The Panic of 1907

An authoritative "biography" of one of history's great financial crises with enduring lessons about contemporary finance

In this newly-revised second edition, offering 50% entirely new material, The Panic of 1907: Heralding a New Era of Finance, Capitalism, and Democracy, delivers a groundbreaking examination of one of the most consequential crises in financial history. Deftly weaving historical evidence, insightful analysis, and compelling narrative, The Panic of 1907 explains how and why a financial panic unfolds, with lessons that can be applied to our understanding of present-day financial and monetary systems. In the book, you'll find:

• The reasons why, despite today's stronger monetary regime and risk-mitigation tools, our modern institutions are not immune to future crises
• Explanations about the development of the United States' Federal Reserve System, which was created in 1913 in direct response to the Panic of 1907
• An engaging and entertaining account of an innately fascinating period in financial and economic history, with remarkable leaders and a gallery of rogues

An indispensable tale that belongs on the shelves of anyone with an interest in American or financial history, The Panic of 1907 is an expert retelling of one of the most important, but least well-known crises of the last 200 years.

Foreword ix

Acknowledgments xiii

Prologue xv

Introduction 1

Chapter 1 A Buoyant Decade, a Fragile System, and Some Leaders at Its Apex 15

Chapter 2 A Shock to the System 31

Chapter 3 The “Silent” Crash 39

Chapter 4 Credit Crunch 53

Chapter 5 Copper King 65

Chapter 6 The Corner and the Squeeze 73

Chapter 7 Falling Dominoes 83

Chapter 8 Clearing House 91

Chapter 9 Knickerbocker 103

Chapter 10 A Vote of No Confidence 115

Chapter 11 A Classic Run 127

Chapter 12 Such Assistance as May Be Necessary 135

Chapter 13 Trust Company of America 145

Chapter 14 Crisis on the Exchange 155

Chapter 15 A City in Trouble 169

Chapter 16 Modern Medici 185

Chapter 17 Instant and Far- Reaching Relief 195

Chapter 18 Turning the Corner 209

Chapter 19 Ripple Effects 215

Chapter 20 Reckoning and a Split 229

Chapter 21 Money Trust 241

Chapter 22 A Central Bank 257

Chapter 23 The Changing Order 273

Chapter 24 Reflections and Lessons 297

Technical Appendix: Analysis of Trust Company Diversity and Deposit Runs 313

Notes 329

Bibliography 375

About the Authors 399

Index 401

ROBERT F. BRUNER, DBA, is University Professor, Distinguished Professor, and Dean Emeritus at the University of Virginia's Darden Graduate School of Business Administration. His research is focused on corporate finance, mergers and acquisitions, emerging market investment, financial crises, leadership, and general management.

SEAN D. CARR, PHD, is the Executive Director and CEO of the Global Innovation Exchange at the University of Washington. He is an affiliate Associate Professor at the University of Washington's Foster School of Business. His research is focused on new ventures, entrepreneurial finance, technology strategy, and innovation leadership.

In the newly revised Second Edition of The Panic of 1907: Heralding a New Era of Finance, Capitalism, and Democracy, a team of renowned researchers delivers an expertly crafted compilation of historical fact and compelling narrative surrounding the 1907 financial crisis in the United States. In the book, authors Robert F. Bruner and Sean D. Carr describe a series of events that will be of interest to banking theorists, financial historians, and students of business and economics. Through the lens of the 1907 crisis, you’ll explore how and why a financial panic unfolds and how to apply its lessons to the present day.

The authors explain why the presence of a strong monetary system and modern risk mitigation tools do not render contemporary institutions immune to new crises. They also discuss the contributions made by the Federal Reserve System created in 1913 in response to the Panic of 1907.

Taking you through the entire story of the 1907 crash, beginning with the dramatic downfall and suicide of Charles T. Barney—deposed President of the Knickerbocker Trust Company—and ending with the establishment of the Federal Reserve System, The Panic of 1907 incorporates the latest research, scholarship, and popular commentary on the events of that year.

A fascinating tale told with depth, nuance, and clarity, this book presents the full history and economics of the 1907 crash, conveying its causes, consequences, and drama unlike any other resource. It belongs in the libraries of investors, policymakers, Fed watchers, risk professionals, and anyone else with an interest in American financial history.

PRAISE FOR
THE PANIC OF 1907 SECOND EDITION

“This book should be required reading for all central bankers and for anyone interested in the role of financial crises as major historical events. Bruner and Carr have expanded their magisterial analysis from the prior edition to encompass an even wider scope of history and politics. One cannot understand the tragedies of the 20th century without starting here.”
—ANDREW METRICK, Janet L. Yellen Professor of Finance and Management, and Director, Yale Program on Financial Stability, Yale School of Management

“In their unparalleled study of The Panic of 1907, Bruner and Carr provide a model of how one can understand a financial panic. They combine an historically informed, detailed narrative of events with contemporary insights from information economics, which can explain how such upheavals occur. A page-turning chronicle of financial drama if there ever was one.”
—CHARLES CALOMIRIS, Henry Kaufman Professor of Financial Institutions, Columbia Business School, Columbia University

“This welcome new edition of The Panic of 1907 incorporates the substantial outpouring of research its previous edition did much to stimulate. The result is simply the best ‘biography’ of any of history’s major financial crises.”
—RICHARD SYLLA, Professor Emeritus of Economics, Stern School of Business, New York University

“The Panic of 1907 is an invaluable resource for students of financial crises. It reviews the causes of the near meltdown that occurred in 1907 and the mitigating actions taken. And it offers a very useful framework for analysis of both historical and present-day financial crises.”
—MICHAEL E. O’NEILL, Director of Citigroup, Inc (2009-2011) and Chairman of the Board of Directors (2012-2018)

“The Panic of 1907 is a fascinating account of the events and characters involved during the Panic and adds valuable new reference material for this critical event in American financial history, material that will be of primary interest to academic researchers and curious students alike.”
—JON MOEN, Professor of Economics, Department of Economics, The University of Mississippi