J.P. Morgan Locked 120 Bankers in His Library and Wouldn't Let Them Out Until They Saved the Banks

On October 14, 1907, the brothers Otto and Augustus Heinze attempted to corner the stock of United Copper. The shares jumped from $39 to $52 in a single day, then collapsed to $10 over the next forty-eight hours when the corner failed. The Heinzes had borrowed against United Copper at several New York banks and one large trust — the Knickerbocker Trust Company, then the third-largest in the city. When that exposure became public, depositors lined up at Knickerbocker's branch on Fifth Avenue and withdrew approximately $8 million in less than three hours on October 22. The trust suspended operations the same afternoon. Panic spread through the rest of the New York trust system and onto the floor of the stock exchange.

The United States had no central bank in 1907. What it had was J. Pierpont Morgan. On the night of October 24, with the New York Stock Exchange itself threatening to close, Morgan summoned bank presidents to his office and raised $23.6 million in ten minutes to keep brokerage firms solvent. He bought $30 million in New York City bonds when the city ran out of cash. On the night of November 2, with the trust company crisis still smoldering, he gathered roughly 120 bankers in the library of his house at 36th and Madison and reportedly locked the doors at three in the morning, refusing to release them until they had committed $25 million to backstop the weakest trusts.

Industrial production fell 11 percent over the following year. Six years later, on December 23, 1913, Congress passed the Federal Reserve Act, building the institution Morgan had personally been.