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). □

MORGAN, J. PIERPONT 1837-1913

Banker

To the Bank Born

J. P. Morgan headed J. P. Morgan and Company, the most important force in American finance in the quarter century before World War I, a time when the American economy grew to be the largest and most powerful in the world. Morgan was born into a wealthy banking family in Hartford, Connecticut. His father instilled in him from childhood principles of integrity and trained him early in the business of international banking as it was practiced at the highest levels. Morgan graduated from the university at Göttingen, Germany, in 1857 and immediately went to work on Wall Street. In 1862 he opened his own firm, which eventually became the Morgan Bank. Morgan took over his father's firm when his father died in 1890, and renamed it J. P. Morgan and Company.

U.S. Steel

In 1901 Morgan was instrumental in establishing the United States Steel Corporation. Morgan underwrote a successful public offering of stock in the world's first $1 billion corporation. This offering netted millions for Morgan and paid $492 million to Andrew Carnegie for about $80 million in actual assets in order to eliminate the steel industry's major price-cutter. With the merger of Carnegie's properties and other steel properties, U.S. Steel controlled 65 percent of the U.S. steel-making capacity. Acquiring Carnegie's steel company was vital to Morgan because he saw Carnegie as a disturbing element, not only in steel, but also in the railroad world. On 3 March 1901 the plan of the organization of the U.S. Steel Corporation was made public. The incorporation stabilized the great, widely scattered, uncoordinated domestic steel industry and made it possible for American steel to invade foreign markets.

Morgan's Method

When Morgan backed U.S. Steel he concentrated on eliminating disturbances and selecting the right men to run the corporation. Morgan viewed his enterprise as too important to be subject to the whims of old age, the desire for retaliation, or the health or change in habits of any small group of men. The management had to be conducted at a high level. Constant attention to research and development and the best engineering talent was gathered to ensure that the United States retain its premier standing in the world of steel. The board of directors was made up of some of the most successful businessmen ever organized into a group. Charles M. Schwab was elected president, and Judge Elbert H. Gary was chosen as the chairman of the executive committee. Morgan was represented by Charles Steele on the executive committee and Robert Bacon on the finance committee.

Billion Dollar Steel Trust

Because of the enormous size and wealth generated by U.S. Steel, many politicians attempted to capitalize politically with the "common people" and the "friends of labor" by talking about the "Billion Dollar Steel Trust." It was attacked as a monopoly that was seeking to destroy competition, influence legislation, and control government. Carnegie did not help matters by stating several times that he would soon come back into possession of the Carnegie Steel Company: "Pierpont is not an ironmaster, he knows nothing about the business of making and selling steel. I managed my trade with him so that I was paid for my properties in bonds, not stocks! He will make a fizzle of the business and default in payment of interest. I will then foreclose and get my properties back, and Pierpont and his friends will lose all their paper profits." Carnegie did not realize that Morgan would not have paid him in anything but bonds because he wanted to eliminate him from control and have him as a creditor only and not as a partner. Of course, the event did not turn out as Carnegie predicted.

The Panic

The rhetoric regarding influential, wealthy men such as Morgan was clearly hostile in 1907. In a 4 July address Princeton University president Woodrow Wilson urged an attack on the illegal manipulations of financiers rather than on corporations. In a speech on 20 August President Theodore Roosevelt castigated "malefactors of great wealth." But later in the year Morgan acted single-handedly to avert a financial panic that began on 23 October with a run on New York's Knickerbocker Trust Company and spread to several other banks and trust companies. To calm the panic and shore up the money supply, Morgan obtained pledges from the Bank of England, John D. Rockefeller, and other major financiers. He acted to allow New York City to avoid defaulting on some short-term bonds. He even resorted to locking leading New York trust company presidents in his library overnight in his efforts to negotiate deals to support financial institutions. By taking command and rallying other bankers, Morgan succeeded in restoring confidence. The financial crisis of 1907 eventually led to the creation of the Federal Reserve System in 1913, which made the private manipulation of financial markets such as those represented by Morgan's actions during the panic both unnecessary and unthinkable. Morgan died in Rome, Italy, in 1913.

Sources:

Vincent P. Carosso, The Morgans: Private International Bankers, 1854-1913 (Cambridge, Mass.: Harvard University Press, 1988);

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

Morgan, J. Pierpont (b Hartford, Conn., 17 Apr. 1837; d Rome, 31 Mar. 1913). American financier, industrialist, and art collector. The son of a financier and head of one of the most powerful banking houses in the world, Morgan used his personal fortune to spend lavishly on works of art. His main collecting interests were manuscripts and rare books and after his death his son, also J. Pierpont Morgan (1867–1943), endowed the Pierpont Morgan Library in New York as a research institute and museum in memory of his father. It has superb collections of illuminated manuscripts and Old Master drawings and also contains stained glass, sculpture, and metalwork. The Metropolitan Museum in New York also received an important bequest from the elder Morgan, who was chairman of its governing board for many years.

Morgan, J. Pierpont (1837–1913). American financier, industrialist, and art collector. The son of a financier and head of one of the most powerful banking houses in the world, Morgan used his personal fortune to spend lavishly on works of art. His main collecting interests were manuscripts and rare books and after his death his son, also J. Pierpont Morgan (1867–1943), endowed the Pierpont Morgan Library in New York as a research institute and museum in memory of his father. It has superb collections of illuminated manuscripts and Old Master drawings and also contains stained glass, sculpture, and metalwork. The Metropolitan Museum in New York also received an important bequest from the elder Morgan, who was chairman of its governing board for many years.

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).

John Pierpont Morgan see Morgan , family.