History of Crises under the National Banking System（National Monetary Commission）

Claims Supported by This Source

1. The Crisis of 1907 began on October 16 with a failed attempt to corner United Copper stock, which Sprague describes as "a gamble in copper which would not ordinarily have possessed any public importance." Heinze's Mercantile National Bank was supported on the condition of a clearing house examination and the resignation of its entire management, reopening with new management on October 21 (pp. 245–248).
2. Morse was a director of seven banks and controlled three, having gained control through a chain of purchases, using stock from one bank as collateral to buy stock in the next. The clearing house investigated his methods in 1902 but took no action. On October 19, two Morse-affiliated banks requested assistance, which was conditioned on Morse's retirement from banking (pp. 247–248).
3. On October 12, the deposits of the five involved clearing house member banks were $56,000,000, or $71,000,000 including three non-member institutions. The member banks prepared a fund of $10,000,000, and by October 21, the clearing house's affairs were settled. "Up to this point there had been nothing which could be called a crisis" (p. 248).
4. Knickerbocker Trust was the third-largest trust company with $62,000,000 in deposits. On Monday, October 21, the National Bank of Commerce announced it would cease to act as its clearing agent the next day. On Tuesday (the 22nd), after a three-hour run in which it paid out $8,000,000, it suspended operations. It reopened the following March under a reorganization plan by depositors and stockholders (p. 251). Its reserves on August 22 were $4,745,000, the largest among the city's trust companies (p. 252, note).
5. In 1903, the clearing house required trust companies that cleared through its members to increase their reserves, and almost all trust companies surrendered their clearing privileges. The exception was the Knickerbocker. Sprague writes that if the Knickerbocker had been a clearing house member bank, it would likely have been supported based on the precedent of 1884 (p. 252).
6. On Wednesday, October 23, a run began on the second-largest Trust Company of America (deposits of $64,000,000), which paid out about $34,000,000 in two weeks ($12,000,000 on Wednesday, $9,000,000 on Thursday). The run on Lincoln Trust began on Thursday. On October 23, a committee of five trust company presidents was established. National banks supplied daily funds by using bonds contributed by the trust companies as collateral for additional government deposits. On November 6, it was announced that a majority of the shares of both companies had been placed under the committee's control, restoring confidence (p. 253).
7. "Without Mr. Morgan's strong influence, no unified action would have been taken." Some trust companies were reluctant to participate in the bailout (p. 254). On Thursday, October 24, Morgan organized a $25,000,000 pool of funds to prevent the collapse of the stock exchange, and another $10,000,000 pool on the 25th (p. 255).
8. The clearing house delayed issuing loan certificates until Saturday, October 26, and simultaneously restricted cash payments. The clearing house president's defense: "Knowing that the issuance of certificates would lead to a nationwide restriction of cash payments, we postponed it day by day, and issued them only after reserves showed a deficit of $53,000,000." Sprague calls the failure to issue them by Tuesday "the most serious error in this crisis" (pp. 256–257).
9. The Secretary of the Treasury deposited $25,000,000 in New York banks on Thursday, October 24, and $36,000,000 between October 19 and 31 (of which $30,700,000 went to the six largest banks). About half the cash paid out by banks in the two weeks to November 2 came from the government. Source: Senate Doc. 208 (The Secretary of the Treasury's response to Senate Resolution No. 33) (pp. 262–265).
10. Loans increased by +$10,800,000 in the week of October 26, +$60,700,000 in the week of November 2, and +$38,900,000 in the week of November 9 (over $110,000,000 in three weeks). The reserve deficit was $38,000,000 on November 2 and about $52,000,000 on November 9. In the last five days of October, 84% of clearing balances were settled with certificates; in November, 96% were (pp. 271–272).
11. Cash payments were not fully resumed until early January, and currency traded at a premium for exactly two months (October 31–December 31). The reserves of New York banks were $224,000,000 on November 2 and $251,000,000 when the premium disappeared. The reserve ratio never fell below 20% (in 1873, it was 12.8%) (pp. 277–279).
12. Gold arriving in New York was about $58,000,000 in November and $38,000,000 in December, for a total of $96,000,000, "larger than in any previous crisis in our country." The driving force was an increase in commodity exports (exports of $411,600,000 and imports of $203,000,000 in the last two months of 1907). The Bank of England raised its bank rate to 7% (pp. 283–284). Between October 26 and December 7, there was a net outflow of $106,921,700 in cash to the interior (p. 285).
13. Nearly 60 of the 106 clearing houses used loan certificates, and more than 20 cities used small-denomination certificates for payments to depositors (p. 289). Cites bank holidays declared by governors in western states, and clearing house resolutions in Atlanta (October 30) and Portland (October 28) (pp. 286–289).
14. Loans by national banks decreased by only 2%, from $4,709,000,000 to $4,624,000,000, between August 22 and December 3. In New York City alone, they increased from $712,000,000 to $775,000,000 (including $54,000,000 in call loans). Clearing house banks took over loans withdrawn by trust companies and country banks (pp. 297–300). Cash held by national banks decreased from $701,600,000 to $660,800,000, while reserves of country banks increased by $47,600,000 (pp. 303–304).
15. Between late August and early December, the money supply increased by $219,000,000 (gold $90,000,000, of which $70,000,000 was imported; silver $5,000,000; banknotes $52,000,000; government deposits $73,000,000). On November 19, the Treasury offered $50,000,000 in Panama bonds and $100,000,000 in 3% certificates, but subscriptions for only $24,631,000 in bonds and $15,436,000 in certificates were accepted. Sprague calls this "unnecessary" and quotes the Secretary's defense ("moral effect") from a Senate Document (pp. 315–317).
16. The only significant bank failure in the week of November 2 was one trust company in San Francisco (deposits of $9,000,000). Liabilities from commercial failures in October were $27,400,000 (compared to $10,553,000 in October 1906). The year 1907 most resembled 1884, the difference being that banks restricted payments (pp. 273–274).
17. Appendix Note J (Report of the Clearing House Committee): The Loan Committee was appointed at noon on October 26 and immediately began issuing certificates using blank forms that had been kept in storage for such an emergency (pp. 427–433).

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