World’s Richest Woman Aids New York City’s Bailout During the 1907 Panic

Hetty Green is recognized as the “world’s greatest miser” and the “Witch of Wall Street,” but today, she is more likely to be regarded as an eccentric investing figure. After all, while she became famed for her thrifty lifestyle and harsh exterior, Green pioneered value investing tactics that have resulted in billionaires among many of today’s top investors. When the chips were down, when people truly needed assistance, the whaling heiress turned independent investor, business tycoon, and world’s wealthiest woman frequently used her cash to save the day.

The knickerbocker dilemma is possibly the best example of Green’s misinterpreted legacy. The knickerbocker crisis, also known as the Panic of 1907, is now largely forgotten, but the economic nightmare remains vivid in the minds of those who lived at the turn of the twentieth century. It had complicated origins, but the short version is this: Wall Street greed turned ugly, resulting in bank runs and a severe recession.

The New York Stock Exchange fell over 50% from its 1906 peak in the three weeks following the panic, which began on October 22, 1907. A year later, in 1908, the Gross National Product (GNP), a measure similar to today’s GDP, plummeted 12%. The banking system’s problems were severe enough during the knickerbocker crisis to prompt the founding of the Federal Reserve System.

It all started when F. Augustus Heinze, a copper magnate, and Charles Morse, the “Ice King” (who literally sold ice), attempted to artificially boost United Copper’s stock price, which is now prohibited. Heinze and Morse borrowed significantly to invest in United Copper and boost the stock price, but when the plan failed, they were forced to default on a number of substantial loans. This caused problems for a few significant banks, including the Knickerbocker Trust, which did not have much cash in reserves at the time.

The problems for banks and trust organizations eventually triggered widespread fear, resulting in bank runs across the country. As the situation deteriorated, John Pierpont Morgan, the American financier who created JPMorgan Chase, convened a group of Wall Street’s finest and brightest at the Morgan Library to discuss how to stabilize the economy and stock market. Hetty Green was the only woman invited to the conference at the height of the hysteria.

Why? Her Wall Street status undoubtedly helped, but she also predicted the entire event.

In 1916, The Literary Digest reported on an article in the New York Tribune about Green’s role in forecasting the 1907 panic and bailing out investors, businesses, and even the city.

“I saw this situation coming,” she remarked, noting the clear indicators of stress. “Some of the solidest men of the Street came to me and wanted to unload all sorts of things, from palatial residences to automobiles.”

Green stated that when the New York Central Railroad company came knocking, she offered them a “big loan,” which caused her to “sit up and think.” She decided to start gathering as much cash as possible, knowing that a panic could be on the road.”When the crash occurred, I had money, and I was one of the few who truly had it. Others had ‘securities’ and ‘values.’ I had the cash and they had to come to me,” she said.

During the 1907 panic, Green observed how men from all across the country flocked to New York to seek loans. Despite being branded a “miser” her entire life, she chose not to take advantage of the circumstance.

“Those to whom I loaned money received it at 6%. “I could have easily secured 40%,” she explained. “Never in my life—no matter what has been said against me—have I practiced usury, and no one knows it better than the wealthy men who have had business dealings with me.”

Usury, or charging a high interest rate on a loan, violated Green’s Quaker moral ethic. And she seemed to enjoy the fact that some of the world’s most powerful men, businesses, and even local governments turned to her for a bailout.

Green went on to lend the New York City government $1.1 million at the height of the 1907 panic, which is almost $33 million in today’s currencies. According to the 1930 book “The Witch of Wall Street: Hetty Green,” she had previously pledged her support. Months before the panic, she provided the city a $4.5 million loan that is now worth over $150 million.

According to Charles Slack, author of Green’s biography, “Hetty: The Genius and Madness of America’s First Female Tycoon,” Green frequently lent money to New York when the city was in financial need. “She always charged reasonable rates. She did not gouge or threaten the city.



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