October 24, 1907: The Panic of 1907

J.P. Morgan

October 24, 1907: The Panic of 1907 hits the New York Stock Exchange, sending stock prices tumbling, and triggering fears of a depression.

The panic was triggered by the failed attempt to corner the market on the stock of the United Copper Company. When the bid failed, banks that had lent money to the cornering scheme suffered runs that later spread to affiliated banks and trusts, leading a week later to the downfall of the Knickerbocker Trust Company, New York City's 3rd-largest trust.

The collapse of the Knickerbocker spread fear throughout the city's trusts as regional banks withdrew reserves from New York City banks. The panic then extended across the nation, as vast numbers of people withdrew deposits from their regional banks, causing the 8th-largest decline in U.S. stock market history.

The panic might have deepened if not for the intervention of financier John Pierpont Morgan, one of the richest men in America, who pledged large sums of his own money, and convinced other New York bankers to do the same, to shore up the banking system. The idea was, if J.P. Morgan was willing to put his fortune and his reputation on the line, they should be willing to do the same. They were.

That highlighted the limitations of the U.S. Independent Treasury system, which managed the nation's money supply, but was unable to inject sufficient liquidity back into the market. By November, the financial contagion had largely ended, only to be replaced by a further crisis due to the heavy borrowing of a large brokerage firm using the stock of Tennessee Coal, Iron and Railroad Company (TC&I) as collateral.

Collapse of TC&I's stock price was averted by an emergency takeover by U.S. Steel Corporation, owned by Morgan since he paid Andrew Carnegie $492 million for it in 1901. (About $17.1 billion in 2022 money.) This move was approved by President Theodore Roosevelt, who, despite having previously picked a policy fight with Morgan and won, knew that letting Morgan have what he wanted was the right move this time. Morgan was pleased to have won one over "the Trust-Buster."

Morgan died in 1913. That same year, United Copper went out of business, and the Federal Reserve Board was established, to help steady the American economy, so that no future panics would cause an economic downturn. It usually works. In 1929, it did not: That crash was so bad, even the Fed couldn't do much about it. Nor could J.P. Morgan Jr., who tried to repeat his father's attempt to prop up the market, and ended up losing 40 percent of his personal fortune as a result. (He lived until 1943.)

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October 24, 1907 was a Thursday. The only sport currently in season in North America was football, and only one game was played: Mississippi A&M beat Mercer, 75-0 at the Columbus Fairgrounds in Columbus, Mississippi.

A&M would be renamed Mississippi State College in 1932, and Mississippi State University in 1958. Mercer University, based in Macon, Georgia, dropped football after the 1941 season due to World War II, and didn't start playing again until 2013, in the Football Championship Subdivision (FCS, formerly known as Division I-AA).