abstract:The Panic of 1907, also known as the 1907 Bankers' Panic or Knickerbocker Crisis, was a financial crisis that occurred in the United States when the New York Stock Exchange fell almost 50% from its peak the previous year. Panic occurred, as this was during a time of economic recession, and there were numerous runs on banks and trust companies.
In fact, the Fed was established as a result of the Panicof1907 and the discount mechanism and rate were the only tools of monetary policy given to the Fed in the Federal Reserve Act.