Related Materials

• Primary Sources: 1907 newspaper reports (New York Times), the Aldrich–Vreeland Act (1908), and the Federal Reserve Act (1913).

• Books: The Panic of 1907 (Bruner & Carr); America’s Bank (Lowenstein).

• Digital Resources: Federal Reserve History, Library of Congress collections on banking and finance.

• Multimedia: PBS’s The Men Who Built America (episodes on J.P. Morgan), NPR’s Planet Money podcasts on financial crises.

• Inference: The crisis revealed that the U.S. financial system was too decentralized and fragile to absorb severe shocks on its own.
• Inference: Delegating a rescue to a single private actor like Morgan highlighted the absence of a durable, institutional mechanism for crisis management.
• Question: Could the panic have been avoided if a robust central bank had existed in 1907?
• Question: How did working-class families and small businesses experience the panic, compared to large investors and banks?
• Question: Did the panic accelerate Progressive Era pressure for regulatory and financial reform?

The following object description information includes basic elements from the Dublin Core Metadata Initiative (DCMI).  An additional notes field is included to list dates from the actual letter, envelope postmark locations, and any other identifying details. 

• Contributing Institution - Piedmont Historical Preservation Society
• Collection Name - Margaret Payne Collection
• Language - English
• Rights - Copyright held by the Piedmont Historical Preservation Society; no reproduction without written consent from the Piedmont Historical Preservation Society.
• Notes – Handwritten letter dated April 23, 1907. Three pages. Includes envelope, postmarked March 29, year illegible, from Piedmont, SC. Envelope may not correspond to actual letter.

Trouble in the Economy

By early 1907, the U.S. economy was already showing signs of fragility. Stock prices had fallen sharply during the first months

of the year, and credit was becoming harder for businesses to secure. Investor confidence was faltering, and economic growth

was slowing.The crisis that erupted later in the year would reveal how precarious the system really was.

Bank Runs and Failing Trusts

The worst phase of the panic began in October with the collapse of the

Knickerbocker Trust Company in New York. The failure was tied to a

speculative scheme involving the copper market. Once that house of

cards collapsed, depositors panicked and rushed to withdraw their funds.

Because there was neither deposit insurance nor a central bank to act as

lender of last resort, even stronger institutions were vulnerable. Lines of frantic customers queuing at bank doors became one of the most vivid images of the crisis. Trust companies were hit especially hard. Unlike many national banks, trusts often operated with lower reserve requirements and engaged more readily in speculative lending. They were not always members of clearinghouses, which limited their access to emergency liquidity support. As fear spread, the withdrawal contagion extended from New York to regional banks across the country, forcing many institutions to suspend operations or fail outright.

J.P. Morgan Steps In

With the financial system teetering on collapse, J. P. Morgan—then the most powerful private banker in the country—played a dramatic role. He returned from a trip and used his personal prestige, wealth, and influence to convene leading bankers in his New York library, effectively orchestrating ad-hoc coordination of capital infusions to shore up failing institutions.

Morgan and his associates helped engineer loans among banks, arranged for the liquidation of troubled firms in an orderly fashion, and pressured wealthy individuals (including John D. Rockefeller) to deposit funds in key banks to restore confidence.

Although he could not (and did not) save every institution, Morgan’s intervention halted the cascade of failures. But the fact that one man had to act as a supplanter for missing public infrastructure exposed a deep institutional weakness.

Bruner, Robert F., and Sean D. Carr. The Panic of 1907: Lessons Learned from the Market’s Perfect Storm. July 6, 2007. ResearchGate. https://www.researchgate.net/publication/228318688_The_Panic_of_1907_Lessons_Learned_from_the_Market’s_Perfect_Storm.

Moen, Jon R., and Ellis W. Tallman. “The Panic of 1907.” Federal Reserve History, December 4, 2015. https://www.federalreservehistory.org/essays/panic-of-1907.

Wikipedia contributors. “Panic of 1907.” Wikipedia, last modified August 4, 2025. https://en.wikipedia.org/wiki/Panic_of_1907.

Terrell, Ellen. “United Copper, Wall Street, and the Panic of 1907: Inside Adams.” Library of Congress, March 9, 2021. https://blogs.loc.gov/inside_adams/2021/03/united-copper-panic-of-1907/.

Nikadesh. “J.P. Morgan.” Medium, December 6, 2020. https://nikadesh.medium.com/j-p-morgan-c2651b3e18de.

What Came After

The Panic of 1907 made it clear to many policymakers and financial leaders that the United States lacked essential stabilizing mechanisms in its banking and monetary systems. In response:

• In 1908, Congress passed the Aldrich–Vreeland Act, authorizing the formation of emergency currency associations and mandating a commission to investigate banking reform.
• That commission—known as the National Monetary Commission—studied central banking models in Europe and proposed structural changes.
• Finally, in December 1913, President Woodrow Wilson signed the Federal Reserve Act, establishing the Federal Reserve System with regional reserve banks empowered to issue currency, rediscount commercial paper, supervise banking institutions, and act as lenders of last resort.

Many of the lessons from 1907—about liquidity, confidence, central coordination, and the dangers of fragmentation—helped shape the architecture of the Fed.

Investopedia Team. “Bank Panic of 1907: Causes, Effects, and Importance.” Investopedia. Accessed October 1, 2025. https://www.investopedia.com/terms/b/bank-panic-of-1907.asp.

Wikipedia contributors. “Panic of 1907.” Wikipedia, last modified August 4, 2025. https://en.wikipedia.org/wiki/Panic_of_1907.