Lessons from the Panic of 1907

Abstract

was so serious that it became a catalyst for the creation of America's central bank. This study, which examines the circumstances leading to and the inter-vention measures taken during the panic, particularly focuses on trust companies' function as a financial intermediary. Unequal regulation among financial organizations, the authors find, led to a concentration of riskier assets in less regulated intermediaries, primarily trusts. Trusts ' riskier asset portfolios made them the focal point from which the crisis spread to other segments of the financial market. Allowing various types of insti-tutions comparable access to all assets and investment opportunities, the authors conclude, might reduce the

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