In 1907 one man caused a banking panic that nearly collapsed the US economy, he fixed it with his personal fortune. This is John Pierpont Morgan, he was 70 years old in October 1907 He was not the US government He was not the Treasury He was a private banker who ran J.P. Morgan and Company from a library in his Manhattan townhouse On October 22, 1907, the Knickerbocker Trust Company, New York's third-largest trust, suspended payments A run had started after rumors spread that it had been involved in a failed attempt to corner the copper market The run spread to other trusts and banks within hours people lined up around the block to withdraw their savings Stock prices fell 50% in three weeks • There was no Federal Reserve • There was no FDIC • There was no government mechanism to backstop the panic President Theodore Roosevelt was on a hunting trip in Louisiana The Treasury Secretary had $25 million in reserves The hole was $100 million A group of New York's most powerful bankers met at Morgan's library on 36th Street Morgan locked the doors He did not let them leave until they had agreed on a rescue plan He personally organized $25 million from Treasury, $10 million from New York banks, and enough from trust companies to stop the immediate runs He decided which institutions deserved saving and which did not • He let some trusts fail • He kept others alive • The panic stopped When it was over, Congress spent five years studying what had just happened Their conclusion: one man should not have that much power over the financial system In 1913, Congress established the Federal Reserve The institution created specifically to do what Morgan had done So no private individual would ever need to do it again Morgan died in March 1913 Two months before the Federal Reserve Act was signed into law He never saw the institution he made necessary His estate was valued at $80 million Rockefeller, who was worth $900 million at the time, looked at the number and said: "And to think he was not even a rich man"