History

ON MONDAY, October 21, 1907, the Na

tional Bank of Commerce of New York

City announced its refusal to clear for the

Knickerbocker Trust Company of the same city. The trust company had deposits amounting to $62,000,000. The next day, following a run of three hours, the Knickerbocker Trust Company paid out $8,000,000 and then suspended.

One immediate result was that banks, acting independently, held on tight to the cash they had in their vaults, and money went to a premium. According to the experts who investigated the situation, this panic was purely a bankers' panic and due entirely to our system of banking, which bases the protection of the financial solidity of the country upon the individual reserves of banks. In the case of a stress, such as in 1907, the banks fail to act as a whole, their first consideration being the protection of their own reserves.

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