The definitive modern account of the 1907 financial panic, when a failed scheme to corner the copper market triggered a cascade of bank runs, trust company collapses, and a stock market crash that threatened the entire American banking system. Bruner and Carr, both finance academics, reconstruct the panic in forensic detail: the speculative boom that preceded it, the institutional fragility of the trust companies, the role of the Knickerbocker Trust failure as the panic's tipping point, and the improvised rescue led by J.P. Morgan — who, at 70, assembled the country's leading bankers in his library and forced them to pool resources until the crisis passed. The panic directly led to the creation of the Federal Reserve in 1913.
This is the best case study available of how a financial crisis actually works — not as a theoretical abstraction but as a sequence of decisions, phone calls, and midnight meetings in a banker's library. For founders, the book's value is twofold. First, it shows how fragile the financial system is beneath the surface of normal operations: the 1907 panic started with a single failed corner in copper stock and cascaded through the banking system in a matter of days. Second, it shows how personal authority can substitute for institutional authority in a crisis. Morgan had no legal mandate to act as America's central bank. He had his reputation, his network, and his willingness to put his own capital on the line. He assembled the bankers, locked the doors, and did not let them leave until they had committed the money.
The book also contains practical lessons about liquidity management, counterparty risk, and the danger of lending against inflated collateral — lessons that every founder managing a cash-heavy balance sheet should internalize. The panic was caused not by fraud or greed alone but by a mismatch between short-term liabilities and illiquid assets, which is exactly the risk that startups run when they borrow short to invest long.