The Panic of 1907 followed the failed attempt to corner the shares of United Copper. Speculators F. Augustus Heinze and Charles W. Morse believed they could force short sellers to buy shares, but the scheme collapsed when the expected short position proved much smaller than anticipated.
The failure damaged confidence in banks connected to the speculators. Depositors began withdrawing funds, and a run spread through trust companies in New York. The panic intensified after the Knickerbocker Trust Company failed, but the United Copper episode was an important early trigger rather than the only cause.
J. P. Morgan organized private financial support and persuaded other bankers to provide liquidity. The crisis exposed the weakness of a banking system without a central bank able to act as lender of last resort.
Congress later created the National Monetary Commission to study the problem. Its work helped lead to the Federal Reserve Act of 1913 and the establishment of the Federal Reserve System.