October 22^nd – Panic of 1907

On this day, in 1907, a major panic spread through the U.S. financial system that caused the stock market to drop in value by 50%. In the currency of the day this would have been two bits or a jalopy.

Times were already tough due to a recession but bankers thought they could take more, so they went all the way and had a depression. Many banks throughout the entire country weren’t man enough and went into “sissy bankruptcy”, which is a legal term you wouldn’t understand.

The fundamental cause of the crisis was a loss of confidence of New York banks and depositors. They withdrew their funds from the market and didn’t ask that cute girl out because she was way out of their league. The system slowly recovered when depositors were told to “just be yourself.”

The crisis was made worse because the U.S. had no central bank to inject funds into the economy. The central bank had ceased to exist after President Andrew “Hardballs” Jackson let the banking charter expire in 1836. He was also remembered for doing that thing where you use a knife to stab between your fingers on a table.

Without a central bank people were not confident of retrieving their funds from the lender of last resort. Otherwise known as your parents.

The crisis was ended with the guidance of J. P. Morgan who was the President of J. P. Morgan and Co., which was heavily involved in banking and a hot dog stand at the corner of 41^st and Broadway. He rallied bankers to inject much needed funds into the banks to guarantee deposits and rebuild depositor confidence. J. D. Rockefeller, the richest man in the U.S. declared “I will deposit ten million dollars of my own money into the banks and I’m still incredibly wealthy. Will you go out with me?”

At the same time as this crisis, New York City was also in danger of going bankrupt. It wasn’t a good month. In a demonstration of just how great a guy he was, Morgan also purchased thirty million dollars of New York City bonds to save the city. What a guy.