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Description edit
"Before reading The Panic of 1907 , the year 1907 seemed like a long time ago and a different world. The authors, however, bring this story alive in a fast-moving book, and the reader sees how events of that time are very relevant for today's financial world. In spite of all of our advances,... read more
Ridiculously Simplified Synopsis edit
Characters/People edit
- Otto Heinze: Add a description of this character.
- Theodore Roosevelt
- J. P. Morgan
- Charles W. Morse
- James Stillman
- Baker
- Judge Gary
- J. Pierpont Morgan
- George Perkins
- George B. Cortelyou
- Jack Morgan
- Charles T. Barney
- Benjamin Strong
- Keynes
- Oakleigh Thorne
- Herbert Satterlee
- Taft
- Schumpeter
- George W. Perkins
- Grant B. Schley
- F. Augustus Heinze
- Loeb
- Henry Frick
- Kuhn
Quotes edit
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“Economic expansion creates rising demands for capital and liquidity”
- Popular Highlights from Kindle Customers
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Between 1894 and 1904, more than 1,800 companies were consolidated into just 93 corporations.
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During 1906, debt market conditions diverged sharply from equities: While stock prices rose, bond prices fell (and thus, interest rates increased).
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Every major financial panic has occurred after an episode of rapid economic growth17
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From 1814 to 1914, the United States saw 13 banking panics—of these, the panic of 1907 was among the worst.
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In a Memorial Day speech at Indianapolis, President Theodore Roosevelt railed that the “predatory man of wealth” was the primary threat to private property in the United States:
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In 1907 three types of banks were in operation: national banks, which were authorized to receive federal deposits and issue government-licensed currency; state banks, which were chartered by state legislatures; and private banks, which ranged from international houses, such as J. P. Morgan & Company and Kuhn, Loeb, to immigrant bankers who ran their businesses out of grocery stores and saloons.
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First, the very existence of a system means that trouble can travel. The difficulties of one financial intermediary can spread to others. Second, the complexity of a financial system means that it is difficult for all participants in the financial system to be well informed—this is called an “information asymmetry” and may motivate perverse behavior that can trigger or worsen a financial crisis.
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Some banks, eager to make profits, unwisely expand their lending to less and less creditworthy clients as the boom proceeds. Then some external shock occurs and the bank directors awaken to the inadequacy of their capitalization relative to the credit risks they have taken; banks reduce or cut off the new loans available to their clients. This triggers a liquidity crisis that drives both a stock market crash and depositor panic.
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The prohibition slashed the volume of finance bills in the London market from $400 million to $30 million by late in the summer of 1907. This meant that American debtors could not simply refinance their obligations in London. As a result, the flow of gold to America suddenly lurched into reverse as gold was remitted to London to settle the payment on finance bills. This further contracted U.S. gold reserves by nearly 10 percent between May and August of 1907 and contributed to a national liquidity drought.5
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Still, research suggests that financial crises will occur where “financial markets are opaque, when regulation and supervision are poor, and when lending is based on collateral rather than expected cash flow due to poor accounting standards. Countries that suffer from longer, costlier, and more systematically destabilizing crashes tend also to suffer from poor transparency, weak macroeconomic policies, and microstructural weaknesses in advance of the asset price bubble.”32
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Authors & Contributors edit
- Sean D. Carr (Author)
- Robert F. Bruner
First Edition edit
Original Language: English
Publisher: Wiley
Country: Add the country of publication.
Publication Date: 2007
ISBN: 047015263X
Page Count: 280
Publisher: Wiley
Country: Add the country of publication.
Publication Date: 2007
ISBN: 047015263X
Page Count: 280
Classification edit
- Library of Congress: Add the Library of Congress Classification.
- Dewey: 330.9730911
Subjects edit
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