The Panic of 1907, 2nd Edition

Chapter 16Modern Medici

There wasn’t going to be any mistake that night. [  J. P. Morgan] intended that all should stay until the end of the party.¹

—Recollection of Benjamin Strong Jr., Bankers Trust Company

On Saturday morning November 2, conditions on the Exchange in New York remained generally quiet; the market closed as usual at noon with no extraordinary activity. Earlier in the day, the State Banking Examiner had released the weekly bank statement, but the report was so bad that it was suppressed and kept from the press. The biggest troubles were occurring at the trust companies.

The situation at the Trust Company of America and the Lincoln Trust Company continued very poorly—these were the 5th‐ and 16th‐largest trust companies in New York by total deposits at the start of 1907²—and there was talk that one or both would fail to open again on Monday because of continuing runs. Following the failure of the Knickerbocker on October 22, any failure would sharply set back a recovery and might return the financial community to full panic. The funds loaned to trust companies so far had not been sufficient to meet depositors’ withdrawals. And depositors were still unconvinced that their money was safe. Again, the trust company crisis was coming to a head; this time, J. P. Morgan would not provide the solution. He decided it was time for others to come forward.

Resolving the Information Problem

For days, J. P. Morgan’s partner, George W. Perkins, had been trying to get a ...