Knickerbocker Trust

About Knickerbocker Trust

The Knickerbocker Trust Company was the third largest trust company in New York. Its collapse in October 1907 triggered the Panic of 1907. Knickerbocker had financed Wall Street speculator F. Heinze and Charles Morse. When their copper speculation failed, depositors lined up to withdraw. Knickerbocker shut down on October 22, 1907. The panic spread to other trust companies. J.P. Morgan organized a rescue of weaker institutions. The failure of Knickerbocker demonstrated the systemic risk of unregulated trust companies, which operated outside normal banking rules. The Panic of 1907 led directly to the creation of the Federal Reserve System in 1913.