The
Panic of 1907 – also known as the
1907 Bankers' Panic or
Knickerbocker Crisis – was a United States
financial crisis that took place over a three-week period starting in mid-October, when the
New York Stock Exchange fell almost 50 rom its peak the previous year. Panic occurred, as this was during a time of economic
recession, and there were numerous
runs on banks and
trust companies. The 1907 panic eventually spread throughout the nation when many state and local banks and businesses entered
bankruptcy. Primary causes of the run included a retraction of
market liquidity by a number of
New York City banks and a loss of confidence among
depositors, exacerbated by unregulated
side bets at bucket shops. The panic was triggered by the failed attempt in October 1907 to
corner the market on
stock of the
United Copper Company. When this bid failed, banks that had lent money to the cornering scheme suffered runs that later spread to affiliated banks and trusts, leading a week later to the downfall of the
Knickerbocker Trust Company—New York City's third-largest trust. The collapse of the Knickerbocker spread fear throughout the city's trusts as
regional banks withdrew
reserves from New York City banks. Panic extended across the nation as vast numbers of people withdrew deposits from their regional banks.