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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
Herbert L. Satterlee, Morgan’s son-in-law, has left us a graphic picture of Morgan, derby hat set solidly on his head, a cigar clamped between his teeth, his coat unbuttoned, sailing along Nassau Street from the Clearing House to his office. He walked fast, eyes straight ahead, mind engrossed in his problems. Those who recognized him stepped deferentially from his path; those who did not, according to Satterlee, “he brushed aside.” He neither dodged nor wove in and out through traffic nor slackened his stride. “He simply barged along … the embodiment of power and purpose.”
Once again the money was enough to save the Exchange, though by the barest of margins. The situation looked a little better that evening, but Morgan was in conference with financial leaders until after midnight and then with Stillman, Cortelyou, and Perkins at the Manhattan Hotel until the small hours of Saturday morning. It was decided (over Morgan’s strenuous objections) to issue Clearing House certificates in lieu of cash, for the huge sums that Cortelyou had been pouring into the banks were evaporating rapidly. Depositors were simply withdrawing their money and salting it away. Perkins checked with the leading banks of the city and discovered that nearly 2,000 new safe deposit boxes had been rented during the past week.
Psychological warfare was also employed. Cortelyou issued a strong and confident statement to the newspapers, and the bankers set up an information committee and undertook to reach religious leaders with an appeal for optimistic sermons. Saturday showed some improvement, and Cortelyou ostentatiously returned to Washington in order to create the impression that the crisis was over. Morgan also left the city for the weekend.
Sunday was calm and Monday also. There was another shortage of money on the Stock Exchange, but this time the desperate brokers were able to make individual arrangements with their banks and no heroic action was necessary. But the runs on the trust companies went on. No longer did the beleaguered companies try to stop the runs by paying rapidly; now they doled out cash as slowly as possible to conserve their dwindling supplies. Slow payment, however it might conserve funds, did nothing to calm the fears of depositors. Each morning found the grim-faced crowds waiting, many clutching lunch boxes along with their passbooks, determined to remain as long as necessary to collect their money. By Tuesday, despite their appearance of serenity, the men in the inner circle that had gathered around Morgan were desperately worried. “Three o’clock never seemed so long in coming nor so welcome when it did come as on this day,” Perkins reported. On Wednesday the timid officers of the Lincoln Trust Company almost failed to open their doors. Only a tongue-lashing from the House of Morgan kept this company and the Trust Company of America going. On Thursday the State Superintendent of Banks, exasperated by the dilatory tactics of tellers at these institutions, informed them that they must begin to pay off depositors at a reasonable rate or he would close them both. All Thursday afternoon and well into the night the Morgan group discussed the problem. Disgust with the management of the two companies was patent. “The officers seemed hopelessly at sea; we couldn’t get them to get down to business and try to collect their loans or realize on their assets,” Perkins complained later. Yet they must be saved in spite of themselves. “It was not because we were particularly in love with these two trust companies,” he said. “Indeed, we hadn’t any use for their management and knew that they ought to be closed, but we fought to keep them open in order not to have runs on other concerns.”
The entire second week of the panic was made up of muted but deadly serious crises. Suddenly the city government found itself pressed for funds. At a time when money was almost impossible to borrow Morgan underwrote a $30,000,000 bond issue (his price was 6 per cent interest and the promise of fiscal reform by city officials) and saved New York from bankruptcy. The top-heavy credit structure of the nation’s banking system was increasingly complicating the New York situation, for banks all over the country were drawing upon assets deposited in New York institutions. By the end of that week the strain was beginning to tell on everyone. Morgan was an old man; he was plagued by a heavy cold; yet he was up late every night, making vital decisions and assuming immense responsibilities. His partner Perkins had not been to bed before two o’clock for fourteen consecutive nights. Twice within the week he had made secret night trips to Washington to see Secretary Cortelyou. On one of these he left New York in the evening, conferred with Cortelyou from midnight until three, then returned at once to New York, arriving at eight o’clock for a working “day” that extended until three in the morning.