Birth of the Federal Reserve Today's newspapers and television networks use many words to describe the dips and plunges in the stock market and economy, but "panic" usually is not one of them. It wasn't always so. Panic of 1907 underscored JoC's campaign for bank reform Through much of the 19th century and into the early years of the 20th, the U.S. was periodically wracked by financial panics that were characterized by bank runs by depositors simultaneously seeking to withdraw deposits. Business failures, bankruptcies and general economic dislocation followed panics in 1873, 1884, 1893 and, the most severe of all, in 1907. J.P. Morgan The Panic of 1907 provided impetus to efforts, championed by the JoC, to establish a U.S. central bank. William Dodsworth, The Journal of Commerce's editor from 1893 to 1910, had long been critical of the arrangement through which there was an annual outflow of capital from New York banks to finance crop shipments from the Midwest to the East Coast each fall. The inherent weakness in this arrangement was that existing U.S. monetary structures tended to be inelastic. The seasonal increases in bank lending to finance harvests were not matched by increases in the U.S. money supply, unless gold flowed in from Europe in response to the high seasonal interest rates. In the fall of 1907, the economy had been slowing, the stock market was down and credit had been tight in Europe, so there was no seasonal inflow of foreign gold. The collapse of an investor's scheme to corner the stock of United Copper Co. raised the anxiety of nervous investors and caused a run on New York City banks, some of which refused to clear each other's checks. The panic was halted after several weeks when J.P. Morgan, the legendary financier, assembled a team of bank and trust executives who redirected money from strong to weak banks, secured lines of credit overseas and bought stock in selected corporations. Morgan made a handsome profit, but he and other bankers didn't want to go through a similar experience as de-facto lenders of last resort. Although the JoC's Dodsworth died in 1910, the newspaper continued to press for reforms to ensure a safer, more stable, more flexible banking system. The paper's H. Parker Willis, an economist and writer, joined Sen. Carter Glass, D-Va., in campaigning for - and drafting - what was to become the Federal Reserve Act. Many of the key portions of the law were written during and after hours in Willis' JoC office.

The merger occurred just as the gilt was wearing off the gilded age. Like the dot-com boom of the late 1990s, the American economy in the 1890s was suffering from overexpansion - in farming, railroads and credit. In Kansas, for example, where new communities had sprung up overnight as more and more farmers bought land on credit, farm prices collapsed. Half of the farmers who had trekked there from the East moved back in the early 1890s, in wagons sporting the motto: "In God we trusted. In Kansas we busted."

In 1893 the collapse of the Philadelphia and Reading Railroad and the National Cordage Co. triggered a financial panic that rolled West, leaving in its wake shuttered banks, business failures and lengthening unemployment lines.

Blaming the panic on the drop in gold reserves, President Cleveland repealed the Sherman Silver Purchase Act, which pulled the rug out from under the price of silver and effectively turned many of the boom mining towns of the Rockies into ghost towns overnight. Deflation followed.

Against this background William Jennings Bryan won the Democratic nomination for president in 1894 and ran on the platform of free silver, intoning, in his famous speech: "You shall not press down upon the brow of labor this crown of thorns; you shall not crucify mankind upon a cross of gold."

William Jennings Bryan

Horrified, Dodsworth, a staunch advocate of the single gold standard for the currency, called Bryan "the ass of ignorance, reaction, cupidity and communism." He continued to blast Bryan in the pages of the JoC up until the day William McKinley won the election for the Republican Party. The JoC's Nov. 4 headline was: "Victory for Sound Money: Overwhelming Verdict against Free Silver Coinage."

Soon after the election, Dodsworth retired because of declining health and turned the paper over to his four sons. Upon the elder Dodsworth's death, John Dodsworth became president and editor. Under the Dodsworths, the paper grew in size and influence. It expanded its business news, domestic and foreign. Editorially, it opposed monopolies, but also opposed government regulation. It stood, as ever, for free and unfettered markets, and a sound banking system.