As lenders dust off their playbooks, 2010 could
be a comeback year for commercial finance.
With pricing and structures returning to normal,
new players are entering the field, and the
legacy ABL teams are adding to their benches.
The brush-back pitch for some commercial
finance players could be over-aggressiveness.
The magnificent mansion and library of J.
Pierpont Morgan stands at the corner of
Madison and East 36th Street in New York
City. Today, it is a serene setting for part of
Morgan’s priceless art and book collection,
which includes three Gutenberg Bibles.
In October 1907, however, the scene was
very different: a failed attempt to corner
the stock of the United Copper Company
triggered the Panic of 1907. When this
stock manipulation ploy failed, the New
York banks backing the ploy suffered
severe runs, which led to the failure of the
Knickerbocker Trust Company, New York
City’s third largest trust. The financial contagion spread across America, and it may
have deepened if not for Julius Pierpont
Morgan, who pledged large sums of his
own money and convinced other New York
bankers to do the same in order to shore
up the banking system.
Before this, trust companies had
enjoyed a period of high-flying growth: in
the early 1900s, trust company assets had
grown 244%, compared with national and
state bank growth of approximately 90%.
With no Federal Reserve Bank as we know
it today, lending had run rampant.
As news spread of the panic, Morgan’s
library at Madison and 36th Street became
a revolving door of New York City bank
and trust company presidents seeking to
survive the crisis. On Sunday, November 3,
1907 at 3 a.m., Morgan locked 120 bankers
in his library and pocketed the door key
to force a solution, a tactic he had been
known to use in the past. He informed the
trust company presidents and bankers
that, unless a coordinated effort was
made, the U.S. banking system would
collapse the following Monday. At about
4: 45 a.m., agreement was reached and he
allowed the bankers to go home.
At one point during the crisis, Morgan
was informed that the City of New York
would go bankrupt by November 1, 1907,
without $20 million of funding; in an effort
to avoid the disastrous signal that a New
York City bankruptcy would send, Morgan
purchased $30 million of city bonds.
One hundred years later, history
repeated itself. Instead of someone like
J. Pierpont Morgan to quell the panic, the
full weight of the U.S. government was