The Panic of 1907, 2nd Edition

Chapter 13Trust Company of America

The look of relief on his face when I handed him the first earnest money I shall never forget.

—Benjamin Strong, Jr., Bankers Trust Company¹

The Trust Company of America was in imminent peril. Morgan received the report from Strong at midday on Wednesday, October 23. And then Oakleigh Thorne, president of the Trust Company, called the Corner and told J. Pierpont Morgan that his company’s meager cash supply had dwindled to $1.2 million.

The challenge to the Trust Company marked a significant new chapter in the spread of the panic. Founded in 1885 and headquartered at 27 Wall Street in the heart of the financial district of New York, the Trust Company had the trappings of stability. It was the fifth‐largest trust company in Manhattan by dollar value of deposits and had the third‐largest number of accounts. Yet 55 percent of the firm’s assets consisted of “loans on collateral,” of which a material portion probably were call loans, whose value and risk depended on the level of share prices any given day. Another 17 percent of assets were invested in stocks and bonds—however, listed at historical book value earlier in the year, by October 22, the portfolio of securities was doubtlessly worth considerably less in market value. In short, up to three‐quarters of the firm’s assets were linked to the securities markets, where prices had fallen sharply since the start of the year. Finally, the Trust Company’s clients held relatively smaller balances ...