The Panic of 1907 : Heralding a New Era of Finance, Capitalism, and Democracy

An authoritative "biography" of one of history's great financial crises with enduring lessons about contemporary finance In this newly-revised second edition, offering 50% entirely new material, The Panic of 1907: Heralding a New Era of Finance, Capitalism, and Democracy, delivers a groundbreaking examination of one of the most consequential crises in financial history. Deftly weaving historical evidence, insightful analysis, and compelling narrative, The Panic of 1907 explains how and why a financial panic unfolds, with lessons that can be applied to our understanding of present-day financial and monetary systems. In the book, you'll find: The reasons why, despite today's stronger monetary regime and risk-mitigation tools, our modern institutions are not immune to future crises Explanations about the development of the United States' Federal Reserve System, which was created in 1913 in direct response to the Panic of 1907 An engaging and entertaining account of an innately fascinating period in financial and economic history, with remarkable leaders and a gallery of rogues An indispensable tale that belongs on the shelves of anyone with an interest in American or financial history, The Panic of 1907 is an expert retelling of one of the most important, but least well-known crises of the last 200 years. Cover Title Page Copyright Page Contents Foreword Acknowledgments Prologue Introduction The Progression of Financial Crisis Causes and Dynamics A Question of Leadership What’s New Here? Plan of the Book Motivating One’s Attention to History Chapter 1 A Buoyant Decade, a Fragile System, and Some Leaders at Its Apex The Boom Wall Street Financial Leaders A Fragile System A Growing Movement for Stability in the United States A Portent Chapter 2 A Shock to the System The Gold Standard and Britain’s Hegemony in Finance The Bank of England Reacts to Gold Exports to the United States Money Conditions Tighten Chapter 3 The “Silent” Crash The Crash Concern about Policy Shifts The Treasury Acts Yet the Slump Continues Treasury Responds Again Then a Rally Roosevelt’s Progressivism Chapter 4 Credit Crunch Worsening Credit Conditions New Liquidity from the U.S. Treasury New York City’s Renewed Difficulties New York City Street Railways Raise Alarms International Disturbances A Stressful Year to Date Chapter 5 Copper King Frederick Augustus Heinze Heinze v. Rockefeller Heinze Enters Banking—with the “Ice King” The Twilight of a Resource-Based Boom Chapter 6 The Corner and the Squeeze The Squeeze Rising Pressure on the Heinzes Executing the Squeeze Squeeze and Delivery of Shares Why the Squeeze Failed Chapter 7 Falling Dominoes The First Domino The Second Domino A Third Domino The Fourth Domino Propagation of Shocks Chapter 8 Clearing House A Patchwork System Fractional Reserves Create Tight Linkages Endemic Instability Run on the Mercantile: NYCH Responds NYCH Defenestrates Heinze and Morse Chapter 9 Knickerbocker An Imposing Edifice The Insurgency by Trust Companies Estrangement from the Clearing House The Geography of Trust The Problem of Dependency A Pillar of the Financial Community Chapter 10 A Vote of No Confidence The End of the Clearing Relationship The Resignation of Charles Barney Morgan Returns to New York City The Problem of Charles W. Morse Knickerbocker Hopes for Assistance The Dilemma Chapter 11 A Classic Run What Prompted the Run? Chapter 12 Such Assistance as May Be Necessary A Fateful Decision: No Rescue for the Knickerbocker Reassurance to Depositors Assistance from the U.S. Treasury A Press Release on Wednesday Morning Strong’s Evaluation of Trust Company of America Chapter 13 Trust Company of America Morgan Attempts to Form a Trust Company Rescue Pool The Purpose of Reserves A Nod from Morgan Union Trust Reneges A Nagging Question Chapter 14 Crisis on the Exchange The Federal Government Lends Assistance A Crisis in Call Money Panic on the New York Stock Exchange Distress Spreads through More Financial Institutions Crisis Returns to the New York Stock Exchange Appealing to the Public Chapter 15 A City in Trouble Criticism and Praise New York Stress: Meeting the Calls of Country Banks Hoarding Imported Gold and More Treasury Deposits NYCH Issues Clearing House Loan Certificates Currency Premium Widens Hope and Optimism New York City Turns to J.P. Morgan . . . Again Severe Pressure Remains Chapter 16 Modern Medici Resolving the Information Problem The Problem of Collective Action in a Diverse Group A Meeting with a Locked Door Chapter 17 Instant and Far-Reaching Relief U.S. Steel Finance Committee Discusses TC&I A Solution in Prospect A Rescue Emerges Would the Government Bar the Deal? Meeting with the President Roosevelt’s Decision Reaction Chapter 18 Turning the Corner Approval of TC&I Acquisition A Final Plan of Support for Ailing Trust Companies Liquidity Rises Encomiums The Lingering Crisis Chapter 19 Ripple Effects Initial Views of the Panic Beyond New York City Then Troubles Spread to the Interior December 1907–January 1908: Signs of Improvement The Real Economy: Deep Immediate Impact Hysteresis Examples of Two Industrial Firms International Impact Social Impact of the Crisis Political Impact Chapter 20 Reckoning and a Split Stopgap Banking Measures A Heightened Focus on Monopolies TC&I Reexamined Attention Turns to Roosevelt Roosevelt Breaks with Taft Chapter 21 Money Trust A Tendency Toward Consolidation Money Trust Investigation Called to Testify The Proceedings The Findings Proposals for Change Reaction to the Report Did the Investigation Prove What It Claimed? Impact Chapter 22 A Central Bank Shift in Orthodox Thinking Necessary, But Insufficient Jekyll Island Report of the National Monetary Commission New Political Landscape A Reserve System Emerges Competing Designs Wilson Decides Perfecting the Fed’s Federal Structure Chapter 23 The Changing Order The Knickerbocker Trust Company The High Tide of Progressivism The Change Agents Outsiders Public Servants Crisis Fighters Chapter 24 Reflections and Lessons Boom Before a Crisis A Vulnerable Financial System Economic Shocks Outbreak of Crisis and Contagion The Crisis Response The Long Tail Coda Technical Appendix: Analysis of Trust Company Diversity and Deposit Runs Sources of Division: Business Model, Market Power, Exposure to Market Discipline Data and Variables Descriptive Statistics Correlations Regression Analysis Discussion Further Research Notes Bibliography About the Authors Index EULA "The "Panic of 1907," as it was called, is considered the third worst stock market crash in history. Historians say it lasted from January 19, 1906, through November 15, 1907. The market crash was primarily caused by a credit crunch in New York that slowly spread across the country. To try to offset the decline, the U.S. Treasury Department bought $35 million worth of government bonds. The Panic of 1907 aims to discuss the drivers of this crash and the major players involved, including F. Augustus Heinze and his bank, Knickerbocker Trust, as well as what lessons we have learned and can continue to learn from the panic"-- Provided by publisher