Editing Federal Reserve (section)

=== Necessity: the 1907 Crisis ===
Despite the grumblings of certain bankers, the question of currency/banking reform could wait so long as economic conditions allowed it to be ignored. After the 1907 Crisis, bankers ''as a class'' could no longer ignore it. As they so often do, the crash followed a period of feverish speculation. By the fall of 1906, this boom was beginning to drain English gold across the Atlantic, and the Bank of England took notice. As Frank Vanderlip reported to James Stillman, “The Bank of England is extremely nervous on the subject of gold exports.”<ref>Lowenstein, Roger. ''America’s Bank: The Epic Struggle to Create the Federal Reserve''. New York: Penguin Press, 2015. p 58</ref> Later that fall, the Bank of England dropped the hammer.<blockquote>London raised its interest rate from 3.5 percent to 6 percent. The Reichsbank in Berlin raised rates as well. Since international capital ever flows to where the yield is highest, these moves inevitably induced investors to ship their gold back across the Atlantic. The Bank of England further insulated the mother country from the overheated American economy by directing British banks to liquidate the finance bills—short-term loans—that they provided to American firms, thereby tightening credit.<ref>Lowenstein, Roger. ''America’s Bank: The Epic Struggle to Create the Federal Reserve''. New York: Penguin Press, 2015. p 59</ref></blockquote>When the Mercantile National Bank, along with a number of failing trusts, appealed to the Clearing House for aid, the Clearing House demanded the "immediate resignation of Messrs. Heinze, Morse, and Thomas from all their banking connections."<ref>Allen, F.L., G. Morgenson, and M.C. Miller. ''The Lords of Creation: The History of America’s 1 Percent''. Forbidden Bookshelf Series. Open Road Integrated Media, Incorporated, 2017. <nowiki>https://books.google.com/books?id=4fwnswEACAAJ</nowiki>. 111</ref> For days on end the newspapers blared the casualties of the Clearing House sterilization campaign. As the spectacle grew, the public began to balk, and a run began on banks and banking trusts. 

Already, the American economy was headed toward crisis. More immediately, the crisis was caused by the failure of a bid to corner the copper market by F. Augustus Heinze of the United Copper Company in collaboration with his brother Otto and the notorious Charles W. Morse. Over mid-October an attempt was made to squeeze short sellers, but the attempt failed. Heinze and company were ruined.<blockquote>the damage done by these failures would probably have been limited had Heinze and his friends not been bankers as well as gamblers. Heinze was president of the Mercantile National Bank; Morse and Thomas were directors of it... depositors naturally became suspicious and began to withdraw their funds. Suspicion spread to the Morse chain of banks, too. The Mercantile, finding its cash being drained away by uneasy depositors, applied to the New York Clearing House for help.<ref>Allen, F.L., G. Morgenson, and M.C. Miller. ''The Lords of Creation: The History of America’s 1 Percent''. Forbidden Bookshelf Series. Open Road Integrated Media, Incorporated, 2017. <nowiki>https://books.google.com/books?id=4fwnswEACAAJ</nowiki>. p109</ref></blockquote>Because of the extreme degree to which the boards of these banks and trusts interlocked, the crisis was virulent. Morse was associated with Charles T. Barney of Knickerbocker Trust Company, who lent him money on occasion. One of the largest in New York, Knickerbocker Trust was targeted by the Clearing House, which demanded resignations. This, coupled with the National Bank of Commerce's refusal to any longer clear their checks, spelled destruction for the trust. On October 21st executives met in a popular restaurant to discuss the emergency. They resolved that only Morgan could save them, and called on him early the following morning.