Chapter 27 3. The Outpost of the Federal Reserve: The 1907 Banking Crisis

In 1903, Paul handed over to Jacob an action plan on how to introduce the advanced experience of the European Central Bank to the United States.Scheff, the document was then forwarded to James C.Stillman and the banker circle in New York, everyone felt that Paul's thoughts were really enlightening, and everyone was enlightened. The problem is that in the history of the United States, the political and civil forces against the private central bank are quite strong, and the New York bankers have a very bad reputation in the circles of the American industry and small and medium-sized owners.Members of Congress avoided any proposal by bankers for a private central bank like the plague.Passing banker-friendly central bank bills is a tall order in such a political climate.

To reverse this unfavorable situation, a gigantic financial crisis was conceived. First of all, a large number of articles promoting new financial concepts began to appear in the direction of news and public opinion.Paul's article was published on January 6, 1907, on the subject of the shortcomings and needs of our banking system. Since then, Paul has become the chief advocate of the central banking system in the United States.Shortly thereafter, Jacob.Scheff declared at the New York Chamber of Commerce that unless we have a central bank sufficient to control credit resources, we will experience an unprecedented and far-reaching financial crisis.

Flies do not bite unsewn eggs, as in 1837, 1857, 1873, 1884, and 1893, the bankers have long seen that the overheating economy is developing The serious bubble phenomenon that has emerged is also the inevitable result of their continuous loosening of money.The whole process is like a banker raising fish in a fish pond. When the banker releases water into the fish pond, he is loosening money and injecting a large amount of money into the economy. After getting a lot of money, people from all walks of life start Under the lure of money, we work hard day and night and strive to create wealth. This process is like a fish in a pond absorbing various nutrients, and the longer it grows, the fatter it becomes.When the banker sees that the harvest is ripe, he suddenly tightens his money and starts pumping water from the fishponds, where most of the fish are desperately waiting to be caught.

However, only a few of the largest banking oligarchs know when to start pumping water to fish for fish. When a country establishes a private central bank system, the banking oligarchs will be more comfortable in controlling the release of water and pumping water, and the harvest will be more precise.Economic development and recession, wealth accumulation and evaporation have all become the inevitable results of bankers' scientific breeding. Morgan and the international bankers behind him accurately calculated the expected outcome of the financial turmoil.The first is to shock American society and let the facts show how fragile a society without a central bank is.The second is to squeeze out and merge small and medium-sized competitors, especially trust and investment companies that attract bankers' attention.There is also an important enterprise that they have coveted for a long time.

At that time, fashionable trust and investment companies enjoyed many businesses that banks could not operate, and government supervision was very loose, all of which led to trust and investment companies excessively absorbing social funds and investing in high-risk industries and stock markets.When the crisis broke out in October 1907, about half of New York's bank loans were mortgaged by high-interest-return trust investment companies to invest in high-risk stocks and bonds, and the entire financial market fell into a state of extreme speculation. Morgan has been on vacation between London and Paris in Europe for several months before this. After careful planning by international financiers, Morgan returned to the United States.Soon, New York suddenly began to widely circulate that Knickerbocker, the third largest trust company in the United States, was about to go bankrupt. Rumors quickly spread throughout New York like a virus. Terrified depositors lined up at the gates of various trust companies all night to withdraw their deposits.The bank required the trust company to repay the loan immediately, and the trust company, which was double-duplicated, had to borrow money from the stock market, and the interest on the loan rose to a sky-high price of 150%.By October 24, stock market trading was almost limited to a halt.

Morgan appeared as a savior at this time. When the chairman of the New York Stock Exchange came to Morgan's office for help, he said in a trembling voice that if he could not raise 25 million US dollars before 3 p.m., at least 50 transactions The merchant would go bankrupt and he would have no choice but to close the stock market.At two o'clock in the afternoon, Morgan called an emergency meeting of the bankers, and within sixteen minutes the bankers had raised enough money.Morgan immediately sent someone to the stock exchange to announce that the loan interest would be open to supply at 10%, and the exchange immediately burst into cheers.Only one day later, the emergency relief funds ran out, and the interest rate skyrocketed again.Eight banks and trust companies have collapsed.Morgan rushed to New York to clear the bank, requesting the issuance of notes as temporary currency in case of severe cash shortages.

On Saturday, November 2, Morgan began his long-planned plan to save the Mooresley Company, which was still in turmoil.The company was already on the verge of bankruptcy with $25 million in debt.But it is the main creditor of the Tennessee Mining and Iron Company. If Mooresley is forced to go bankrupt, the New York stock market will collapse completely, and the consequences will be disastrous.Morgan invited all the big names in New York financial circles to his library. The commercial bankers were arranged in the east study, and the bosses of trust companies were arranged in the west study. The financiers were anxiously waiting for Morgan to arrange for them destiny.

Morgan knew well that the iron ore and coal resources in Tennessee, Alabama, and Georgia owned by the Tennessee Mining and Iron Company would greatly strengthen the monopoly of the steel giant Morgan himself founded: U.S. Steel Corporation.Under the constraints of the anti-monopoly law, Morgan has always been unable to talk about this big piece of fat, and this crisis has created a rare opportunity for him to merge.Morgan's condition was that in order to save Mooresley and the entire trust industry, the trust company must raise $25 million to keep the trust company from collapse. U.S. Steel bought Tennessee Mining and Iron Company from Mooresley debt.Anxious and restless, the pressure of being on the verge of bankruptcy, and the extremely tired CEOs of the trust investment who stayed up all night finally surrendered to Morgan.

After getting the fat piece of Tennessee Mining and Iron Works, the overjoyed Morgan still had to pass the last hurdle, which was the old President Roosevelt who was unambiguous about antitrust.On the night of Sunday, November 3, Morgan sent people to Washington at night to get the president's approval before the stock market opened on Monday morning.The bank crisis, a large number of business closures, and thousands of angry people who lost their life savings formed a huge regime crisis. The old Roosevelt had to rely on Morgan's strength to stabilize the overall situation. He was forced to sign an alliance under the city at the last moment.At this time, there are only five minutes left before the stock market opens on Monday!

New York stock markets soared on the news. Morgan bought the Tennessee Mining and Iron Company at a super low price of 45 million US dollars, and the company's potential value according to John.Moody's estimates are at least around a billion dollars. Every financial crisis is a long-planned and precisely targeted explosion, and the dazzling new financial buildings are always built on the ruins of thousands of bankrupts.