Final answer:
The Panic of 1907 stimulated reform in banking policy, leading to the establishment of the Federal Reserve System.
Step-by-step explanation:
The Panic of 1907 stimulated reform in banking policy. This financial crisis, also known as the Knickerbocker Crisis, led to a widespread economic downturn. It exposed weaknesses in the banking system and prompted calls for regulatory reform.
Following the Panic of 1907, the government established the Federal Reserve System in 1913 to regulate the banking industry and stabilize the economy. The Federal Reserve Act and subsequent reforms aimed to prevent future banking crises and provide a framework for monetary policy.
The Panic of 1907 led to significant reforms in banking policy, demonstrating the need for government intervention and oversight to ensure the stability of the financial system.