ARTICLE on the 1907-08 recession and migration: scroll down here

Book text excerpt (this page below)



1907: The trust company bubble burst

“Whereas banks had to hold 25%of their assets in cash, trust [companies]faced a 5% minimum. Able to pay higher rates of 1907 they were almost as big as the national banks, having grown by nearly 250% in ten years”.

Economist, April 12, 2014, p. 50 (Special essay on historical financial crises).




Business of Transatlantic Migration, chapter 6

(pp. 197-98, 203-04).

The immediate trigger of the 1907-08 recession was the stock and money market “panic” which occurred towards the end of 1907. “Trust companies” in New York City, overextended into risky speculations, collapsed like bowling pins following the dramatic insolvency of the Knickerbocker Trust on October 22, 1907…Falling confidence and a drying up of credit caused cancellations of industrial purchases, reductions in production, and dismissal of workers. Decreased job availability was particularly severe for low-skilled employees in economically fluctuating sectors such as mining and construction that were heavily reliant on immigrant labor. Sharp reductions in demand for immigrant labor led, within a couple of months, to a very steep decline in (seasonally adjusted) immigrant arrivals. The resulting drastic drop in westbound revenues for steamship lines was only partially offset by an even more prompt increase in eastbound passenger volumes due to migrants returning to Europe where being unemployed was cheaper. Record shipping line profits in 1907 were followed by record losses in 1908.


About 120 thousand passengers departed the United States for Europe in steerage class during November 1907. This was not only by far the biggest monthly eastbound total ever before World War I, it was also double the size of the average monthly westbound flow during 1900-14. Measured in both directions, November 1907 was the biggest month for transatlantic steerage travel of the 1900-1914 period, and two-and-a-half times the monthly average. “Of course,” [as the New York Times] pointed out,


the psychology of the immigrant is rudimentary...[but]..he sees the factories shut down or cut wages; he sees friends, countrymen, and Romans leaving...trouble may not be there yet, or the wolf absolutely at the door, but the symptoms are there all right: can we blame him if he elects to run before the wolf...



L A T E R    P O L I C Y   C H A N G E

Economist, Dec. 31, 2013, p. 97
Economist, Dec. 31, 2013, p. 97

Investigative commisions following the Panic of 1907 led to the creation of the Federal Reserve in 1913, the first modern central bank in the United States.