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John Pierpont Morgan

John Pierpont Morgan

John Pierpont Morgan (1837-1913), the most powerful American banker of his time, helped build a credit bridge between Europe and America and financially rescued the United States government twice.

On April 17, 1837, J. P. Morgan was born in Harford, Conn. After 2 years at the University of Göttingen in Germany, he entered the world of banking and commerce in 1857. In 1895 his firm, a private bank engaging in commercial as well as investment banking, adopted its final name of J. P. Morgan & Company.

Early in the Civil War, Morgan lent money to a man who bought rifles from the Federal government and resold them to it; this is the notorious Hall carbine affair, but there is no evidence that Morgan was other than a creditor. Less than 2 decades later Morgan became instrumental in the periodic reorganization of American railroads, emerging as a decisive factor in railroading. He refinanced bankrupt railroads, acted to stabilize rates, and consolidated competing lines. In addition, to protect individuals who purchased railroad securities from his firm, Morgan placed his own representatives on the railroads' boards of directors.

Financial Rescue of the Government

In 1893 America experienced a major economic downturn which, in conjunction with questionable monetary policies (resulting from pressure from the silver inflationists), put an impossible burden on the U.S. Treasury's gold reserve. President Grover Cleveland's attempts to replenish the gold reserve were ineffective. In 1895 Morgan played the role of central banker, sold government bonds for gold (half obtained abroad through his foreign affiliates), and guaranteed to protect the gold reserve. Though Morgan was charged with profiting exorbitantly and taking advantage of the dire straits of the government, he never revealed the precise amount of his profits, so the validity of such allegations is impossible to assess. His syndicate succeeded temporarily in its objectives; public and private ends harmonized at a price which was probably not excessive, considering the service rendered to the nation.

In 1901 a tremendous conflict opened between James J. Hill and Edward H. Harriman for domination of the railroads west of the Mississippi and in the northern half of the country. Morgan was allied with Hill, and in the course of this contest the price of Northern Pacific stock shares jumped to astronomical heights. The compromise reached was based on pooling all interests in the Northern Securities Company. When this company was dissolved in 1904 as a consequence of successful prosecution under the Sherman Antitrust Act, modern antitrust enforcement had been inaugurated.

Morgan founded the U.S. Steel Corporation in 1901. The culmination of a wave of similar consolidations, it was the largest industrial concern of the time. U.S. Steel never controlled the entire steel industry, and its share of the market has declined steadily.

Solving the Panic of 1907 represents Morgan's highest achievement; never again would private power be vested with so large a public responsibility. When the panic hit, the financial community of New York rallied around Morgan, and the Federal government entrusted its funds to his disposition. He recruited brilliant lieutenants to investigate the resources of the various New York banks and trust companies, determine which were solvent, and act to save them. (There was no central bank, as the Federal Reserve System was created only in 1913 as an after-math to the panic.) Morgan and his cohorts were, for all practical purposes, the central bank.

An Assessment

Morgan was preeminently suited to the world in which he lived. During the years of his power the American economy grew at a prodigious rate. Morgan was one of the "vital few" who made it happen. He was a superb organizer in an economy that was replacing competition with concentration. He chose extremely able associates but reserved the crucial decisions for himself. He earned his economic reward by linking those who needed capital with those who had it to invest, whether in Europe or America. The success of his endeavor actually lessened the investment banker's significance, as enterprises became internally financed and less dependent on external financing.

As an art collector, Morgan avidly sought paintings, sculpture, and tapestries. He made the Metropolitan Museum of Art in New York the equal of any museum in the world, although he contributed to others, too. "The Morgan collections represent the most grandiose gesture of noblesse oblige the world has ever known," wrote Aline B. Saarinen (1957). He was a man of genuine taste. His death in Rome on March 31, 1913, left a void, for his was a personal, not an institutional, power and hence not readily transferable.

Further Reading

Since the primary sources are unavailable, there is no definitive biography of Morgan. The best is Frederick Lewis Allen, The Great Pierpont Morgan (1949). Of considerably less value are John Kennedy Winkler, Morgan the Magnificent: The Life of J. Pierpont Morgan (1930), and Herbert Livingston Satterlee, J. Pierpont Morgan: An Intimate Portrait (1939).

Many books deal with a history of Morgan's firm or with particular episodes in which Morgan was prominent: Henry Meyer Balthasar, A History of the Northern Securities Case (1906); Abraham Berglund, The United States Steel Corporation: A Study of the Growth and Influence of Combination in the Iron and Steel Industry (1907); Stuart Daggett, Railroad Reorganization (1908); Alexander D. Noyes, Forty Years of American Finance (1909); Lewis Corey, The House of Morgan (1930); Allan Nevins, Grover Cleveland (1944); Paul Studenski and Herman E. Krooss, Financial History of the United States (1952); and Edwin P. Hoyt, Jr., The House of Morgan (1966). Excellent selections are in N. S. B. Gras and Henrietta M. Larson, Casebook in American Business History (1939), and Jonathan R. Hughes, The Vital Few: American Economic Progress and Its Protagonists (1966). Robert Gordon Wasson, The Hall Carbine Affair: A Study in Contemporary Folklore (1948), is a historiographical exercise concerning Morgan's complicity in an event used to attack his integrity.

For background see John Moody, The Masters of Capital: A Chronicle of Wall Street (1919), and Frederick L. Allen, The Lords of Creation (1935). The biographies of two of Morgan's partners are worthy of mention: Thomas Williams Lamont, Henry P. Davison (1933), and especially John A. Garraty, Right-hand Man: The Life of George W. Perkins (1960). Morgan's role as art patron is treated in Francis Henry Taylor, Pierpont Morgan as Collector and Patron (1957), and Aline B. Saarinen, The Proud Possessors: The Lives, Times, and Tastes of Some Adventurous American Art Collectors (1957). □

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Morgan, John Pierpont (1837-1913)

John Pierpont Morgan (1837-1913)

Banker

Sources

A Knack for Banking. John Pierpont Morgan was born into a prosperous mercantile-banking family in 1837 and was raised in Hartford, Boston, and London. After a formal education that began in New England schools and continued in Switzerland and Germany, Morgan was placed by his father in an affiliated firm, where he rose from junior clerk to a position brokering sugar in Cuba and Louisiana. In 1860 he returned to New York and opened his own office, handling much the same kind of business his father did, namely, managing American investments for English clients and trading in foreign exchange. During the Civil War years Morgan speculated in various kinds of financial investments, as well as foreign exchange and gold, and counseled English investors about conditions in the American market. Morgan also brokered some important railroad offerings and played a prominent role in the refinancing of the federal governments Civil War debt in the late 1860s and 1870s. In 1873, when Jay Cookes firm went bankrupt amid a general financial panie, Morgans firm became the nations preeminent dealer in government bonds.

Wheeling and Dealing. In 1879 Morgan turned his focus to railroad finance, overseeing much of the consolidation then transforming that industry. Two dramatic negotiationsthe first helping William Vanderbilt to quietly unload his huge personal holdings in railroad stock, the second handling $40 million in stock issued by the financially troubled Northern Pacific Railroad (in which Jay Cooke had invested heavily and disastrously)buttressed Morgans reputation and demonstrated the feasibility of selling large stock offerings via underwriting syndicates. Over the next few decades Morgan played a critical role in raising the huge sums of capital needed to build the major railroad systems of the period. From 1885 to 1890, in an effort to curb destructive competition, he convened a series of meetings to organize leading railroad companies into voluntary associations. When these broke down, Morgan shifted to system building, taking advantage of the Panie of 1893 to reorganize many of the largest systems and bring them under the control of boards of directors, or of voting trusts, that he and his associates closely controlled. By 1900 he had amassed financial control over the largest railroad empire in the country.

Not Enough. Still, Morgan did not achieve much mainstream public notice before the gold crisis of the mid 1890s, when he organized a syndicate to stem the outflow of gold from the U.S. Treasury. The terms of this assistance, when they became known, outraged the public and helped to bring down the presidential administration of Grover Cleveland in 1896. Morgan refused to divulge his profits to a congressional committee investigating the affair. Beginning the 1890s, meanwhile, Morgan expanded the scope of his financial activities beyond government securities and railroads. In 1892 he managed the formation of General Electric; in 1898 the Federal Steel Company; in 1901 U.S. Steel (capitalized at $1.4 billion); and in 1902 the International Harvester Company. Well before his death in 1913 he had become the most important financier in the countrya key conduit for moving European capital into U.S. investmentsand a major figure in the rise of big business.

Sources

Lewis Corey, The House of Morgan: A Social Biography of the Masters of Money (New York: G. Howard Watt, 1930);

Herbert L. Satterlee, J. Pierpont Morgan: An Intimate Portrait (New York: Macmillan, 1939).

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Morgan, John Pierpont

MORGAN, JOHN PIERPONT


John Pierpont Morgan (18371913) was probably the most important and powerful business investment banker in U.S. history. Morgan played a major role in the rescue of the U.S. government in 1893 and 1907, when the United States experienced major economic downturns. However, Morgan's most enduring achievement was probably the crucial role he played in the creation of the United States Steel Corporation.

Morgan was the son of international banker Junius Morgan. He graduated from the famous English High School in Boston and then studied for two years at the University of Gottingen, Germany. He later graduated from Harvard University.

In many ways John walked in his father's footsteps, succeeding his father in most of the senior Morgan's business enterprises. Like his father Morgan made large gifts to educational institutions and to the arts. He became a great collector of art and books, and later in life donated many of his valuable art collections to U.S. libraries and museums. He also was famous as a yachtsman, defending the America's Cup in international yacht races on several occasions.

John entered his father's banking house, The George Peabody Co., in London. A year later his father secured a position for him in New York with Duncan, Sherman and Co., the U.S. agents for the George Peabody firm. Then, at the age of 23, Morgan founded his own company, the J. Pierpont Morgan and Co., to serve as a special agent for the London Peabody Company. And by age 26 Morgan became a member of a firm struggling for financial control of the Albany and Susquehanna Railroad. After his success in this enterprise Morgan grew significantly in personal status within the banking community. He became known as a voice for stabilization in an age noted for its wild and fiery business sectors.

Morgan's motive was to guarantee high profits by stunting competition. His first major effort to create business monopolies during this time was his financial supervision of the reorganization of the railroad industry on the East Coast of the United States. This effort was often dubbed "Morganization." By the beginning of the 20th century Morgan made U.S. railways into a vast inter-related empire.

Morgan financed General Electric and consolidated the railroad industry. Toward the end of his career he negotiated with Carnegie Steel in his greatest economic achievement, the creation of the world's largest steel company, United States Steel. It was the first billion-dollar corporation in the United States.

Though the steel industry became the backbone of business growth in the 20th century its growth did not come easily. Internal conflicts emerged between individual steel manufacturers, and the ups and downs of the U.S. economy almost crushed the industry. In 1911 the presidential administration of William Howard Taft (19091913) filed suit against U.S. Steel for possible monopoly practices and illegal business manipulation. Federal committee investigations in 1912 revealed that Morgan's partners held 72 directorships in 47 major corporations in the United States. This may have been admirable as a business achievement, but it was also illegal.

Morgan was one of the few truly vital people of his time. He brought together the financial economics of Europe and the United States. He linked those who had money with those who needed it for the enormous industrial development of the United States that began during the middle of the 19th century. As a result of having so much power and money, he was frequently seen as either a force of great good or the source of great evil in the business world. A few months after his appearance as a defendant in the federal business trial, J. P. Morgan died in Rome, Italy, a broken revolutionary force in U.S. industry.


FURTHER READING

Allen, Frederick Lewis. The Great Pierpont Morgan. New York: Harper and Row, 1949.

Carosso, Vincent P. The Morgans: Private International Bankers. Cambridge, MA: Harvard University Press, 1987.

Cotter, Arundel. The Authentic History of United States Steel Corp. New York: Moody, 1916.

Studenski, Paul and Herman E. Krooss. Financial History of the United States. New York: McGraw-Hill, 1952.

Winkler, John K. Morgan the Magnificent: The Life of J. Pierpont Morgan. New York: Garden City Publishing Co., Inc., 1930.

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Morgan, J.P.

Morgan, J.P. ( John Pierpont) (1837–1913) US financier. Son of a rich banker, he formed what became the influential banking house of J. P. Morgan in 1871. He built a vast financial and industrial empire, financing and consolidating US industries, including the giant US Steel Corporation (1901).

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Morgan, John Pierpont

John Pierpont Morgan: see Morgan, family.

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