Monetary Commission, whose work contributed to the Federal Reserve Act of 1913. The Panic of 1907 was therefore both a market crisis and a major institutional turning point.