The harm of financial crisis to any country is huge. If the country does not have a central bank, then the harm will be fatal. In 1907, the United States, which was in its golden age, encountered a financial crisis. At that time, the Federal Reserve had not yet appeared. It was an old man who was over seventy years old who turned the tide and saved the U.S. economy. His name was John Pierpont Morgan, known as the Napoleon of Wall Street.
Morgan was born into a wealthy businessman family in 1837. During the American Civil War, he relied on his shrewd judgment and natural adventurous spirit to make a fortune in gold speculation, and established himself on Wall Street. Heel.
In the process of promoting the French government's US$50 million in national debt in 1871, Morgan created an underwriting syndicate that combined institutions, shared interests, and assumed risks. As a result, a huge 5,000 Thousands of dollars in French government bonds were quickly sold. Since then, joint underwriting of bonds has become a new rule on Wall Street in the United States, and Morgan has thus become the leader of the Wall Street bond industry.
With financial capital, Morgan continued to expand into other industries. By the beginning of the 20th century, a Morgan consortium with more than 100 companies with J.P. Morgan Bank as the core was finally formed. It owns one-third of the financial capital in the United States, and Morgan became the leader of Wall Street. In 1900, the United States replaced the United Kingdom and became the world's largest industrial power. All industries were developing rapidly, and the stock market was rising steadily. Therefore, many institutions and individuals began to use borrowed money to speculate in stocks. By 1907, half of New York's bank loans were mortgaged by trust companies and invested in the stock and bond markets. However, behind this prosperity were the seeds of destruction.
In October 1907, Knickerbocker, the third largest trust company in the United States, borrowed a large amount of debt to acquire the shares of United Copper Company. However, the acquisition failed, the stock price plummeted, and Knickerbocker's capital chain was broken. Bankruptcy, people began to realize that all trust companies are likely to go bankrupt.
A run on trust companies occurred, and banks began to collect loans. The stock market plummeted, stock trading became unsustainable, and a catastrophe was imminent on Wall Street. At that time, there were more than 20,000 state-level and national-level banks and trust companies in the United States. However, because there was no central bank, they lacked unified reserves and a unified direction of action, and their ability to resist crises was very poor. People All eyes are focused on Morgan. Only he can lead Wall Street to resist this crisis.
On October 19, 1907, Morgan convened a meeting with the presidents of major U.S. banks. Everyone expressed their intention to obey Morgan’s unified command. Two days later, on October 21, the Morgan consortium issued a statement, If the trust company's bills are honored and the balance of market funds is maintained, this news will alleviate the market panic, but it will not prevent the spread of the crisis.
As of October 24, the current financing rate of NYSE brokers exceeded 100%, and it was difficult for the brokers to raise enough funds to maintain trading. In desperation, the president of the exchange proposed With the suggestion of closing the market, Morgan knew that if the exchange closed, disaster would really strike. He immediately raised $23.5 million and sent it to the New York Stock Exchange. The money was immediately subscribed by 50 brokers. The next day, Morgan raised another $10 million and came to the exchange in person. At that time, the market lending rate had reached 150%, and Morgan lent it to brokers at an interest rate of 25%-50%. His arrival made the New York Stock Exchange Thunderous cheers.
The New York Stock Exchange withstood the blow of the financial crisis, but trust companies were not so lucky. The run continued, and the situation that had just eased reached a deadlock. Morgan calmed investors' emotions while , while raising funds for blood transfusion for the trust company.
In the early morning of November 3, 1907, a group of bankers from New York were locked in the Morgan Library. Morgan made it clear that no one could leave until the crisis was over. Every trust Each company must pay its share of the $25 million. At 4:45, with the signing of the last trust company, Morgan had raised enough funds to deal with the financial crisis.
As soon as this news was released, investors finally believed that under the leadership of Morgan, Wall Street had the ability to deal with the crisis. Market confidence was quickly restored, and the financial crisis was resolved. During this financial crisis, Morgan led the bankers to raise more than $60 million in funds and issued $100 million in notes, demonstrating his strong financing capabilities and absolute control over Wall Street. From then on, Morgan The consortium has a new title: the private central bank of the United States.
On March 31, 1913, Morgan died in Rome. In the same year, the U.S. Congress passed the Federal Reserve Act, and the U.S. Federal Reserve Board was established to exercise the power of the central bank. Morgan relied on the power of finance to reorganize American industry and forever changed the structure of the American financial market.