- Historic Sites
A Lion In The Street
How J. P. Morgan, like a “one-man Federal Reserve,” calmed the bankers and helped ease the Panic of 1907
June 1957 | Volume 8, Issue 4
The Knickerbocker Trust gave up the ghost at two o’clock on the twenty-second. At once Morgan decided to ask Secretary of the Treasury George Cortelyou to come to New York. While Cortelyou was en route, Morgan instructed his partner Perkins to try to get the presidents of the city’s trust companies to organize for their mutual defense, but Perkins discovered that none of them was willing to call a meeting, fearing that if he did his own institution would be suspected of weakness. Morgan and Perkins then conferred at length with George F. Baker of the First National Bank and James Stillman of the National City Bank, and when Cortelyou arrived at about nine in the evening, their group was closeted with him for hours in his rooms at the Manhattan Hotel. Cortelyou agreed to deposit government cash in the New York banks, but the danger to the trust companies remained.
The most likely scene of future trouble seemed to be the Trust Company of America. This company, one ol the biggest in New York, held a large block of stock in the Knickerbocker Trust as collateral for loans, and rumors connected it with the Heinze copper speculations. That day the company had experienced heavy withdrawals, although not of panic proportions. As a result, Morgan’s committee had begun to look over its records to see if it was worth helping. But in the meantime, nothing further could be done. The conference broke up at two o’clock, Cortelyou and Perkins issuing “reassuring” statements to the newspapers.
These statements, however, did not have a reassuring effect. Evidently, in emphasizing the intention of Morgan to help deserving trust companies, Perkins gave too much stress to the Trust Company of America. Although he later denied referring specifically to that company, some newspapers quoted him as saying that it was “the chief sore point” in the crisis. Perhaps because of this statement, on the morning of the twenty-third long lines of depositors were waiting when the company opened its doors. President Oakleigh Thorne put on extra tellers in an effort to reduce the lines, but they seemed without end. Soon the main lobby was jammed with people, while hundreds more milled about in the street. Attendants struggled desperately to organize the mob; finally the police had to be called in. The huge pile of $11,000,000 in gold and banknotes that Thorne had collected to meet the rush dwindled rapidly. This was panic.
Meanwhile, Morgan’s team of investigators was rushing its evaluation of the company’s assets, while Perkins, with Morgan’s approval, shuttled through the financial district urging the presidents of other trust companies to attend a meeting that Morgan had called for twelve thirty in his office. So long as Morgan was willing to call the meeting, the presidents (now thoroughly frightened) were eager to attend.
By noon President Thorne was in desperate straits. He hurried up Wall Street to tell Morgan that he simply must have help. Morgan promised to do his best, but he was still depending on the other trust companies to save the Trust Company of America by raising a fund to tide it over the crisis. However, when the heads of the trust companies began to drift into his office, they were not in a co-operative mood. Their lack of organization was complete; many did not even know one another and had to be introduced. Morgan outlined the problem and suggested joint action, but when he finished his speech no one said a word. He tried again, but the heads of the largest and most secure companies said flatly that the Trust Company of America’s problem was none of their business and that weak companies would only obtain their just deserts if the panic spread.
While these discussions were going on, Thorne was sending bulletin after bulletin to Morgan describing his dwindling cash reserves. One o’clock: $1,200,000. One twenty: $800,000. One forty-five: $500,000. Two fifteen: $180,000. Still the other companies would not help. Leaving them fruitlessly debating, Morgan went to another office and called for a report from his special crew of experts. These experts had not finished their complicated task, but when Morgan asked one of them whether the company was solvent he was told that it probably was. “This, then,” said Morgan decisively, “is the place to stop this trouble.” Baker and Stillman, who were at hand, agreed; together with Morgan they would supply the cash to keep the trust company going until closing time at three o’clock. Morgan ordered Perkins to the phone. If the company would send over half a million of its best securities as collateral, cash would be provided. This was done, and as Perkins said later, “we kept them open until three o’clock, with cash sent down every few minutes.”