Panic of 1907

  • 1 Kerry A. Odell and Marc D. Weidenmier, “Real Shock, Monetary Aftershock: The 1906 San Francisco Earthquake and the Panic of 1907,” J. Econ. Hist. 64, no. 4 (2004): 1002–1027.

Indeed, the Federal Reserve arguably owes its creation, which followed the Panic of 1907, at least in part to the insurance industry.

Some scholars have argued that it was the catastrophic 1906 San Francisco earthquake that caused the Panic of 1907.1 The 1906 earthquake left over half of San Francisco homeless.

  • Such widespread destruction of one of the country’s largest cities had a commensurate effect on the economy and insurance industry.
  • Fearing that the U.S. financial markets could not absorb that many dollars in asset sales, many
    European insurers paid claims by withdrawing money from foreign banks and shipping gold
    across the Atlantic.
  • The Bank of England’s gold supply accordingly dropped 14 percent.
  • It responded to this gold outflow with measures that contributed to the panic and, after an admittedly long chain of events, led to my being here today.  (p1)

2021 0526 - FRB to NAIC - Randal K. Quarles, Vice Chair for Supervision Board of Governors of the Federal Reserve System to National Association of Insurance Commissioners International Insurance Forum - 9p

Valuations Committee

  • In 1907, following the Armstrong investigation and as a result of the panic of that year, the N.A.I.C. adopted a resolution to set the stage to obtain uniformity in valuing securities.
    • Up to 1909, New York and Massachusetts, at their own expense, had prepared valuation lists which were used by other states. In that year, the Valuations Cormnittee of the N.A.I.C. hired its own expert to prepare its list.
    • He was the first salaried staff employee of the N.A.I.C. Later the work was done by professional organizations for a fee; concerns like Moodys and Poor's were employed, with various state insurance departments contributing to the payment of this expense.
  • Several times over the years, the N.A.I.C., through its Valuations Committee, has taken steps to adjust values in times of national economic stress or emergency.
    • As stated above, this was done during the panic of 1907. It was undertaken again during the market demoralization of 1914 and again in 1917.
  • As a result of the stock market crash of 1929, the N.A.I.C. adopted so-called convention values in 1931.
  • Thus, upon at least four different occasions, the N.A.I.C., by realistic and timely action, became a potent factor in protecting the public against insolvency. (p11-12)

1958 - Insurance Regulation in the Public Interest "A BETTER N.A.I.C." - Robert E. Dineen - 122p