Abstract
The problem studied relates to the monetary policy employed by Leslie M. Shaw, Secretary of the Treasury, 1902–1907. Secretary Shaw initiated active intervention in the New York City money market to relieve the pressure on bank reserves and interest rates which accompanied the annual autumn specie drain. The empirical results suggest that the banks anticipated Shaw's policy of depositing government funds into the banks, and made fewer preparations for autumn drain of specie. The deposit policy was not carried out in a timely and adequate fashion in 1907, the banks were not in position to meet the outflow of specie, and thus this paper helps explain the occurrence of the Panic of 1907.
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