Review of the Causes of 1907 Panic and Aftermath
DOI:
https://doi.org/10.6000/1929-7092.2020.09.03Keywords:
1907 Panic, Shadow Banks, NY Clearing House, 1906 San Francisco Earthquake and Fire "Silent Crush".Abstract
The Panic of 1907 is often known as the Panic that initiated the development of the Federal Reserve System (Bordo, 1985). The Panic of 1907 was “The beginning of the end of unregulated capital markets and banking system without the lender of the last resort in the United States.†(Fohlin, Gehrig and Haas, 2015, page 2). Numerous causes lead to the Panic of 1907 including: shadow banking, the San Francisco earthquake and fire, stock price manipulation, seasonal agriculture fluctuations, an outflow of gold, and higher interest rates. This paper reviews the primary literature on these causes, and how they led to the Panic of 1907 and the subsequent regulations culminating in the Federal Reserve Bank.
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Betz, Frederick, (Oct 17, 2013). Why Bank Panics Matter: Cross-Disciplinary Theory. Springer International Publishing.
https://doi.org/10.1007/978-3-319-01757-0_11
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Bruner Robert F and Sean D. Carr (2009). The Panic of 1907: Lessons Learned from the Market's Perfect Storm, John Wiley & Sons, April 2009 258 pp.
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Chari, V. V. (1989). ""Banking without Deposit Insurance or Bank Panics: Lessons from a Model of the US National Banking System."" Federal Reserve Bank of Minneapolis Quarterly Review. Summer 1989, 3-19.
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Donaldson, R. Glen. (1993). ""Financing Banking Crises: Lessons from the Panic of 1907,"" Journal of Monetary Economics. February, 31: 69-95.
https://doi.org/10.1016/0304-3932(93)90017-A
Fohlin, Caroline Thomas Gehrig Marlene Haas (April 3, 2015). Rumors and Runs in Opaque Markets: Evidence from the Panic of 1907.
https://doi.org/10.2139/ssrn.2591343
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Gorion (1985). Clearing Houses and the Origin of Central Banking I the US. Journal of Economic History: 45(2): 277-83.
https://doi.org/10.1017/S0022050700033957
Herrick, Clay (1908). ""Trust Companies: Uniform Laws and Reports,"" Banker's Magazine, 77 (Sept. 1908), pp. 375-79.
Kemmerer, E. W. (1910). Seasonal Variations in the Relative Demand for Money and Capital in the United States. National Monetary Commission, US Senate Doc. 588. Washington, DC: GPO.
Kindleberger, C. P. and Aliber, R. Z. (2011). Manias, Panics and Crashes: A History of Financial Crises. Palgrave Macmillan.
King, Gilbert (September 20, 2012). The Copper King’s Precipitous Fall Augustus Heinze dominated the copper fields of Montana, but his family’s scheming on Wall Street set off the Panic of 1907, Smithsonian Institute. https://www.smith-sonianmag.com/history/the-copper-kings-precipitous-fall-44306513/#I12rVZlZtEewEv1u.99
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Miron Jeffrey A. and Christina D. Romer (1990). ""A New Monthly Index of Industrial Production, 1884–1940."" This Journal 50, no. 2 321–37.
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Odell, Kerry A. and Marc D. Weidenmier (Dec. 2004). Real Shock, Monetary Aftershock: The 1906 San Francisco Earthquake and the Panic of 1907 The Journal of Economic History Vol. 64, No. 4 pp. 1002-1027 (26 pages).
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https://doi.org/10.1017/S0022050704043062
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https://doi.org/10.2139/ssrn.2021410
Sprague, O.M.W. (1910). History of Crises under the National Banking Era, National Monetary Commission (Washington: Government Printing Office).
Timberlake, Richard H. (1984). ""The Central Banking Role of Clearinghouse Associations,"" Journal of Money, Credit, and Banking, 41 (Feb. 1984), pp. 1-15.
https://doi.org/10.2307/1992645
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United States History (n.d.). Aldrich-Vreeland Act: Responding to the Panic of 1907. Retrieved from https://www.u-s-history.com/pages/h953.html
U.S. Securities and Exchange Commission (n.d.). Introduction, retrieved form https://www.sec.gov/Article/whatwedo.html
Wicker, Elmus. (2000). Banking Panics of the Gilded Age, New York: Cambridge University Press.
https://doi.org/10.1017/CBO9780511571992
Wilson, B. K. and Rodgers, M. T. (2011). Systemic Risk, Missing Gold Flows and the Panic of 1907. The Quarterly Journal of Austrian Economics.
https://doi.org/10.2139/ssrn.1617468
vol. 7.
Betz, Frederick, (Oct 17, 2013). Why Bank Panics Matter: Cross-Disciplinary Theory. Springer International Publishing.
https://doi.org/10.1007/978-3-319-01757-0_11
Bordo, Michael (1985). ""The Impact and International Transmission of Financial Crises: Some Historical Evidence, 1870-1933."" Revista di Storia Economica. 2, 1985, 41-78.
https://doi.org/10.3386/w1606
Bruner Robert F and Sean D. Carr (2009). The Panic of 1907: Lessons Learned from the Market's Perfect Storm, John Wiley & Sons, April 2009 258 pp.
Calomiris, C. W. and Gorton, G. (1991). The Origins of Banking Panics: Models, Facts, and Bank Regulation. In Financial Markets and Financial Crises, pages 109{174. University of Chicago Press.
Chari, V. V. (1989). ""Banking without Deposit Insurance or Bank Panics: Lessons from a Model of the US National Banking System."" Federal Reserve Bank of Minneapolis Quarterly Review. Summer 1989, 3-19.
https://doi.org/10.21034/qr.1331
Calomiris, Charles and Gary Gorton (1991). ""The Origins of Banking Panics: Models, Facts, and Bank regulation."" In Financial Markets and Financial Crises, edited by R. Glenn Hubbard Chicago: University of Chicago for NBER.
Donaldson, R. Glen (1989), ""Panic, Liquidity, and the Lender of Last Resort"" (Princeton University Working Paper No. 150, Oct. 1989).
Donaldson, R. Glen. (1993). ""Financing Banking Crises: Lessons from the Panic of 1907,"" Journal of Monetary Economics. February, 31: 69-95.
https://doi.org/10.1016/0304-3932(93)90017-A
Fohlin, Caroline Thomas Gehrig Marlene Haas (April 3, 2015). Rumors and Runs in Opaque Markets: Evidence from the Panic of 1907.
https://doi.org/10.2139/ssrn.2591343
Friedman, Milton, and Anna Jacobson Schwartz, (1963). A Monetary History of the United States, Princeton, Princeton University Press.
Gorion (1985). Clearing Houses and the Origin of Central Banking I the US. Journal of Economic History: 45(2): 277-83.
https://doi.org/10.1017/S0022050700033957
Herrick, Clay (1908). ""Trust Companies: Uniform Laws and Reports,"" Banker's Magazine, 77 (Sept. 1908), pp. 375-79.
Kemmerer, E. W. (1910). Seasonal Variations in the Relative Demand for Money and Capital in the United States. National Monetary Commission, US Senate Doc. 588. Washington, DC: GPO.
Kindleberger, C. P. and Aliber, R. Z. (2011). Manias, Panics and Crashes: A History of Financial Crises. Palgrave Macmillan.
King, Gilbert (September 20, 2012). The Copper King’s Precipitous Fall Augustus Heinze dominated the copper fields of Montana, but his family’s scheming on Wall Street set off the Panic of 1907, Smithsonian Institute. https://www.smith-sonianmag.com/history/the-copper-kings-precipitous-fall-44306513/#I12rVZlZtEewEv1u.99
McAndrews, James and William Roberds (1995). ""Banks, Payments, and Coordination,"" Journal of Financial Intermediation (October), pp. 305-327.
https://doi.org/10.1006/jfin.1995.1013
Mcnelis, Sarah (2012). The Biography of F. Augustus Heinze: Copper King at War. Published by ProQuest LLC
Miron J. (1986). Financial Panics, the Seasonality of the Nominal Interest Rate, and the Founding of the Fed. American Economic Review. 1986;76 (1) :125-40.
Miron Jeffrey A. and Christina D. Romer (1990). ""A New Monthly Index of Industrial Production, 1884–1940."" This Journal 50, no. 2 321–37.
https://doi.org/10.1017/S0022050700036469
Moen, Jon and Ellis W. Tallman (1992). The Bank Panic of 1907: The Role of Trust Companies. The Journal of Economic History, Vol. 52, No. 3 (Sep., 1992), pp. 611-630.
https://doi.org/10.1017/S0022050700011414
Moen, Jon and Ellis Tallman (1990). ""Lessons from the Panic of 1907."" Federal Reserve Bank of Atlanta Economic Review, May/June 1990, 2-13.
Odell, Kerry A. and Marc D. Weidenmier (Dec. 2004). Real Shock, Monetary Aftershock: The 1906 San Francisco Earthquake and the Panic of 1907 The Journal of Economic History Vol. 64, No. 4 pp. 1002-1027 (26 pages).
https://doi.org/10.1017/S0022050704043062
Odell Kerry A. and Marc D. Weidenmier (2005). An Earthquake, a Silent Crash, and ""Perverse"" Elasticity Real Shock, Monetary Aftershock: The 1906 San Francisco Earthquake and the Panic of 1907 DOI: University Press: 31 January 2005.
https://doi.org/10.1017/S0022050704043062
Piatt. Andrew, A. (May 1906). ""The Influence of the Crops upon Business in United States."" Quarterly Journal of Economics. 20:3, (May 1906): 323-52.
https://doi.org/10.2307/1882854
Rodgers, M. T. and Payne, J. E. (2012). An Overlooked Central Bank Rescue: How the Bank of France Ended the United States Financial Crisis of 1907. Journal of Economic History.
https://doi.org/10.2139/ssrn.2021410
Sprague, O.M.W. (1910). History of Crises under the National Banking Era, National Monetary Commission (Washington: Government Printing Office).
Timberlake, Richard H. (1984). ""The Central Banking Role of Clearinghouse Associations,"" Journal of Money, Credit, and Banking, 41 (Feb. 1984), pp. 1-15.
https://doi.org/10.2307/1992645
United States House of Representative (n.d.). The Clayton Antitrust Act October 08, 1914. Retrieved from https://history.house. gov/HistoricalHighlight/Detail/15032424979
United States History (n.d.). Aldrich-Vreeland Act: Responding to the Panic of 1907. Retrieved from https://www.u-s-history.com/pages/h953.html
U.S. Securities and Exchange Commission (n.d.). Introduction, retrieved form https://www.sec.gov/Article/whatwedo.html
Wicker, Elmus. (2000). Banking Panics of the Gilded Age, New York: Cambridge University Press.
https://doi.org/10.1017/CBO9780511571992
Wilson, B. K. and Rodgers, M. T. (2011). Systemic Risk, Missing Gold Flows and the Panic of 1907. The Quarterly Journal of Austrian Economics.
https://doi.org/10.2139/ssrn.1617468
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