ons except
customs dues.

The panic of 1907 imposed a severe strain upon the cash resources of the
banks of New York City, but did not cause any such considerable number of
failures as occurred in 1893.

Payment of cheques in currency was suspended in New York on the 28th of
October 1907, and continued until about the beginning of the year 1908. The
panic was precipitated by over-speculation by a group of national banks,
followed by the suspension of the Knickerbocker Trust Company on the 22nd
of October with deposits of $48,000,000. Then came runs on other companies,
a deficit in the required reserves of New York banks of $38,838,825 in the
week of 2nd November, and arrangements for the importation of foreign gold
to an amount which soon approached $100,000,000. With an increase during
the autumn of about $77,000,000 in national bank circulation, a transfer of
$72,000,000 from the treasury to the banks, and a further decline in
required reserves in New York during the next week, the amount of currency
which was added to the circulation or disappeared during a few weeks of the
panic amounted to more than $275,000,000, or nearly one-tenth of the usual
volume of circulation in the country. The total bank-note circulation on
the 28th of December 1907 had risen to $687,340,835; but this amount was
abnormal and was reduced somewhat during the spring of 1908.

The position of the trust companies, especially those of the city of New
York, was one of the disturbing features of the panic. These companies were
comparatively a small factor in New York finance at the time of the panic
of 1893. The capitalization of all the trust companies in the United
States, even as late as 1897, was only $106,968,253, and individual
deposits were $566,922,205. The capital of these companies had risen in
1907 to $276,146,081 and their deposits to $2,061,623,035. The trust
companies of New York were required by the law of the state to maintain
only 5% of their demand deposits in cash in their vaults. Whilst most of
them had also large amounts on deposit in national banks, these reserves
proved inadequate to sustain the vast mass of credit which was built upon
them. The absolute amount of the reserves, however, was perhaps less
important than the class of business to which some of the less conservative
of these companies had committed themselves. Instead of keeping their
assets liquid by purchases of commercial paper and loans on first-class
nego