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The Early 1900s
Early AirplaneEntrepreneurs want to expand and buy other companies, creating new lending opportunities for New York bankers. The most powerful and wealthy of these entrepreneurs are called Robber Barons.

Interstate banking and branching is restricted (this is referred to as unit banking), but some states begin to allow branching at a state level.


  • Checks become a more common means of payment.
  • Ownership of capital stock increases as common people become more affluent, have surplus capital, and have access to the stock market.

The Gold Standard Act of 1900
This act stabilizes the economy, establishes gold as the only standard for redeeming paper money, and prohibits the exchange of silver for gold.


  • The Panic of 1901
    First National City Bank (Citibank), led by James Stillman and William Rockefeller, with Standard Oil money, buys $115 million of Northern Pacific Railroad’s stock and triggers a stock market panic. Thousands of small investors are wiped out.
    Theodore Roosevelt becomes president and continues former President William McKinley’s trust-busting efforts.
  • John Pierpont Morgan creates U.S. Steel, the first billion-dollar corporation. U.S. Steel is a giant integrated steel trust. Capitalized with $1.4 billion at a time when the capitalization of all American manufacturing is $9 billion, U.S. Steel elevates both Wall Street and U.S. industry to a new plateau. When it comes time for J.P. Morgan to sell U.S. Steel, approximately 300 underwriters dispose of the securities.

J.P. Morgan cartoonPresident Theodore Roosevelt announces an antitrust suit against J.P. Morgan’s railroad holding company.

The Bank of Italy is chartered in California. In 1927, the bank is renamed Bank of America of California.

There are 9,018 state banks and 5,664 national banks.

The stock market experiences a speculative boom.

The Early 1900s
Between 1907 and 1917, eight states adopt an insurance plan for bank obligations.

Robber Barons

J.P. MorganJ.P. Morgan

John D. RockefellerJohn D. Rockefeller

Andrew CarnegieAndrew Carnegie

The term robber baron was revived in the 19th century in the U.S. as a pejorative term describing businessman who allegedly used unscrupulous tactics in their business operations and on the stock market to amass huge personal fortunes.Many of their massive businesses controlled a large majority of all activity in the respective industry, often arrived at through predatory pricing schemes that are now illegal.

Some of the most notable robber barons were J.P. Morgan (banking), John D. Rockefeller (oil), and Andrew Carnegie (steel).

The Panic of 1907
The panic is brief but significant in its financial implications. In March 1907, the New York Stock Exchange goes into drastic decline. The subsequent public panic leads to runs on banks. These runs lead to large-scale liquidations of call loans, or loans used to finance stock market purchases. As a result, thousands of businesses fail.

The panic exposes weaknesses in the financial system, particularly the inability of banks to acquire currency during emergencies.

Depositors "run" on the Knickerbocker Bank. J.P. Morgan and James Stillman of First National City Bank (Citibank) act as a "central bank," providing liquidity to the Knickerbocker Bank. Their efforts stop the run.

President Theodore Roosevelt provides Morgan with $25 million in government funds to use to control the panic. Morgan, acting as a one-man central bank, decides which firms will fail and which firms will survive. He organizes a rescue of banks and trusts, averting a shutdown of the New York Stock Exchange, and engineers a financial bailout of New York City.

Morgan is a strong adherent of a central bank like the Bank of England, which is controlled by private bankers. European bankers, who had lent money to the U.S., back away from that role.


  • President William Taft begins trust-busting proceedings, carrying on with the intent of Presidents William McKinley and Theodore Roosevelt.
  • U.S. Presidents
    from the 1900 to 1919

    Theodore RooseveltTheodore Roosevelt

    William TaftWilliam Taft

    Woodrow WilsonWoodrow Wilson

    Taft establishes the National Monetary Commission. The commission’s goal is to propose a banking reform plan. None of the commission’s proposals make it to the floor of Congress. The report is comprehensive. Congress takes years to study its proposals for a central bank and other banking issues.
  • Moody’s Investors Service provides its first credit rating on railroad bonds.

Sears and Roebuck offers lines of credit.


  • The Supreme Court rules that Standard Oil, which has 64 percent market share, is a monopoly and orders it to be broken up, resulting in the creation of 37 new companies.
  • Congressman Arsène Pujo, Chairman of the House Committee on Banking and Currency, investigates the influence of money trusts over U.S. finance and commerce. The hearings reveal the scope of control exerted by J.P. Morgan and First National City Bank (Citibank). With 341 directorships on 112 companies, these companies controlled $22 billion in resources.
  • 25,000 commercial banks are operating in the U.S.

The Federal Reserve Act of 1913
This act passes in an attempt to bring stability to financial markets after the Panic of 1907 exposes weakness in an uncontrolled system.

This act:

  • Establishes the Federal Reserve System, commonly known as the Fed, as the central bank—the nation’s third central bank. The bank has a 20-year charter.(The McFadden Act of 1927 gives the FRB permanence.)
  • Federal Reserve sealGives the Fed authority to regulate and supervise state-member banks
  • Allows state-member banks and national banks to borrow money from FRB when they are experiencing liquidity problems
  • Allows national banks to open branches overseas
  • Moderately expands national banking powers by permitting real estate loans, time and savings deposits, trust services, and foreign branches.

Congressman Carter Glass sponsors legislation to create a central bank.

World War I: 1914-1918
Congressman Carter GlassWorld War I is a major stimulus to the U.S. economy. The economy booms between 1914 and 1918. The financial havoc reigning in Europe presents U.S. banks with new demands for services. The U.S. economy is the largest in the world in terms of GNP. The financial center of the world shifts from London to Wall Street. After the war, the economy flourishes.

There are 18,227 state banks and 7,598 national banks.

First National City Bank (Citibank) has $1 billion in assets.

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Last Updated 05/02/2006 learning@fdic.gov

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