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Portrait: Financier and banker J. P. Morgan

Wednesday, 28 March 2018 - 11:00 am (CET/MEZ) Berlin | Author/Destination: Editorial / Redaktion
Category/Kategorie: Portrait Reading Time:  13 minutes

🔊 Listen to this Post John Pierpont Morgan Sr. was an American financier and banker who dominated corporate finance and industrial consolidation in the United States of America in the late 19th and early 20th centuries. In 1892 Morgan arranged the merger of Edison General Electric and Thomson-Houston Electric Company to form General Electric. He also played important roles in the formation of the United States Steel Corporation, International Harvester and AT&T. At the height of Morgan’s career during the early twentieth century, he and his partners had financial investments in many large corporations and had significant influence over the nation’s high finance and United States Congress members. He directed the banking coalition that stopped the Panic of 1907. He was the leading financier of the Progressive Era, and his dedication to efficiency and modernization helped transform American business. Adrian Wooldridge characterized Morgan as America’s “greatest banker”. Morgan died in Rome, Italy, in his sleep in 1913 at the age of 75, leaving his fortune and business to his son, John Pierpont Morgan Jr. His fortune was estimated at “only” $80 million, prompting John D. Rockefeller to say: “and to think, he wasn’t even a rich man”.

Morgan went into banking in 1857 at the London branch of merchant banking firm Peabody, Morgan & Co., a partnership between his father and George Peabody founded three years earlier. In 1858, he moved to New York City to join the banking house of Duncan, Sherman & Company, the American representatives of George Peabody and Company. During the American Civil War, in an incident known as the Hall Carbine Affair, Morgan financed the purchase of five thousand rifles from an army arsenal at $3.50 each, which were then resold to a field general for $22 each. Morgan had avoided serving during the war by paying a substitute $300 to take his place. From 1860 to 1864, as J. Pierpont Morgan & Company, he acted as agent in New York for his father’s firm, renamed “J.S. Morgan & Co.” upon Peabody’s retirement in 1864. From 1864–72, he was a member of the firm of Dabney, Morgan, and Company. In 1871, he partnered with the Drexels of Philadelphia to form the New York firm of Drexel, Morgan & Company. At that time, Anthony J. Drexel became Pierpont’s mentor at the request of Junius Morgan. After the death of Anthony Drexel, the firm was rechristened “J. P. Morgan & Company” in 1895, retaining close ties with Drexel & Company of Philadelphia; Morgan, Harjes & Company of Paris; and J.S. Morgan & Company (after 1910 Morgan, Grenfell & Company) of London. By 1900, it was one of the most powerful banking houses of the world, focused especially on reorganizations and consolidations. Morgan had many partners over the years, such as George W. Perkins, but always remained firmly in charge. His process of taking over troubled businesses to reorganize them became known as “Morganization”. Morgan reorganized business structures and management in order to return them to profitability. His reputation as a banker and financier also helped bring interest from investors to the businesses that he took over. The Federal Treasury was nearly out of gold in 1895, at the depths of the Panic of 1893. Morgan had put forward a plan for the federal government to buy gold from his and European banks but it was declined in favor of a plan to sell bonds directly to the general public to overcome the crisis. Morgan, sure there was not enough time to implement such a plan, demanded and eventually obtained a meeting with Grover Cleveland where he claimed the government could default that day if they didn’t do something. Morgan came up with a plan to use an old civil war statute that allowed Morgan and the Rothschilds to sell gold directly to the U.S. Treasury, 3.5 million ounces, to restore the treasury surplus, in exchange for a 30-year bond issue. The episode saved the Treasury but hurt Cleveland’s standing with the agrarian wing of the Democratic Party, and became an issue in the election of 1896 when banks came under a withering attack from William Jennings Bryan. Morgan and Wall Street bankers donated heavily to Republican William McKinley, who was elected in 1896 and re-elected in 1900. In 1896, Adolph Simon Ochs owned the Chattanooga Times, and he secured financing from Morgan to purchase the financially struggling New York Times.

The Panic of 1907 was a financial crisis that almost crippled the American economy. Major New York banks were on the verge of bankruptcy and there was no mechanism to rescue them, until Morgan stepped in to help resolve the crisis. Treasury Secretary George B. Cortelyou earmarked $35 million of federal money to deposit in New York banks. Morgan then met with the nation’s leading financiers in his New York mansion, where he forced them to devise a plan to meet the crisis. James Stillman, president of the National City Bank, also played a central role. Morgan organized a team of bank and trust executives which redirected money between banks, secured further international lines of credit, and bought up the plummeting stocks of healthy corporations. A delicate political issue arose regarding the brokerage firm of Moore and Schley, which was deeply involved in a speculative pool in the stock of the Tennessee Coal, Iron and Railroad Company. Moore and Schley had pledged over $6 million of the Tennessee Coal and Iron (TCI) stock for loans among the Wall Street banks. The banks had called the loans, and the firm could not pay. If Moore and Schley should fail, a hundred more failures would follow and then all Wall Street might go to pieces. Morgan decided they had to save Moore and Schley. TCI was one of the chief competitors of U.S. Steel and it owned valuable iron and coal deposits. Morgan controlled U.S. Steel and he decided it had to buy the TCI stock from Moore and Schley. Elbert Gary, head of U.S. Steel, agreed, but was concerned there would be antitrust implications that could cause grave trouble for U.S. Steel, which was already dominant in the steel industry. Morgan sent Gary to see President Theodore Roosevelt, who promised legal immunity for the deal. U.S. Steel thereupon paid $30 million for the TCI stock and Moore and Schley was saved. The announcement had an immediate effect; by November 7, 1907, the panic was over. The crisis underscored the need for a powerful oversight mechanism. Vowing to never let it happen again, and realizing that in a future crisis there was unlikely to be another Morgan, in 1913 banking and political leaders, led by Senator Nelson W. Aldrich, devised a plan that resulted in the creation of the Federal Reserve System in 1913.

While conservatives in the Progressive Era hailed Morgan for his civic responsibility, his strengthening of the national economy, and his devotion to the arts and religion, the left wing viewed him as one of the central figures in the system it rejected. Morgan redefined conservatism in terms of financial prowess coupled with strong commitments to religion and high culture. Enemies of banking attacked Morgan for the terms of his loan of gold to the federal government in the 1895 crisis and, together with writer Upton Sinclair, they attacked him for the financial resolution of the Panic of 1907. They also attempted to attribute to him the financial ills of the New York, New Haven and Hartford Railroad. In December 1912, Morgan testified before the Pujo Committee, a subcommittee of the House Banking and Currency committee. The committee ultimately concluded that a small number of financial leaders was exercising considerable control over many industries. The partners of J.P. Morgan & Co. and directors of First National and National City Bank controlled aggregate resources of $22.245 billion, which Louis Brandeis, later a U.S. Supreme Court Justice, compared to the value of all the property in the twenty-two states west of the Mississippi River.

After the death of his father in 1890, Morgan gained control of J. S. Morgan & Co (renamed Morgan, Grenfell & Company in 1910). Morgan began conversations with Charles M. Schwab, president of Carnegie Co., and businessman Andrew Carnegie in 1900 with the intention of buying Carnegie’s business and several other steel and iron businesses to consolidate them to create the United States Steel Corporation. Carnegie agreed to sell the business to Morgan for $480 million. The deal was closed without lawyers and without a written contract. News of the industrial consolidation arrived to newspapers in mid-January 1901. U.S. Steel was founded later that year and was the first billion-dollar company in the world with an authorized capitalization of $1.4 billion. Morgan was a member of the Union Club in New York City. When his friend, Erie Railroad president John King, was black-balled, Morgan resigned and organized the Metropolitan Club of New York. He donated the land on 5th Avenue and 60th Street at a cost of $125,000, and commanded Stanford White to “…build me a club fit for gentlemen, forget the expense…”. He invited King in as a charter member and served as club president from 1891 to 1900.

An avid yachtsman, Morgan owned several large yachts. The well-known quote, “If you have to ask the price, you can’t afford it” is commonly attributed to Morgan in response to a question about the cost of maintaining a yacht, although the story is unconfirmed. A similarly unconfirmed legend attributes the quote to his son, J. P. Morgan Jr., in connection with the launching of the son’s yacht Corsair IV at Bath Iron Works in 1930. Morgan was scheduled to travel on the ill-fated maiden voyage of the RMS Titanic, but canceled at the last minute, choosing to remain at a resort in Aix-les-Bains, France. The White Star Line, which operated Titanic, was part of Morgan’s International Mercantile Marine Company, and Morgan was to have his own private suite and promenade deck on the ship. In response to the sinking of Titanic, Morgan purportedly said, “Monetary losses amount to nothing in life. It is the loss of life that counts. It is that frightful death.”

Morgan was a notable collector of books, pictures, paintings, clocks and other art objects, many loaned or given to the Metropolitan Museum of Art (of which he was president and was a major force in its establishment), and many housed in his London house and in his private library on 36th Street, near >Madison AvenuePierpont Morgan Library a public institution in 1924 as a memorial to his father, and kept Belle da Costa Greene, his father’s private librarian, as its first director. Morgan was painted by many artists including the Peruvian Carlos Baca-Flor and the Swiss-born American Adolfo Müller-Ury, who also painted a double portrait of Morgan with his favorite grandchild, Mabel Satterlee, that for some years stood on an easel in the Satterlee mansion but has now disappeared.

Morgan was a benefactor of the American Museum of Natural History, the Metropolitan Museum of Art, Groton School, Harvard University (especially its medical school), Trinity College, the Lying-in Hospital of the City of New York, and the New York trade schools.

By the turn of the century, Morgan had become one of America’s most important collectors of gems and had assembled the most important gem collection in the U.S. as well as of American gemstones (over 1,000 pieces). Tiffany & Co. assembled his first collection under their Chief Gemologist, George Frederick Kunz. The collection was exhibited at the World’s Fair in Paris in 1889. The exhibit won two golden awards and drew the attention of important scholars, lapidaries, and the general public. George Frederick Kunz continued to build a second, even finer, collection which was exhibited in Paris in 1900. These collections have been donated to the American Museum of Natural History in New York where they were known as the Morgan-Tiffany and the Morgan-Bement collections. In 1911 Kunz named a newly found gem after his best customer, morganite.

Morgan was a patron to photographer Edward S. Curtis, offering Curtis $75,000 in 1906, to create a series on the American Indians. Curtis eventually published a 20-volume work entitled The North American Indian. Curtis also produced a motion picture, In the Land of the Head Hunters (1914), which was restored in 1974 and re-released as In the Land of the War Canoes. Curtis was also famous for a 1911 magic lantern slide show The Indian Picture Opera which used his photos and original musical compositions by composer Henry F. Gilbert.

Read more on The Morgan Library & Museum, biography.com – J. P. Morgan, history.com – J. P. Morgan and Wikipedia J. P. Morgan (Smart Traveler App by U.S. Department of State - Weather report by weather.com - Johns Hopkins University & Medicine - Coronavirus Resource Center - Global Passport Power Rank - Democracy Index - GDP according to IMF, UN, and World Bank - Global Competitiveness Report - Corruption Perceptions Index - Press Freedom Index - World Justice Project - Rule of Law Index - UN Human Development Index - Global Peace Index - Travel & Tourism Competitiveness Index). Photos by Wikimedia Commons. If you have a suggestion, critique, review or comment to this blog entry, we are looking forward to receive your e-mail at comment@wingsch.net. Please name the headline of the blog post to which your e-mail refers to in the subject line.

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