Investment Term For The Day - Bank Panic of 1907
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Description
The Bank Panic of 1907 was a short-lived banking and financial crisis in the U.S. that occurred at the beginning of the twentieth century. It resulted from the collapse of...
show moreIt resulted from the collapse of highly-leveraged speculative investments propagated by easy money policies pursued by the U.S. Treasury in the preceding years. This led to runs on New York banks and trust companies that had been financing these risky investments and to shrinking stock market liquidity as smaller regional banks, in turn, drew down their deposits from the New York banks.
Without a central bank to fall back on, leading financiers (most notably J.P. Morgan) stepped in and put their own money on the line to bail out the surviving Wall Street banks and other financial institutions. This event became the impetus for the establishment of the Aldrich Commission and the infamous meeting at Jekyll Island, Georgia, where the foundations for the Federal Reserve System would be laid.
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