mpetition, devised a
remedy in the form of mergers. Others of less capacity but greater
daring saw opportunities for money-making, and a craze for mergers and
for the incorporation of private enterprises swept over the country. By
1907 there were at least $38,500,000,000 worth of securities in
existence. The natural result was speculation. When investors began to
fear the soundness of the securities a collapse of credit was due.

The rapid development of trust companies had its effect. The cash
reserves held by these companies were small; their investments were not
always conservative and the depositors were often suspicious. This free
expansion of business with little or no reference to cash reserve or
capital gave rise to another cause for the panic, which was not a matter
of money. It was a matter of what was in men's minds. There was a period
of "muckraking" in which leaders financial and political were severely
critcised. Whether or not this criticism was justified by the exposition
of the frauds of the insurance companies and the questionable dealings
of some other corporations need not be discussed. The criticism created
an attitude of mind throughout the nation, and the first weakening of a
bank brought on the deluge.

[Illustration]
The panic of 1907. Uptown branch of the
Knickerbocker Trust Company, 125th Street.

To the ordinary observer the panic of 1907 will date from October 22,
when the Knickerbocker Trust Company of New York closed its doors.
Earlier in the month the Mercantile National Bank had gotten into
difficulties and had appealed to the clearing-house committee for aid,
which was given. Soon it was noted that the Knickerbocker Trust Company
was in a precarious condition, and the directors, following the example
of the other bank, appealed to the same committee. The investigation of
the committee showed the company insolvent and aid was refused. When the
facts became known, a run on the bank began and it was compelled to
close its doors. The lack of confidence in other financial institutions
was soon shown by similar runs.

No bank could stand the strain unaided. Now the Federal Government
stepped in and Secretary of the Treasury Cortelyou came in person to New
York and deposited $40,000,000 of the surplus from the United States
Treasury to be used for the aid of beleaguered institutions. For more
than a week the crowds of depositors sought their money. The lines were
not broken at night