Let the people resume business the way they were doing twelve months ago, start everything with a hurrah, and we will forget all about the panic in a day or two.

—President of a local branch bank¹

After announcements on November 4 and 5 of the trust company rescue pool and the U.S. Steel deal to acquire TC&I, the mood in the markets began to improve.² “A tremendous change for the better had taken place and at last we had one day when everyone was hopeful, and all talk of failure and collapse ceased,”³ George Perkins said. The bromides issued by leaders a few days earlier finally seemed to gain traction. On October 23 Treasury Secretary Cortelyou had said, “The general situation here is well.”⁴ Clark Williams, the New York State Superintendent of Banking, said, “the improvement in financial circles is continuing.”⁵ “It is very much improved … the outlook is very good,” said James Stillman in an article subtitled “Getting Back to Normal” on October 29.⁶ Some people believed that the whole episode was simply a matter of lost confidence. Local associations, such as the “Sunshine Movement” and “Prosperity League,” organized to boost economic activity and employment.⁷

Approval of TC&I Acquisition

Tuesday, November 5, was Election Day for state and local races—a banking holiday. That evening at Morgan’s library, the finance committee of the U.S. Steel Corporation formally ratified the plan discussed with Roosevelt to acquire the Tennessee Coal, Iron & Railroad Company. The official announcement was released to the press around 3 a.m., and the reaction was extremely positive. J. P. Morgan & Company, which served as the transfer agent for the deal, would eventually exchange more than $35.6 million of U.S. Steel’s bonds for shares of TC&I stock, thereby saving Moore & Schley. The markets responded buoyantly, showing their first gains in weeks.

A Final Plan of Support for Ailing Trust Companies

Runs at the Trust Company of America and Lincoln Trust—sites of the fiercest depositor runs—ended. Professor Sprague wrote that “confidence was not restored until on November 6 announcement was made that a majority of shares of Trust Company of North America and another trust had been placed under the control of a committee of trust company presidents.”⁸

Under the terms of the trust company rescue pool that Morgan had negotiated with the trust company presidents, the Trust Company of America and the Lincoln Trust placed 66 percent of their securities in the hands of a trustee named by Morgan. To meet their daily cash needs, the firms could use these assets as collateral for loans from the syndicate of trust companies. Morgan also required that a certain percentage of the trusts’ deposits could not be withdrawn for 60 to 90 days. The impact of this plan was immediate. “On Thursday both the Trust Company of America and the Lincoln Trust Company promptly met the demands of their depositors,” the Commercial and Financial Chronicle reported, “and yesterday the runs on both institutions, it was thought, had practically ended.”⁹

The Trust Company of America and the Lincoln Trust received $15 million and $5 million, respectively, through this arrangement. Reports surfaced that efforts were under way to form a depositors’ committee to reopen the Knickerbocker Trust Company. In the coming months, the Knickerbocker would be resuscitated, though not before Charles T. Barney, the trust company’s former president who became embroiled in the schemes of Augustus Heinze and Charles W. Morse, committed suicide in his Park Avenue home on November 14, 1907.

During the next week, President Roosevelt contributed further to these salutary measures by issuing a statement saying that the crisis had passed and announcing that no special session of Congress would be necessary to meet the needs of the present situation because the existing regulations were sufficient. “What is most needed at this time,” wrote President Roosevelt, “is that people should realize how fundamentally sound business conditions in the country are and how absurd it is to permit themselves to get into a panic and create stringency by hoarding their savings instead of trusting safe banks.”¹⁰

Liquidity Rises

The public also learned that a shipment of more than $12.4 million in gold had arrived on November 8 from Liverpool, England, aboard the Lusitania—“the richest cargo that ever came across the Atlantic on a single steamship.”¹¹ J. P. Morgan’s son, Jack, negotiated a $16 million gold loan from the Bank of France, which was announced on November 22.¹² These and other imports brought total gold shipments to the United States from Europe in November and December to over $94 million.¹³

Furthermore, Secretary Cortelyou embarked on another tactic aimed at boosting liquidity and confidence. On November 19, the Treasury invited subscriptions for about $50 million in U.S. gold bonds to finance ongoing construction of the Panama Canal—and $100 million in government notes.¹⁴ By buying these bonds, the banks could use them to increase their issuance of banknotes, thus further alleviating the liquidity drought. Investor interest in the Panama Canal bonds was oversubscribed some 44 times, owing to a speculative appeal in the bonds. However, investor interest in the notes was tepid, having subscribed for merely 15 percent of the issue. Furthermore, the delays in issuing the securities meant that the impact of the tactic was not felt until December, when the recovery from panic was under way. Nonetheless, Cortelyou later argued,

The most potent weapon at such times in bringing a crisis to an end is often as much one of moral effect as of the definite action taken. It has been the history of many great crises in Europe, as well as in this country, that the knowledge that adequate resources existed to avoid disaster was often sufficient to obviate the necessity for employing such resources to their utmost limit.¹⁵

Encomiums

The sense of turning a corner released a nimbus of praise for the efforts of Cortelyou, Morgan, and his circle. On November 1, the Boston Stock Exchange voted a resolution “to express their great and deep admiration for the timely, disinterested, courageous, and wise action of Mr. J. Pierpont Morgan and his associates during the recent crisis … we offer to them, as high‐minded public citizens, who have preferred the good of others to the good of themselves, our heartiest thanks.”¹⁶ The New York Times called Morgan a “genius … colossus … [and] skillful.”¹⁷ The Literary Digest anointed him “The Man of the Hour.”¹⁸ A progressive‐leaning newspaper, the Seattle Star, grumbled that Morgan quelled the crisis because it was in his own personal interest and then grudgingly conceded that “of the man himself there is much good to be written, and we write it gladly.”¹⁹

William Jennings Bryan commended J. P. Morgan’s wisdom and “splendid patriotism”: “Everybody is thrilled with admiration over his magnificent contribution of $25,000,000 in the recent Wall Street stock market slump to help our country.”²⁰ Even labor unions, following Samuel Gompers’s lead, voted resolutions expressing confidence in the banks.²¹ On November 22, Senator John C. Spooner lauded Morgan:

Who stemmed the tide of distrust and suspicion and distrust that seemed to overwhelm the business and people of this country? It was not the Federal government. It helped all it could. It was the strong, patriotic, resourceful bankers and financiers of this great city, led by the uncrowned king of them all, J.P. Morgan, who accomplished more in the way of correcting bad methods, of holding men to the faith involved in trusteeship, than a Congress could do in a dozen years.²²

The next few years would challenge Spooner’s hyperbole.

The Lingering Crisis

Indeed, in contrast to the calming utterances by public officials, the relief over the avoidance of another blow‐up, the backslapping for Morgan and his circle, and the happy thoughts of the “Sunshine Movement,” objective measures suggested that the crisis was hardly over. New rentals of safe deposit boxes declined after the first week of November, but the weekly volume of new rentals continued higher than before the Panic (see Figure 15.2)—evidently, people were still hoarding. The currency premium in Figure 15.6 did not start to decline materially until November 23. The trend of cash outflows from New York to the interior reversed on November 15 but did not return to the average of prior years until December 20 (see Figure 15.1). Clearing house loan certificates remained outstanding in New York city until the last certificate was canceled on March 28—in Macon, Georgia, loan certificates circulated until May 1.²³ Net gold imports began to subside in the week of December 7 (see Figure 15.3). The spreads between high and low quotations of call money interest rates did not subside back to the noise level until January 10, 1908 (see Figure 14.2). Thus, the quantitative measures suggested that the financial disturbance lasted well beyond public statements of leaders in business and government.

The recession that began in May 1907 would run until June 1908, sacrificing jobs, businesses, and aspirations for millions of people. The broad stock market index would not recover to the level of its previous peak in September 1906 until August 1909. And the debtors and creditors who were severely chastened by the panic would not return to the peak borrowings of August 1907 until September 1908.²⁴

Yet the financial indicators tell but part of the long tail of the Panic. The wrenching experience tipped public attitudes toward government intervention in financial markets. In November, the governors of Oregon, Nevada, and California declared legal holidays, which had the effect of closing the banks entirely. Bank holidays constrained consumers and business leaders and therefore slowed the return to normal market conditions. But they also dampened manic behavior. And an announcement on November 19 by Secretary Cortelyou of a new measure for expanding the volume of currency in circulation indicated that the scarcity of cash remained chronic.