The Panic of 1907, 2nd Edition

Chapter 10A Vote of No Confidence

He said that the thing to do was to save the other trust companies and prevent general disaster.

—Herbert L. Satterlee, J. P. Morgan’s son‐in‐law and biographer¹

The failed corner on United Copper and the troubles of a few national banks a week earlier were but early tremors of the financial volcano that erupted on Monday afternoon, October 21. Twin shocks came in rapid succession.

First, after a meeting of the board members of the Knickerbocker Trust Company, the public learned that Charles T. Barney had been asked to tender his resignation. The week before, depositors had run on three banks affiliated with Heinze and Morse, all of which had appealed to the New York Clearing House (NYCH) for aid and received it (subject, of course, to the defenestration of Heinze, Morse, and their associates). The Knickerbocker had been one of three trust company members of the NYCH and had observed the reserve and reporting requirements. Thus, Barney appealed to the NYCH for rescue assistance like what the ailing banks received. However, the clearing house demurred, saying that “the advance of money for the protection of depositors is limited to its own members.”² Given the practice of the NYCH of ousting management of distressed institutions, it seems likely that Barney’s resignation was engineered by Knickerbocker’s board in a final effort to placate the clearing house leaders.

Shortly thereafter, the National Bank of Commerce, the clearing house agent ...