San Francisco Earthquake & The Panic of 1907

By | September 17, 2015

Was there a relationship between the San Francisco Earthquake of 1906 and the Panic of 1907 when J. P. Morgan had to step in and save the financial world after Knickerbocker Bank collapsed? The Southern Pacific and Union Railroads and the Insurance companies that had to pay out millions in claims were forced to sell stock in their possession to raise funds and led to a general downturn in Wall Street. They had huge losses in San Francisco and the railroads were severely damaged as well as SF being the hub of the S. Pacific RR. One Jesse Livermore shorted the Union RR and made millions simply by getting the news of the SF quake a few hours ahead of the general press.

Why did the Insurance companies have to pay out so much? After all, almost no one had quake insurance. Well, the damage, they would claim (similar to insurers after Katrina claimed for those without flood insurance) wasn’t due to the insured cause (fire) rather was caused by the quake. But that didn’t set well in SF.

The town fathers and PTB however was so concerned that people would not move to the area that they refused to call it an earthquake, rather it was a “tremor” but they called the whole mess the “San Francisco Fire”, not the “San Francisco Earthquake”. The Real Estate Commission even went so far as to order its members to NOT MENTION the earthquake and refer only to the “fire”. Papers who called it a quake were ostracized. Geologists and engineers were button-holed and criticized for trying to get the city to be prepared for future quakes and to reinforce the building codes. As a result, the building codes remained rather lax with more emphasis on fire prevention than actually building earthquake proof buildings. And, of course, the insurance companies were pressured to pay up for the fire damage. As far as the city fathers were concerned, there was no earthquake…

Just a little tidbit of history for you.