The Panics of 1893 and 1907


The panic of 1893 was caused by a plethora of reasons: railroads were being overbuilt, and in attempts to continue growth companies were buying out each other (in some cases facilitated by Morgan) which threatened their stability; many mines were being opened flooding the market with silver and farmers in the midwest were feeling the effects of a drought making it more difficult to pay off their debts. The faith in the state of the economy was starting to fail causing many bank runs. The Federal Treasury was quickly running out of gold reserves, where President Cleveland was forced to turn to J.P. Morgan to bail out the U.S. government from economic failure. Morgan loaned the treasury $65 million in gold in order to preserve the gold standard and preventing economic collapse.6 


The financial crisis of 1907 nearly crippled the U.S. economy where main New York banks were on the verge of bankruptcy, with no central bank to bail them out. 

Morgan, again, took it upon himself to the U.S. from economy disaster by holding a meeting with the country’s biggest financial titans in his New York mansion and convincing them to bail out various institutions that were in financial trouble. Morgan used his position on power in the many major institutions to stabilize the economic market, he was initially revered by many for helping save the economy. 

Morgan, who reportedly discussed the situation at the stock exchange with other bankers before his meeting with Thomas, told Thomas to announce that $25 million would be available not he exchange floor. After a short time, Steele arrived at the exchange with a list of national banks which, as a group, promised to loan $25 million to the exchange, including $4 million from First National and $8 million from National City. The market borrowed a total of $18.95 million that day”7 

However, in the years following progressive politicians criticized Morgan for having too much control over the economy and using his huge financial might to influence market for his own gain. This led to the Pujo Committee, which questioned Morgan over his actions, which eventually led to the creation of the Federal Reserve System in 1913.  


6. Gary Richardson, “Banking Panics of the Gilded Age” Federal Reserve History 2015

7. Ellis W. Tallman and John R. Moen, “Lessons from the Panic of 1907” Economic Review (1990) 8.