How a 1906 earthquake triggered a financial collapse and birthed the Federal Reserve

When the 1906 San Francisco earthquake sparked a nationwide economic panic, the United States lacked a central institution to stabilize the banking system. This video explores how the resulting crisis forced a private individual, J.P. Morgan, to act as the nation's emergency lender, exposing the fragility of the pre-Federal Reserve era.

In 1906, the San Francisco earthquake initiated a sequence of events that devastated the American economy by 1907. As unemployment surged and stock markets plummeted, public panic led to massive runs on banks. Even healthy institutions were forced to close because they could not access credit, creating a cycle of layoffs and economic decline.

Without a central bank to intervene, the responsibility of halting the panic fell to J.P. Morgan. This reliance on a single private financier to manage national economic stability highlighted the critical need for a formal, institutional response to financial crises, eventually leading to the creation of the Federal Reserve.

Source: A Secret Meeting And The Birth Of The Federal Reserve | Planet Money | NPR