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Roosevelt pressured congress to increase the regulatory power of the federal government. Regulation of railroads was strengthened by the Elkins Act in 1903 and the Hepburn Act in 1906. This legislation protected merchants by regulating the rates that the railroads could charge to transport their goods. With Roosevelt's direction, the Attorney General commenced forty-four law suits against monopolies. One of the most famous cases was against J. P. Morgan's Northern Securities Company, in which a huge railroad monopoly was broken up.
In the case of Swift and Company v. United States the government broke up the "Beef trust" that monopolized over half or all beef sales. The evidence at trial showed that the "Big Six" leading meatpackers were engaged in a conspiracy to fix prices and divide the market for livestock and meat in order to obtain higher prices and higher profits. They blacklisted competitors who failed to go along, used false bids, and accepted rebates from the railroads to haul their beef. The six companies involved, Swift, Armour, Morris, Cudahy, Wilson and Schwartzchild, did a combined $700 million a year in business and controlled half of the national market, and up to 75% in New York City. In 1902, the Big Six decided to merge into one National Packing Company in 1903, so they could continue to control the trade internally and not have to use conspiracies. The government's victory in the case encouraged it to pursue other antitrust actions.
Public opinion had been outraged by Upton Sinclair's novel The Jungle, that depicted horribly unsanitary conditions in Chicago's meatpacking plants, and public opinion was with the president on this issue. Roosevelt pushed Congress to pass the Pure Food and Drug Act of 1906, as well as the Meat Inspection Act of 1906. These laws provided for labeling of foods and drugs, inspection of livestock and mandated sanitary conditions at meatpacking plants.
Toward the end of his presidency, Roosevelt faced The Panic of 1907 (referred to by some as the "Knickerbocker Crisis")in which the New York Stock Exchange fell almost 50% from its peak the previous year. Panic occurred and there were numerous runs on banks and trust companies. The panic spread throughout the nation when many state and local banks and businesses declared bankruptcy. The panic was triggered by the failed attempt in October 1907 to corner the market on stock of the United Copper Company. When this bid failed, banks that had lent money to the cornering scheme suffered runs that later spread to affiliated banks and trusts, leading a week later to the downfall of the Knickerbocker Trust Company, which was New York City's third-largest trust company. The collapse of the Knickerbocker spread fear throughout the city's trusts as regional banks withdrew reserves from New York City banks. Panic extended across the nation as vast numbers of people withdrew deposits from their regional banks.
To meet the crisis, Roosevelt turned to a former enemy, J. P. Morgan. Realizing that his own interests were threatened, Morgan pledged large sums of his own money, and convinced other New York bankers to do the same, to shore up the banking system. At the time, the United States did not have a central bank to inject money back into the market. By November, the panic had largely ended, only to be replaced by a new crisis.
The new problem involved heavy borrowing of a large brokerage firm that had used the stock of Tennessee Coal, Iron and Railroad Company (TC&I) as collateral. When TC&I's stock price dropped rapidly, clients of the brokerage firm began to withdraw their funds. This crisis was once again averted by cooperation between Roosevelt and Morgan. Roosevelt allowed an emergency takeover by Morgan's U.S. Steel Corporation which in turn gave stability to the company's stockholders. The following year, Senator Nelson W. Aldrich chaired a commission to investigate the crisis and propose future solutions. Aldrich's recommendations would eventually lead to the creation of the Federal Reserve System.