The Panic of 1907, 2nd Edition

Chapter 17Instant and Far‐Reaching Relief

They must deal with it as they see fit. I have gone with it as far as I can.¹

—J. Pierpont Morgan, November 3, 1907

Early on Saturday morning, November 2, J. P. Morgan called an emergency conference at the library. There was a new problem on Wall Street.

Collapse threatened one of the largest brokerage houses, and its failure promised to spark another wave of panic. The brokerage firm Moore & Schley, and its senior partner Grant B. Schley, had borrowed more than $30 million from numerous banks, trust companies, and other financial institutions in New York and elsewhere. To secure the loans, the debtors had used the stock of the Tennessee Coal, Iron & Railroad Company (commonly known at the time as Tennessee Coal and Iron, or simply TC&I) as collateral. However, the strained market conditions had raised questions about the value of the TC&I shares, and on Monday many of the banks would likely call in loans to Moore & Schley, and others. If the loans were called and creditors liquidated the TC&I shares en masse, then the market would be flooded with TC&I stock. TC&I’s price would plummet. The risk was that all this would cause Moore & Schley to fail, crash the stock market, and inflame again the financial panic.

Under ordinary circumstances, Moore & Schley’s loans would not have commanded much attention from the major banks and trust companies. However, the unusually heavy demands for cash by depositors now prompted lenders to demand ...