Panic of 1901
The Panic of 1901 was the first stock market crash on the New York Stock Exchange, caused in part by struggles between E. H. Harriman, Jacob Schiff, and J. P. Morgan/James J. Hill for the financial control of the Northern Pacific Railway. The stock cornering was orchestrated by James Stillman and William Rockefeller's First National City Bank financed with Standard Oil money. After reaching a compromise, the moguls formed the Northern Securities Company. As a result of the panic, thousands of small investors were ruined.
One of the key players in this was Harriman who "by 1898…was chairman of the executive committee of the Union Pacific and he ruled without dissent. But he speculated heavily with Union Pacific holdings, and his attempt to monopolize the Chicago rail market led to the Panic of 1901." Harriman's opponent in the struggle for Northern Pacific was James J. Hill, who had allied himself with financier J.P. Morgan. ll
One of the causes of this stock market crash was Harriman's effort to gain control of Northern Pacific by buying up its stock. The panic began when the market crashed during that afternoon in May 8.. Investors did not see it coming, but by 1:00pm, the decline in the market was beginning to show. First came the gradual decline in Burlington stock. It had been high all morning but suddenly a sharp weakness came about. Prices of stocks such as St. Paul, Missouri Pacific, and Union Pacific began to fall. Soon enough the whole market was drowning. Investors that had once held on tightly to their stocks were selling out of pure panic. Others caught on and an overwhelming cry of "Sell! Sell! Sell!" was heard throughout the floor of the New York Stock Exchange. During the selling, a rumor spread among traders that Arthur Housman, broker for J.P. Morgan, had died. Housman, the head of A.A. Housman & Company, was brought to the floor of the New York Stock Exchange to assure traders that J.P. Morgan was still doing business.
Affected stocks included St. Paul, Union Pacific, Missouri Pacific, Amalgamated Copper, Sugar, Atchison, and United States Steel. However, not all stocks finished the day out on a rough note. Northern Pacific had not only avoided a decline, but it had also seen a net advance of 16½ points.
In fact, the 1901 panic stands sui generis, its origin difficult to fathom. No long process of depression preceded it, no sudden disaster gave it birth; on the contrary, prosperity ran before it and through it; and not a shock was felt outside Wall Street and its tributaries. It was simply and solely a speculative frenzy wrought by the furious clash of rival interests in the Northern Pacific corner, which in its gigantic evolution spread fright and dismay, to the overturn of reason.
As a result of this crash, Harriman and Hill joined forces to form a holding company, the Northern Securities Company, to control the Northern Pacific, the Great Northern, and the Burlington. [Wolff 2003] This company was shortly shut down under the Sherman Antitrust Act of 1890 (see Northern Securities Co. v. United States).
- FDIC: Learning Bank
- AmericanHeritage.com / The American Heritage
- Cosmic COINTELPRO events for 1901
- The History Box | The Panic Of 1901-Market Fails, Panic Reigns-Part I
- A.A. Housman Dead; Ill Only Three Days; Known as 'Morgan Broker'. New York Times, August 22, 1907
- The Financial Situation. New York Times, May 19, 1901
- American Experience | Streamliners | People & Events
- Wolff, David A. (2003). Industrializing the Rockies: Growth, Competition, and Turmoil in the Coalfields of Colorado and Wyoming 1868–1914. University Press of Colorado. pp. 158–159. ISBN 0-87081-747-7.