In 1907, an economic downturn gripped the United States. It became known as the Panic of 1907. Numerous banks temporarily ceased operation, hoping to prevent depositors from withdrawing their funds. A majority of the banks reopened after a few weeks, but several of them closed permanently. The Panic of 1907 prompted the federal government to implement the Federal Reserve System. The Ohio state government also responded, implementing the Thomas Law.
The Ohio governor signed into law the Thomas Law on May 5, 1908. This legislation established the State Department of Banks. This government agency was to enforce Ohio's banking laws, making sure that each financial institution operated in a legal and fiscally sound manner. At first, the State Department of Banks enjoyed oversight of only those financial institutions that the state government had chartered, but in 1911, its powers were extended over privately owned banks. By 1911, the State Department of Banks was the sole body in Ohio that could charter new banking institutions. As a result of the Thomas Law, banks in Ohio became more fiscally sound and stable, reducing the fears of depositors.