judgment of the day, beyond the bounds of reason; it was commonly expected that the higher courts would set it aside, and, as a matter of fact, the Illinois Circuit Court, in July, 1908, found that a fine thus computed "had no basis in any intention or fixt rule discoverable in the statute,' " and was many times confiscatory. The court to whom the case was remanded for retrial directed, in March, 1909, a verdict of acquittal for lack of proper evidence. In this matter, despite an overwhelming and not unfounded dislike to the methods of the Standard Oil Company, public sympathy was with the corporation."

4 Various suits followed the decision of March, 1909, including suits in Texas and Missouri. The most important of these was concluded at St. Louis in November, 1909, the testimony covering 10,000 pages, and other evidences covering 15,000 more. The decision in this case, covering 20,000 words, was rendered in St. Paul. It upheld the Sherman Anti-trust law as a rightful exercise of the power of Congress to control commerce between States and with foreign nations, and declared the Standard Oil Company a combination in restraint of trade. The case was appealed by the company to the United States Supreme Court, which rendered a decision in May, 1911, under which the company was directed to dissolve into its component parts, and was restrained from continuing by any device whatever, directly or indirectly, the illegal combination. The trust had until December, 1911, in which to effect a dissolution. When the dissolution took place certificates for stock in more than thirty companies were sent to owners of stock in the old Standard Oil Company of New Jersey. Small holders received in some of these companies only fractional shares.

THE PANIC OF 1907

BY ALEXANDER D. NOYES1

It had for many years been a cardinal doctrine, in American banking circles, that a panic like those of 1873 and 1893 would never again be witnessed in this country. The ground for this belief lay in the phenomenal increase of our economic strength, the "coordination of American industry" since 1899, the establishment of the gold standard of currency, and, more particularly, the great and concentrated resources of our banks. We have discovered the weak point of this argument; the strain imposed on credit had as greatly exceeded precedent as did the strength of the organism subjected to it. But there were other reasons why the idea of an American commercial crisis in 1907 had not been entertained. One was the fact that predictions of the sort, in 1901 and 1903, had failed so signally of fulfilment. Another was prevalent belief in the "twenty-year cycle" between two great panics.

Even if not prepared, however, for another panic of the sort, the community found itself, as 1907 drew on, in a thickening atmosphere of apprehension. In June, an $8,000,000 iron-manufacturing house went down at New York City; in midsummer, two New York City loans, offered for public subscription, failed to find a market;

1 From Noyes's "Forty Years of American Finances." permission of the publishers, G. P. Putnam's Sons. right, 1909.

By

Copy

in the early autumn, the $52,000,000 New York street railway combination went into receivers' hands, followed, a few weeks later, by the $34,000,000 Westinghouse Electric Company; early in October, the storm broke with the utmost suddenness and violence on the New York banks.

One of the characteristic incidents of the era of speculation, watched by conservative financiers with much uneasiness, had been what was called "chain banking. In New York City half a dozen banking institutions of the second rank had been bought up by a speculating financier. He had used his stock in one institution as collateral on which to borrow money; the proceeds he had used to buy stock in another bank, repeating the process with each new acquisition. Controling his "chain of banks" on such a tenure, he had utilized the whole of them to promote his personal speculations. This had been going on during half a dozen years. On Wednesday, October 16, 1907, one of these institutions, the Mercantile National, of New York City, a bank with $11,500,000 deposits, applied to the other banks of the Clearing-House for help.

While the Clearing-House committee was investigating the Mercantile's condition, financial uneasiness began to spread to the community at large. On Thursday, the committee announced that the crippled bank would be helped through, and an interval of relief occurred. Other events, however, which occurred at the same time, and the demand of the Clearing-House banks that, as a condition for their assistance, all the directors of the Mercantile should resign, disclosed the fact that the bank's predicament had occurred

through misuse of its capital, by its president, in copper share speculation. During the two or three ensuing days, bankers were very generally employed in overhauling accounts of other institutions with which they had engagements. Late Monday afternoon, October 21st, the National Bank of Commerce suddenly announced that it would no longer accept for collection checks of the Knickerbocker Trust Company. With the next day's opening, a run began on that institution, a concern with 17,000 depositors and total deposit liabilities of $35,000,000. By noon the Knickerbocker had closed its doors; next day, nearly every trust company in the city was besieged by a line of panic-stricken depositors. Nothing like this had been seen in New York City since 1873; even in 1884 and 1893, the New York bank runs were confined to one or two crippled institutions. The extraordinary phenomena which followed the Knickerbocker failure can not be understood except by a glance at the nature and history of the institutions on which the panic of 1907 now converged.

The Knickerbocker closed its doors on October 22d; that night, certain other trust companies sought aid from the banks to safeguard them against a run. Knowledge of this conference, reported next morning in the daily papers, brought the run at once; and long before business opened on October 23d, lines of depositors had formed outside the doors of other companies. The Knickerbocker had catered especially to the so-called "up-town clientage" of the shopping and residence district; its main competitor in this line of business had been the Lincoln Trust Com

pany, with something like 8,000 depositors and demand deposits of $16,000,000. On Broadway and Wall Street, the Trust Company of America had accumulated $42,000,000 demand deposits from 12,000 separate depositors. Against these demand liabilities the Lincoln had been keeping $1,100,000 in its cash reserve and the America $3,200,000.

On these two institutions there now converged such a run as was probably never witnessed in the history of banking. It must be remembered that banks and other trust companies, to whom the beleaguered institutions were indebted, or with whom checks on the Lincoln or America were deposited, had no other way of collecting than by stationing messengers in the line of frightened depositors; this was the punishment for the events of 1903.

Recognizing the gravity of the crisis, the Secretary of the Treasury, Mr. Cortelyou, came on at once from Washington, and arranged to deposit $35,000,000 of the Government surplus with the national banks, by whom it was hurriedly advanced to the trust companies against their liquid assets. This great sum was almost instantly engulfed in the withdrawals by depositors; the Trust Company of America alone had to pay out $34,000,000 to depositors. The runs con

tinued fourteen successive days, depositors holding their places in line by night to get a chance to withdraw their funds next day. Ten million dollars cash provided by other institutions went with the rest; the run was not stopt until, on November 6th, the older trust companies had organized in committee to assume responsibility