ThePanic of 1901 was the firststock market crash on theNew York Stock Exchange, caused in part by struggles betweenE. H. Harriman,Jacob Schiff, andJ. P. Morgan/James J. Hill for the financial control of theNorthern Pacific Railway. The stock cornering was orchestrated byJames Stillman andWilliam Rockefeller'sFirst National City Bank financed withStandard Oil money. After reaching a compromise, the moguls formed theNorthern Securities Company. As a result of the panic, thousands of small investors were ruined.[1]
One of the key players wasE. H. Harriman, who "by 1898…was chairman of the executive committee of theUnion 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."[2] One of the causes of this stock market crash was Harriman's effort to gain control ofNorthern Pacific Railway by buying up its stock.
The panic began when thestock market crashed during the afternoon of May 8, 1901.[3] Investors did not see it coming, but by 1:00 pm, the decline in the market was beginning to show. First came the gradual decline inChicago, Burlington and Quincy Railroad (CB&Q) stock. It had been high all morning, but suddenly a sharp weakness came about. Prices of stocks such asSt. Paul,Missouri Pacific, and Union Pacific began to fall. Soon enough, the whole market was drowning. Investors who had once held on tightly to their stocks were selling out of panic. Others caught on and an overwhelming cry of "Sell! Sell! Sell!" was heard throughout the floor of theNew York Stock Exchange.[4]
During the selling, a rumor spread among traders that Arthur Housman, broker forJ. P. Morgan, had died. Housman, the head ofA.A. Housman & Company, was brought to the floor of theNew York Stock Exchange to assure traders thatJ.P. Morgan & Co. was still doing business.[5]
Affected stocks included St. Paul, Union Pacific, Missouri Pacific,Amalgamated Copper, Sugar,Atchison, andUnited States Steel. However, not all stocks declined: Northern Pacific saw a net advance of16+1⁄2 points.[6]
As a result of this crash, Harriman and Hill joined forces to form a holding company, theNorthern Securities Company, to control the Northern Pacific, theGreat Northern, and the CB&Q.[7] This company was shortly shut down under theSherman Antitrust Act of 1890.[8]