J.P. Morgan & Company
J.P. Morgan was a potent force in American business during its era of greatest growth, and a tycoon who almost single-handedly established the practice of investment banking. The son of a banker with international connections, Morgan, through his successful investments and cunning acquisitions, amassed a fortune that was almost unimaginable at the time. "Essentially an organizer and an integrating force, he continually fought the financial buccaneers of his day with their own weapons, and triumphed over them, becoming a powerful force for stabilization in the economic system," declared John N. Ingham in the Biographical Dictionary of American Business Leaders.
The Morgan family's roots in the United States stretched back to 1636 with the arrival of one Miles Morgan from Wales. They were affluent farmers by the time Joseph Morgan, J.P.'s grandfather, entered adulthood, but Joseph became quite prosperous by acquiring a number of holdings, including stagecoach manufacturing concerns and fire insurance providers. His son, Junius Morgan, was involved in the dry-goods wholesale business, first in Hartford, Connecticut and later in Boston. In 1836 Junius wed Juliet Pierpont of Boston. Their first son, John Pierpont, was born in April of 1837 when the family was still in Hartford.
J.P. was tagged with the unwieldy "Pierpont" name as a youth, and earned good grades in school. He was especially gifted in math. Four other siblings followed him—all girls, a fact that historians would later note made it easy for him to gain such mastery over the family's businesses and assets; he would have been expected to share some power with a brother. When he was 14, the Morgans moved to Boston and J.P. unofficially began his collection of rare documents: he sent a card to U.S. president Millard Fillmore that he asked him to sign, which the Chief Executive did and returned to the youngster. Morgan graduated from English High school at the age of 17. His family moved once more at that point when Junius Morgan entered into a partnership with an American who possessed a thriving London brokerage. The senior Morgan became a partner in George Peabody & Company, a firm that handled financial transactions for transatlantic trade and would play a vital role in the growth of J.P. Morgan's career.
Before he joined his family in London, J.P. Morgan adjourned to the Azore Islands for health reasons; it was thought that the tropical sea air would cure a host of his health problems, including skin and stomach ailments. Later that year, he enrolled in a boarding school in Vevey, Switzerland, where he stayed two years. From there, he traveled and studied in Europe, spending two years at the University of Goettingen in Germany. He worked for his father for a time, in a lowly clerk's position at the London office, and then returned to New York City in August of 1857. He rented rooms at West 17th Street, and took on George Peabody's son as a roommate.
In early 1860 Morgan married Amelia Sturges against his father's advice; Junius thought the couple should wait a bit longer. For their honeymoon the pair sailed to North Africa to cure what was thought to be a lingering cold in Amelia. Instead she died in Algiers of tuberculosis a few months later. In 1865 Morgan wed Frances Tracy, whom he had come to know though his affiliation with St. George's Episcopal Church in New York City. Together they had four children—one son, J.P. Morgan Jr., and daughters Louisa, Juliet, and Anne. When Junius Morgan died in 1890, J.P. inherited a great deal of money, which he used to buy European art and rare manuscripts. Known as a tireless executive, Morgan's few activities outside of the business world involved St. George's. He owned a series of ocean-going yachts he named Corsair, and traveled to Europe at least once a year.
When Morgan returned to New York City after some training at his father's firm in England (which was involved in financing the import of British-made iron rails for the American railroad system), he was hired at Duncan, Sherman & Company. Here too, he spent much of his first months as a copyist: there were no typewriters, and every business document had to be written in longhand and then copied in the same manner. Soon Morgan advanced to a position of more responsibility; the fact that his father was a prominent London banker certainly helped. He was sent on research missions for the firm. He traveled throughout the South, and gleaned information on the cotton trade, then a major part of southern economy. On the side, Morgan engineered deals, once buying a shipload of coffee in New Orleans and selling it to local merchants at a profit.
In 1861 the 24-year-old founded his own firm, J.P. Morgan & Company, to act as the American agent for his father's London firm, now called J.S. Morgan. That same year the American Civil War broke out, and Morgan, like 70,000 other men who could afford to do so, hired someone to take his place in the Union Army. He came under worse criticism, however, for his role in financing what came to be known as the Hall Carbine Affair, in which Morgan loaned money to a profiteer who used it to buy armaments from the U.S. government, and then sold them back to the government at a profit.
Morgan's first office was at 53 Exchange Place near Wall Street, and at first he did not even have a permanent clerk to copy papers at the office. But soon he was making a name for himself in increasingly brazen deals: he bought gold in small transactions, then sold half of it overseas, which drove up the price; he then sold the other half at a profit. His father, Junius Morgan, disapproved of such dealings, and forced J.P. to hire the older, more cautious Charles Dabney as senior partner. Thus the firm became Dabney & Morgan from 1864 to 1871, then Drexel, Morgan in 1871 when his father arranged a merger with the New York branch of a successful Philadelphia family-run bank.
During this era the younger Morgan made a fortune in financing the growing railroad industry as it spread across the continent. By 1869, he had gained control of the Albany and Susquehanna Railroad, and in 1879 Morgan was part of a secret syndicate that sold $25 million worth of William Vanderbilt's holdings in the New York Railroad. He had colluded with his father in London to do this, and the deal both enriched him and made him famous for the return on the investment. For the success of his plan he was granted a seat on New York Central Railroad's board of directors. Between 1885 and 1890 Morgan held private meetings at his home with other railroad tycoons, a group that called itself the Interstate Commerce Railway Association, to squash potential competition on lucrative routes. During this era, competing railroad lines would build parallel tracks, and one carrier inevitably went under. The magnates also set rates amongst themselves. This practice was declared illegal with the Interstate Commerce Act of 1887.
Morgan's ties with the federal government began in the early 1870s when he became involved in treasury bonds and government loans. With the financial crisis that was known as the Panic of 1893, Morgan was tapped to act as a central banker by President Grover Cleveland. The United States had no Federal Reserve system at the time, and Morgan and the other bankers knew the nation's monetary system was in danger of collapse. Morgan led the effort that created a syndicate with European lenders to provide $65 million in gold. He profited enormously from the deal, and came under great fire in the press. Cleveland too was criticized, and Congress launched an inquiry. Morgan refused to reveal how much profit he had actually made in the transaction, which did not endear him to the press or the public, and was tagged as a "Robber Baron." Still, latter-day historians credit Morgan with saving the United States' commercial banking system from collapse on this and a few other occasions.
In the late 1870s Morgan became involved in funding the Edison Electric Company. Drexel and Company in Philadelphia became one of the first offices in the world to operate by electric light. In the early 1890s Morgan arranged a merger of Edison with its competitor to form General Electric. Morgan's firm also worked with the Boston brokerage of Kidder, Peabody to underwrite bonds for the capitalization of American Telephone & Telegraph's telephone infrastructure. By 1895 Morgan was head of his own firm, J.P. Morgan & Company, and was considered a powerful force in American finance. He became involved in merging a number of small steel producers until Andrew Carnegie's giant Carnegie Steel was threatened. Morgan then arranged a merger that created United States Steel in 1901, the first billion-dollar manufacturing corporation in the world. He engineered another profitable merger with the creation of International Harvester around the turn of the century.
Chronology: J.P. Morgan
1854: Studied in Germany at University of Goettingen for two years.
1861: Opened offices at 53 Exchange Place.
1869: Gained control of his first railroad, the Albany and Susquehanna.
1873: Opened famous headquarters at 23 Wall Street.
1887: Presided over the Interstate Commerce Railway Association.
1890: Inherited $12 million upon death of his father.
1895: Engineered major international gold transaction on behalf of U.S. Treasury.
1901: Founded U.S. Steel.
1907: Reorganized American banks during confidence crisis.
In 1907, Morgan was again tapped by the government to help out in a potentially disastrous American financial crisis when many banks were about to fail. Morgan and a group of other prominent financiers evaluated which institutions were solvent. In the midst of the crisis, Morgan's U.S. Steel traded some stock for one bank's share in the Tennessee Coal, Iron, & Railroad Company, and Morgan was later indicted by President William H. Taft for this. Morgan's son, J.P. Morgan, Jr., took over the company upon his death in 1913, and quickly achieved success when he became the American purchasing agent for France and England during the early years of World War I.
Social and Economic Impact
Before Morgan's era, large costly enterprises such as transportation systems and massive manufacturing enterprises, were usually created by a monarch and funded from the royal coffers. Morgan and a few others realized early on an opportunity to fill such a role in the United States with the creation, underwriting, and sale of bonds. New railroads and public utilities are examples of the infrastructure created with Morgan's influence.
Despite the fact that Morgan was willing to step in and help the federal government if he foresaw a benefit for himself—he even financed the entire army payroll in 1871 when a deadlocked Congress would not appropriate the funds for it—much of America's legislative involvement in business dates from this era and Morgan's infamy. During this time, private banks became involved in financing the development of industrial nations, and politicians saw great wealth being created. At the time, there were neither personal nor corporate taxes. Furthermore, the nation was becoming more cohesive after the resolution of the Civil War, with less regional differences that had caused political friction between the states' powers and federal powers. In other words, any federal regulation regarding business was viewed as anti-business and heavy-handed. This changed in the Morgan era with the introduction of several important legislative acts, such as the aforementioned Interstate Commerce Act of 1887 and the Sherman Anti-Trust Act of 1890. Naturally, Morgan decried the increasing hand played by government in the affairs of business. "The time is coming when all business will have to be done in glass pockets," he said, after the Supreme Court found his Northern Securities concern an illegal enterprise in 1909, according to Encyclopedia of American Business History and Biography.
Morgan's role in creating U.S. Steel made a significant difference in helping that particular economy thrive in the following decades. Demand for steel greatly increased; steel wire was needed to enclose grazing lands out West, and other variations of the strong metal were needed for a growing urban America, such as nails, skyscraper skeletons, and tubes for steam boilers. Still, the popular image of Morgan at the time, fanned by tabloid-style newspapers, was as an enormous, greedy tycoon. Such images had political repercussions. Because of the Panic of 1907 and Morgan's role in it, he again came under Congressional suspicion and faced the Pujo Committee in 1912. The Pujo Committee was part of the House Banking and Currency Committee and investigated insurance practices. It found that among the country's public utilities and banking, insurance, and transportation giants, transactions and profits seemed to be controlled by a very small number of men, Morgan among them. To avoid the periodic economic panics and the reliance upon Morgan and others to help out, Congress finally voted to create a Federal Reserve System in 1913 within the department of the Treasury. Such an institution had been attempted on other previous occasions in American history, but had until then been viewed with suspicion as perhaps too powerful an economic force. It was only the influence wielded and profits reaped by men like Morgan that helped sway public and legislative opinion.
Morgan died during the Pujo Committee aftermath while staying at the Grand Hotel in Rome. He left a fortune estimated at $68 million, which was separate from his extensive collection of fine art. He had built up a superb rare book and manuscript collection that included several historically significant pieces, such as the first Bible ever printed in North America. He served as president of Metropolitan Museum of Art, to which he bequeathed his extensive art collection. His rare books and manuscripts, at first housed at his mansion at Madison Avenue and 36th Street in New York, were moved to the Pierpont Morgan Library.
Sources of Information
Contact at: J.P. Morgan & Company
60 Wall St.
New York, NY 10260-0060
Business Phone: (212)648-5213
Byers, Paula K. and Suzanne M. Bourgion, eds. Encyclopedia of World Biography. Detroit: Gale Research, 1998.
Frey, Robert L., ed. Encyclopedia of American Business History and Biography. New York: Facts on File, 1988.
Ingham, John N. Biographical Dictionary of American Business Leaders. Westport, CT: Greenwood Press, 1983.
Rosenblum, Joseph, ed. Dictionary of Literary Biography. Detroit: Gale, 1994.
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.
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.
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, John Pierpont
MORGAN, JOHN PIERPONT
John Pierpont Morgan (1837–1913) 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 (1909–1913) 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.
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.
Morgan, John Pierpont (1837-1913)
John Pierpont Morgan (1837-1913)
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 government’s Civil War debt in the late 1860s and 1870s. In 1873, when Jay Cooke’s firm went bankrupt amid a general financial panie, Morgan’s firm became the nation’s 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 negotiations—the 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 Morgan’s 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 country—a key conduit for moving European capital into U.S. investments—and a major figure in the rise of big business.
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).