Venture Catastrophists

In 1907, amidst rising interest rates and a declining stock market, two New York bankers attempted to corner the stock of a copper company. Their scheme collapsed, and depositors at the banks that backed them pulled their money. One bank, Knickerbocker Trust, lacked the capital to withstand the bank run and, four days later, shut down. The rout was on.

 
J.P. Morgan, the nation’s preeminent banker and business leader, saw obligation and opportunity. He gathered the heads of New York’s banks at his Madison Avenue mansion and, the story goes, locked the doors and pocketed the key. “This is the place,” Morgan proclaimed, “to stop the trouble.” First he addressed his obligation: to save the system in which he’d built his wealth. He pledged an $8 million loan ($255 million in today’s dollars) to the next domino after Knickerbocker, the Trust Company of America. Then he convinced a dozen other banks and the U.S. Treasury to deposit $70 million into other vulnerable banks. The “Panic of 1907” subsided. Morgan saved the financial system. Fourteen years earlier, he’d done the same thing.

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Πηγή: profgalloway.com