Bank Panic of 1907

In a three-week period starting October, 16, 1907, the New York Stock Exchange fell to a level 50% below its previous year's peak. It was a wealth-ectomy on the richly invested.

The impetus for the panic was two greedy scalawags, a Mr. Heinze and a Mr. Morse. They tried to "corner the market" in terms of a company called United Copper. "Corner the market" means to obtain controlling interest just shy of a monopoly in an attempt to manipulate the copper market in the U.S. They failed. However, the failure caused a residual impact of people wanting to disassociate from them.

That need to disassociate was interpreted as bank insolvency, which caused a level of anxiety, which became a fear. People wanting their money out of banks associated with Heinze and Morse caused numerous runs on banks and trust companies. The U.S. was already in a recession, and the impact of this local panic rippled outwards throughout the U.S., to the point that many state and local banks and businesses entered bankruptcy.

Heinze and Morse were minor speculators and minor participants in the financial world, but the fear they caused preyed upon the lack of liquidity of banks in the New York area. That scare began to shape U.S. policy in protecting the fragile and vital trust that investors have in the capital markets system of this country.