In mid-October 1907, a failed attempt to corner (control) the market for United Copper stock helped trigger a broader loss of confidence in New York’s financial markets. The resulting strain quickly spread from the stock market into banks and trust companies, increasing demand for cash.
On October 22, 1907, depositors rushed to withdraw funds from the Knickerbocker Trust Company, and it suspended operations the same day. The failure alarmed the public and intensified runs on other New York trust companies, worsening the city’s cash shortage.
On the evening of October 23, Treasury Secretary George B. Cortelyou met with major New York financiers to coordinate a response. The plan centered on quickly adding cash reserves to New York’s national banks so they could meet withdrawals and continue making payments.
On October 24, 1907, Cortelyou deposited about $25 million of Treasury funds in New York national banks. These deposits were intended to strengthen bank reserves and reduce the risk that a cash shortage would force otherwise solvent institutions to close.
Between October 21 and October 31, the Treasury deposited a total of about $37.6 million in New York national banks. This was a major federal liquidity move for the period, but it still had limits because the Treasury’s available working balance was not unlimited.
Alongside bank deposits, the Treasury provided roughly $36 million in small-denomination currency to help meet depositor withdrawals and everyday cash needs. Small bills mattered because people needed physical cash for wages and retail payments, not just bank balances.
By mid-November 1907, the Treasury’s working capital reportedly fell to around $5 million, limiting how much more it could inject into banks. With the public and institutions still hoarding cash, pressure remained high even after the most dramatic days of October.
As conditions slowly stabilized, the Treasury shifted from adding funds to withdrawing them. Early in December 1907, the Treasury called on banks to return part of the money it had deposited during the panic, beginning the unwind of the emergency support.
In December 1907, about $6 million of the panic-era Treasury deposits were returned by banks. This step signaled that the most acute phase of the cash emergency had eased enough for the Treasury to rebuild its own balances.
Toward the end of January 1908, the Treasury called in about $10 million more from the banks. This continued the transition from crisis management to normalization, reversing a portion of the extraordinary liquidity support used in October 1907.
Even after the worst panic passed, cash substitutes remained important in many places because currency was still scarce. From October 1907 through March 1908, New York clearinghouses issued over $100 million in clearinghouse loan certificates and other cash substitutes to support payments and bank settlements.
The Treasury’s 1907–1908 emergency deposits and cash shipments highlighted a core problem: the U.S. lacked a reliable, permanent way to expand liquidity quickly in a panic. The experience became part of the case for later reforms—especially the Aldrich-Vreeland Act (1908) and, ultimately, the creation of the Federal Reserve (1913).
U.S. Treasury gold transfers and emergency liquidity operations (October 1907–March 1908)