I started to research the Panic
of 1907 late in 2009. I came to the topic by a rather circuitous route. While
working on my dissertation on the origins of the 1898 Bankruptcy Act, I also
started to study the evolution of corporate reorganization, which wasn’t
covered by the Act. That research ultimately appeared in Business
History Review. Several important reorganization cases involved the
Farmers’ Loan and Trust Company. The name was familiar to me from teaching
American Economic History because of the income tax case, Pollock v. Farmers’
Loan and Trust Co., and two important railroad regulation cases, Reagan v.
Farmers’ Loan and Trust Co. and Stone v. Farmers’ Loan and Trust Co. I was curious what this company did that left
its fingerprints all over nineteenth century legal and economic history. So I
wrote a
book about the Farmers’ Loan and Trust company and its influence on the
law.
About the time that I finished
the book there was increased attention to the Panic of 1907. The descriptions
of New York City trust companies as novel, unregulated and reckless did not fit
with what I had been reading and writing about trust companies like the
Farmers’ Loan and Trust Co. So I
ended up writing a paper that argued that the panic was not the result of
inadequate regulation of trust companies and that to understand the Panic one
has to understand that not all trust companies were the same.
What is really remarkable is that we know so
much more about the panic of 1907 than when I started my work in 2009.
Rodgers
and Payne have shown how gold shipments from France played a role in ending
the Panic.
Hilt,
Frydman and Zhou show how the Panic impacted the companies doing business
with the trust companies that experienced runs.
Moen and Tallman, who were ahead
of the curve in re-examining the Panic of 1907, have examined the
transmission of the panic as well as how the Clearing House Association helped to
alleviate the Panic.
Most recently, Fohlin, Gehrig
and Haas have shown the role that lack of transparency played in the panic
in the stock market.
I believe that we have a much
more about what happened in 1907 than we did just a few years ago, but these
additions to our knowledge about financial crises in history should also
promote caution. I like to think that my work will stand up to the test of
time, but I’m sure previous authors did as well. It seems to me that the fact
that we are still learning about the Panic of 1907 should cause economists to
speak with some caution about the current economic events.
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