The Panic of 1907, 2nd Edition

Chapter 23The Changing Order

And slowly answer’d Arthur from the barge: “The old order changeth, yielding place to new.”

—Alfred, Lord Tennyson, Morte d’Arthur (1842)

Tennyson’s poem would have been familiar to Morgan, Roosevelt, and other participants in the Panic of 1907. It was a staple of assignments for high school and college students in the late nineteenth century. And its reference to a changing order must have haunted them as they dealt with the lingering effects of the panic. The old order was changing. How did the Knickerbocker emerge from its calamity—and what did this emergence presage for trust companies? Did the Progressive Movement sustain its momentum beyond the Federal Reserve Act and other achievements of President Wilson’s first term? And what became of the leading protagonists in the Panic of 1907?

The Knickerbocker Trust Company

One of the sharpest points of contention in 1907 and since was the failure of the New York City financial community to assist the Knickerbocker Trust Company. After its suspension on October 22, 1907, the Knickerbocker went into the hands of receivers. The New York State Superintendent of Banks oversaw a resolution process that hinged on two questions. First, was the trust company insolvent, or was it merely illiquid? Chapter 9 discusses the significance of this question. Second, if the trust company was solvent, what steps should be taken to resume operation?

To answer the first question, the Superintendent of Banks ordered ...