Across the corridor from Heinze and Morse were his brothers, Otto and Arthur P Heinze, who had a brokerage firm. With the experienced Morse, Otto conceived an ill-fated attempt to corner United Mining stock in October 1907. Otto, however decided to go forward with the cornering attempt without the capital that Morse thought was necessary to insure success. The result was that the corner dramatically failed, and its failure was the critical catalyst in a major US financial system collapse.
Otto Heinze had miscalculated. He overestimated how much United Copper that Augustus and the family controlled. When he required short sellers to buy back stock, there was more than enough United Copper stock available in the open market for the “shorts” to cover their short sales. When the collective market realized that Otto’s maneuver had failed, the price of United Copper stock collapsed. Then panic spread as people pulled money out of banks associated with Heinze, and then from trust companies associated with those banks. Augustus Heinze had supported his brother’s cornering attemp. Augustus’ deep commitments across the financial system led to great personal losses. He would be barred from further involvement in financial institutions.
The Panic of 1907 was one of the most significant financial crises in American history. Contributing factors included the costs of the 1906 San Francisco earthquake, yet it was the actions of the Heinze brothers that had caused much of the panic. J. Pierpont Morgan, the premier financier of the day, was able to stabilize the financial markets through his own manipulation. However, the US Government was not to leave the markets open to the solutions of private capital much longer. The 1907 crash directly lead to the formation of the US Federal Reserve System in 1913.
MUst Serve Ten Days and Pay $250 for Sending Copper Witness and Books Away. $2,500 BAIL PENDING A STAY Prisoner Denounced by Judge Roy for “Deliberate and Willful Obstruction of Justice.
Judge Ray, in the United States Circuit Court, announced yesterday that Arthur P. Heinze, brother of F.A. Heinze, the copper man, must go to jail for ten days and pay a fine of $250 as a penalty for his obstruction of justice last June in the Grand Jury investigation of the doings of F.A. Heinze in the Mercantile National Bank.
My great grandmother Ruth- Arthur Heinze’s wife.