The Panic of 1907, 2nd Edition

Chapter 12Such Assistance as May Be Necessary

If we get help overnight we shall reopen in the morning. If we don’t, we won’t. That’s all there is to it at present. We can’t tell now whether we are going to get help or not.

—G. L. Boissevain, Knickerbocker Trust Company¹

After the Bank of Commerce had announced on Monday, October 21, that it would no longer clear for the Knickerbocker Trust Company, all the other national banks also refused to cash the Knickerbocker’s checks, reflecting their growing unease about the Knickerbocker’s ability to honor the checks for payment. The banks would, however, accept checks for collection on behalf of the Knickerbocker’s depositors, even though those depositors would not be paid until the banks received payment directly from the Knickerbocker. It was in this way that large numbers of checks started arriving at the Knickerbocker late on Tuesday morning, October 22. Throughout the day many other banks were also sending messengers to the Knickerbocker on behalf of clients or customers who had deposits with the Knickerbocker and who sought to collect through other institutions. Ultimately, such exchanges accounted for nearly $5 million of the total disbursed that day, and they quickly overwhelmed the Knickerbocker’s ability to honor them.²

A Fateful Decision: No Rescue for the Knickerbocker

As depositors of the Knickerbocker clamored for their money, J. Pierpont Morgan’s diligence team hurried to review the trust company’s accounts. Later, ...