Panic of 1907

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Crowd of people on Wall Street in October 1907

The panic of 1907 (Engl .: Panic of 1907 , as in 1907 Bankers' Panic known) was a financial crisis in the United States in 1907. The price on the New York Stock Exchange fell here by almost half from their peak in 1906. This caused a panic as the country was already in recession and resulted in numerous bank runs . The crisis quickly spread across the country and resulted in the bankruptcy of numerous smaller banks and companies. The bank runs were caused by the low liquidity of a number of New York banks and the loss of confidence on the part of savers. Some supporters of the Austrian School also argue that the crisis is due to the inflation triggered by the Ministry of Finance in the previous two years .

Causes and course

The financial crisis was triggered in October 1907 by a failed attempt to corn the shares of the United Copper Company . The banks, which had financed this attempt by granting loans and at the same time investing a large part of their reserves at high interest rates with banks of JP Morgan , were now faced with an onslaught of savers who withdrew their deposits en masse. The onslaught spread to related banks. The banks of JP Morgan, which by August 22nd had acquired almost four-fifths of all US cash through skillful interest rate policy and trading in government securities, now refused to pay out the deposits to other banks before the panic ended. This led to the collapse of the Knickerbocker Trust Company , the third largest trust company in New York , on October 21 . Their insolvency in turn alarmed regional banks, which tried to withdraw their reserves from JP Morgan's New York banks, which they also refused; and numerous people across the country began withdrawing funds from their respective regional banks. At that time there was no central bank in the United States capable of adding further liquidity to the market, so the panic might have grown much larger without the intervention of banker Morgan himself. To support the market, Morgan raised large sums of his own fortune and convinced other New York bankers to do the same.

The crisis, which had apparently already been averted, worsened again at the beginning of November when a large New York brokerage house had to take out massive loans. It used shares in the Tennessee Coal, Iron and Railroad Company (TC&I) as collateral and thus put the company's share price under pressure. Morgan convinced US President Theodore Roosevelt, known for his fight against trusts, of the seriousness of the situation and received approval to take over TC&I with his US Steel Corporation in a night-and-fog operation.

In the US Senate , the financial expert Nelson W. Aldrich set up a commission called the “National Monetary Commission” to investigate the origins of the crisis and to make suggestions for improving the financial system. This eventually led to the creation of the privately owned US Federal Reserve in 1913.

Perception in the media

“ A few years ago in the news from the United States, a panic was a panic and nothing more; Now reasons for and details of crises enable thoughtful persons to differentiate between runs on banks by ignorant foreigners and withdrawals by sober-minded investors. "(" A few years ago, the news from the United States was panic, panic and nothing more; now the reasons for and details of crises enable observant people to distinguish between bank rushes by ignorant strangers and withdrawals by prudent investors. " )

What is particularly interesting about the panic of 1907 is the contemporary perception of crisis and criticism in newspapers in Europe and the USA. In comparison with the financial crisis of 2007 , lines of conflict between the “old” and the “new” world can already be identified, which are still relevant today. The New York Times writes, not without self-criticism: " These, jointly, create a disposition to run risks in the ordinary course of business which we in this 'effete old country' would not dare to take - partly for our own peace of mind, partly, it may be claimed, on account of genuine respect for the welfare of others, and partly because bankruptcy is a much more serious thing in Europe than in a new country. “(“ These create, together, an attitude to deal with risks as the normal course of things that we did not dare to accept in this 'worn out old country' - partly for the sake of our peace of mind, partly, one might think, out of genuine respect for the good others, partly because bankruptcy is a much more serious thing in Europe than in a new country. ")

The Times from London strikes in a breach that is also familiar today when it criticizes the circumvention of regulation, which is already possible by simply renaming the actors, in this case “ Trusts ” instead of “Bank”: “ It is a curious mystery that the United States, having laid down stringent rules for bankers and the amount of cash that they have to keep in proportion to deposits, should allow a large group of companies to conduct banking business and evade the law by calling themselves something else. "(" It is a strange mystery that, after the United States has imposed strict rules on bankers and the amount of cash to be kept in proportion to deposits, the United States is supposed to allow a large group of firms to do banking and enforce the law deal by calling themselves differently. ")

German press reviews, on the other hand, tend to reveal resentments about the USA, which only a few years later were to develop fully in the First World War . Possibly it is also the German origin of the actors ultimately triggering the crisis that would rather make them appear as victims.

“The name of F. Augustus Heinze is now on everyone's lips in America, because through him, albeit indirectly, the great crisis that is now moving the world was caused. Heinze had borrowed large sums from New York banks and trust companies, but the tremendous plunge in copper prices has made it impossible for him to meet his obligations. So the avalanche started rolling. "

literature

  • Adolf Hasenkamp: The economic crisis of 1907 in the United States of America . Jena 1908
  • Robert F. Bruner, Sean D. Carr: The Panic of 1907: Lessons Learned from the Market's Perfect Storm . John Wiley & Sons, Hoboken, New Jersey 2007, ISBN 9780470152638 .
  • Charles W. Calomiris, Gary Gorton: The Origins of Banking Panics: Models, Facts and Bank regulation . In: R. Glenn (ed.) Hubbard (Ed.): Financial Markets and Financial Crises . University of Chicago Press, Chicago 1992, ISBN 0226355888 .
  • Tony Caporale, Barbara McKiernan: Interest Rate Uncertainty and the Founding of the Federal Reserve . In: The Journal of Economic History . 58, No. 4, 1998, pp. 1110-1117. doi : 10.1017 / S0022050700021756 .
  • Vincent P. Carosso: The Morgans: Private International Bankers, 1854-1913 . Harvard University Press, Cambridge 1987, ISBN 0674587294 .
  • Ron Chernow : The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance . Grove Press, New York 1990, ISBN 0802138292 .
  • Ron Chernow: Titan: the life of John D. Rockefeller, Sr. . Random House, New York 1998, ISBN 0679438084 .
  • Milton Friedman , Anna Jacobson Schwartz: A Monetary History of the United States: 1867-1960 . Princeton University Press, Princeton 1963, ISBN 0691003548 .
  • Fabian Gail: Crisis and Criticism - The Panic of 1907 . Grin Verlag, Cologne 2012, ISBN 365611661X .
  • Gary Gorton: Clearinghouses and the Origin of Central Banking in the United States . In: The Journal of Economic History . 45, No. 2, August, pp. 277-283. doi : 10.1017 / S0022050700033957 .
  • Gary Gorton, Lixin Huang: Bank panics and the endogeneity of central banking . In: Journal of Monetary Economics . 53, No. 7, 2006, pp. 1613-1629. doi : 10.1016 / j.jmoneco.2005.05.015 .
  • G. Edward Griffin : The Creature from Jekyll Island: A Second Look at the Federal Reserve . American Media, 1998, ISBN 0912986212 .
  • Myron T. Herrick: The Panic of 1907 and Some of Its Lessons . In: Annals of the American Academy of Political and Social Science . 31, 1908, p. 8. doi : 10.1177 / 000271620803100203 .
  • Owen Johnson : The Sixty-First Second . Frederick A. Stokes Company, New York 1913.
  • Charles P. Kindleberger , Robert Aliber: Manias, Panics, and Crashes: A History of Financial Crises (5th ed.) . John Wiley & Sons, Hoboken 2005, ISBN 978-0-471-46714-4 .
  • Sarah McNelis: Copper King at War: The Biography of F. Augustus Heinze , 2nd. Edition, University of Montana Press, Missoula 1969, OCLC 7369533 .
  • Jon Moen, Ellis Tallman: The Bank Panic of 1907: The Role of the Trust Companies . In: The Journal of Economic History . 52, No. 3, 1992, pp. 611-30. doi : 10.1017 / S0022050700011414 .
  • Kerry A. Odell, Marc D. Weidenmier: Real Shock, Monetary Aftershock: The 1906 San Francisco Earthquake and the Panic of 1907 . In: The Journal of Economic History . 64, No. 4, 2004, pp. 1002-1027. doi : 10.1017 / S0022050704043062 .
  • B. Mark Smith: A History of the Global Stock Market; From Ancient Rome to Silicon Valley (2004 ed.) . University of Chicago Press, Chicago 2004, ISBN 0226764044 .
  • Oliver MW Sprague: The American Crisis of 1907 . In: The Economic Journal . 18, 1908, pp. 353-72. doi : 10.2307 / 2221551 .
  • Ellis W. Tallman, Jon Moen: Lessons from the Panic of 1907 . (PDF) In: Federal Reserve Bank of Atlanta Economic Review . 75, 1990, pp. 2-13. . Retrieved August 24, 2009.

Individual evidence

  1. ^ Murray N. Rothbard: The Case Against The Fed , p. 108.
  2. ↑ Fritz Schwarz: Morgan, the uncrowned king of the world . 5th edition. Cooperative publishing house free-trade writings, Bern 1933, p. 13 ff . ( oktave.ch [PDF]).
  3. ^ The New York Times, October 28, 1907
  4. ^ The New York Times, October 26, 1907
  5. ^ The Times - Financial and Commercial Supplement: Investors and Investments. II. The Distribution of Investments; London 25th October 1907
  6. ↑ Berliner Tageblatt: The novel of the copper king. To the New York crisis; Berlin October 27, 1907

Web links

Commons : Panic of 1907  - Collection of Pictures, Videos and Audio Files