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1907 Financial Crisis - Report presentation

Here is the description of what happened in 1907, and then the comparison with the Global Financial Crisis of 2008 in order to propose some ideas and advices for the Future of Finance.

Roxane Poissonnier

on 10 December 2014

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Transcript of 1907 Financial Crisis - Report presentation

Report 3 - Financial M&I

Group BLUE
Cedric HO
Friederike VON URUH

Prof. Silviu URSU

Panic of 1907
Financial Crisis


What future for Finance ?

#1 - Financial Knowledge

#2 - Putting Investors First

#3 - Transparency & Fairness
Financial Crisis

“This-time-is-different syndrome”
Afflicted bankers, investors & policy makers

Lots of M&A and Start-up, financed by Wall-Street
No central bank
Trust Companies
Clearing Houses
#2 - One big financial institutions went bankrupt
1907: Knickerbocker Trust Company
2008: Lehman brothers

Introduction & Context
Crisis of 1907
Global financial crisis
Future of Finance

Panic's mechanism
#1 - The Run leads to Panic

#2 - Panic leads to pessimism & paranoia

#3 - Withdrawals amplified liquidity problem

#4 - Money rates impacted exchange market

#5 - J.P. Morgan

#6 - Cash injection

#7 - NYSE kept afloat
that we learned
"As fast as a depositor went out of the place ten people and more came asking for their money [and the police] were asked to send some men to keep order"
The New York Times
#1 - Classical financial crises
Started in an economy in recession
Suffer from a sudden lack of liquidity
#3 - Liquidity provider were needed
1907: J.P. Morgan
2008: Federal Reserve Bank
How does it happen ?
Initial context
How did it spread?
What we learned
Related to Global Crisis
Impact on the future of finance
What follows from it
#1 - Trigger Factors
1907: collapse of the 2 largest trust companies in the United States
2008: real estate bubble burst in the United States
#2 - Consequences
1913: the Federal Reserve system was founded
2008: SIFI (systemically important financial institution) was developed
#3 - Parties involved to overcome the crisis:
1907: J. B. Morgan
2008: the European Central Bank & Federal Reserve bank
#1 - Financial Knowledge
Explore Environmental, Social and Governance (ESG) Issues in investing with...
#2 - Putting Investors
• Events in more than 50 cities organized by CFA representatives

• Fair and honest service and accurate assessment of risk and reward is the core of client service
#3 - Transparency and Fairness
• Trustworthy investment reporting

• Information you do not have, is the one that will damage you

• Guidelines should be set (trust will be reset)

• GIPS (Global Investment Performance Standards) for fair presentation
The Chartered Financial Analyst (CFA) program
Impart knowledge in EGS topics
Sustainability and ethical subjects in investing
Recognition & analysis of similarities with past experience from other countries/from history

Essential step toward for the Future
Economic Environment
Fluctuations of liquidity & interest rates
Absence of finance bills
Low volume of gold
Money need intensifying
Business Structure
Theodore Roosevelt
Political Environment
in San Francisco
Sell-off and drop in price of shares

Shipment of gold: London U.S.

Prohibition of U.S. finance bills
United Copper speculations
Mercantil national


Gross & Kleeberg

22nd october 1907: The Run

Massive withdrawals

21% decrease in prices
47% increase in number of bankruptcies
11% fall in production
26% decrease in imports
Unemployment rose from 2.8% to 8%

Economy stabilized only before WWI
Financial Effects
Global Effects
Mexico lost $55 millon dollars of foreign investment
Depending heavily on foreign capital and markets
Mexican Revolution
Associated with crises in Egypt, Hamburg, Chile, Holland & Genoa, Copenhagen
Provides better knowledge in investment theory and ethical and professional standards
Improve skills for advanced investment analysis and real-world portfolio management
Experts' words
London Business School

Richard A. ‘Dick’ Brealey:
More attention on behaviors of people in the world of finance
The role of financial institutions
Provides better knowledge in investment theory and ethical and professional standards
Improve skills for advanced investment analysis and real-world portfolio management
Impart knowledge in EGS topics
Sustainability and ethical subjects in investing
Some ideas
Role of finance in the society

Serves individuals, families, businesses & governments

Performs indispensable functions

Promote for better economic decision-making (World Economic Forum)

Needs to gain the trust of people & investors
Massive scale of the transformation & Innovations
Francesca Cornelli:
Behavioural psychology main topic of the research
Thank you for listening !

Any Question?
"If people will keep their money in the banks, everything will be all right.3
J.P. Morgan
Trust should be more regulated

Transparency between clearinghouse & national banks and between trust & clearinghouse
Full transcript