Morgan, J



Morgan, J. P.

Also known as: John Pierpont Morgan  

Born: 1837   Died: 1913  

Occupation: financier

From: Encyclopedia of American History: The Development of the Industrial United States, 1870 to 1899, vol. 6.

J. P. Morgan was the preeminent financier of the Gilded Age. Born on April 17, 1837, in Hartford, Connecticut, the son of international banker Junius Spencer Morgan and Juliet Pierpont, daughter of a Unitarian minister, John Pierpont, Morgan was educated at public schools in Hartford and Boston. Upon graduating from high school in 1854, he went on to study in Europe. In 1857, when his father relocated in London, he began his career in finance with Duncan, Sherman & Company in New York and in 1861 established his own private bank, J. P. Morgan & Company, becoming his father's agent in New York. During the Civil War he avoided conscription in the Union Army by hiring a substitute and profiteered by speculating in gold and by purchasing defective carbines from the War Department and reselling them to the government at a high profit. His father reined him in by pairing him in 1864 with Charles Dabney in Dabney, Morgan & Company, and in 1871 (again at his father's urging) Morgan merged with Philadelphia's Drexel & Company to form Drexel, Morgan & Company. In 1895, after the death of Anthony Drexel in 1893, the firm became J. P. Morgan & Company. From the start Morgan was the leading spirit in these firms.

Morgan's main business was underwriting (selling) new issues of bonds and stocks of railroads and other enterprises. Since railroads and industry were expanding rapidly and in constant need of capital, they were compelled to listen to Morgan who, to protect the investments of his clients, sought to eliminate wild speculation and cutthroat competition. As a result, Morgan emerged as the major force in organizing, integrating, and stabilizing American railroads and industry in the Gilded Age. In the early 1880s, for example, the New York Central (NYC)—in which Morgan was deeply interested—and the Pennsylvania Railroad (PRR) engaged in rate wars and invasions of each other's territory. The PRR backed the construction of the West Shore line up the Hudson opposite the NYC's main line, while the NYC was constructing the South Pennsylvania paralleling the PRR's main line. In July 1885 Morgan invited representatives of the PRR and the NYC to meet with him on board his yacht the Corsair on the Hudson River. With his guidance the railroads agreed to cease their rate wars: The NYC got the West Shore line and the PRR received the South Penn, which it abandoned. (A half century later the Pennsylvania Turnpike utilized the South Penn's route and tunnels.) Neither the PRR nor the NYC reneged on their agreement, since Morgan could punish them by making their future financing difficult.

In the 1880s and 1890s Morgan reorganized many bankrupt railroads (including the Reading, the Chesapeake & Ohio, the Southern, and the Erie) and saw to it that dependable allies would sit on their boards of directors and vote against rate wars and overbuilding, which so often had caused their failures. Morgan came to dominate a vast transportation network with more than 55,000 miles of rail, but he had no influence over the systems of both Jay Gould (whom he never trusted) and Edward H. Harriman (who reminded him of Gould). Harriman was backed by Jacob Schiff of Kuhn, Loeb, & Company. Morgan and his ally James J. Hill clashed in 1901 with Harriman over control of the Chicago, Burlington & Quincy (CB&Q), which connected Chicago to both St. Paul, Minnesota, and Omaha, Nebraska. Hill and Morgan controlled the Great Northern (GN) and the Northern Pacific (NP), which came no further east than St. Paul, while Harriman controlled the Southern Pacific and the Union Pacific, which got no closer to Chicago than Omaha. Their struggle panicked Wall Street, but Morgan and Schiff caught themselves and compromised, with Harriman getting a share in the management of the CB&Q. The deal was solidified by establishing the Northern Securities Corporation, which owned the GN, NP, and CB&Q. To Morgan's disgust it was dissolved by the Supreme Court in 1904, but a community of interest had been established.

As industrial corporations began to dominate the American economy in the 1890s, J.P. Morgan & Co. became a leader in their consolidation and reorganization, financing many of the country's greatest industrial developments. In 1892 Morgan financed the organization of General Electric, and in the following years he financed American Telephone and Telegraph (AT&T) and International Harvester. Morgan's greatest merger occurred in 1901, when he merged Andrew Carnegie's steel company with other firms in the Steel industry to form the first billion-dollar corporation, United States Steel ("Big Steel").

In his later years Morgan collected art and rare books as compulsively as he had collected railroads, accumulating by the time of his death what was estimated as the largest private collection of paintings, sculpture, manuscripts, and jewelry in history. He became the president of the Metropolitan Museum of Art in New York, to which he left the bulk of his collection of art, and his personal library was made public after his death. He was also a major benefactor of the New York Public Library and the Cathedral of St. John the Divine. Morgan took a strong public stand for moral rectitude and assisted Anthony Comstock in establishing the New York Society for the Suppression of Vice in 1873. Nevertheless, though married in 1865 to Frances Louisa Tracy, with whom he had four children, he had a mistress and was widely criticized for marital infidelity.

For the last 20 years of his life, Morgan was the most powerful financial figure in America. Indeed, his power was so great that during two notable crises presidents followed his lead and enabled Morgan to play a statesmanlike role for a price. In 1895 Grover Cleveland was failing in his efforts to keep the nation on the gold standard as its gold reserves dwindled. Morgan, however, organized a loan to the federal government of $62 million in gold, which restored confidence, stanched the outflow of gold from the treasury, saved the gold standard, and netted his firm a $295,000 profit. In 1907, in the absence of a central bank, Morgan's arbitrary and effective actions (for which he was harshly criticized) reduced the effect of the Panic of 1907, but he used that crisis to extract from the Trust-busting Theodore Roosevelt approval of United States Steel's acquisition of Tennessee Coal, Iron, & Railroad Company, which under normal circumstances Roosevelt never would have agreed to. Morgan was not the richest man in America, but his influence exceeded that of men like John D. Rockefeller and Andrew Carnegie, who were far wealthier than he. Morgan died on March 31, 1913, in Rome.

Business practices of J. P. Morgan

Date: 1860–1913

From: The New Encyclopedia of American Scandal.

America's most successful financier, John Pierpont Morgan, was pilloried by a special House investigative body, the Pujo Committee, in 1912, as one of "a few financial leaders who had achieved an unhealthy control of the nation's money and credit." Morgan was unaffected by this assault upon him; he had totally ignored public criticism throughout his career. He knew what he wanted to do and he did it, regardless of ethical, legal, or public considerations. Morgan, at least, was no hypocrite. He made no attempt to hide his uncharitable nature. "I owe the public nothing," he said in 1901.

Born in 1837 in Hartford, Connecticut, into a financier's family, Morgan at 23 managed the New York office of his father's London-based international bank enterprise, J.S. Morgan and Company. From 1860 on, he prospered as a partner in several investment companies, finally becoming owner of his own firm, J.P. Morgan and Company, in 1895.

Investment banking was not Morgan's only concern. He sold obsolete carbines to the Union Army during the Civil War, while also conducting speculations in gold that accidentally helped the Confederacy. (Money, he noted, was "neutral.") He involved himself in railroads after the Civil War—then the biggest money makers in America. He wrested control of one railroad from Jay Gould, conducted reorganizations of others after 1873, assisted in battles for railroad dominance, and fatally "Morganized" the New Haven Railroad.

Morgan was also busy during national financial crises, at times because he had produced them: as part of Drexel, Morgan and Company, he was partly responsible for the Panic of 1873. During the crisis of 1894–95, he set up harsh terms for the lending of gold to the federal government, and during the Panic of 1907, he was one of the few, including John D. Rockefeller, who remained both financially unscathed and financially dominant.

Morgan's most famous stratagem, a ploy defiant of federal law, was his role in putting together a virtual steel monopoly.

His activities brought him into conflict with many, but his most revealing enmity was that toward Theodore Roosevelt, whose measures of "regulation" for the public's sake perpetually rankled Morgan. This personal enmity seems to have been on Morgan's side only, however, for when Roosevelt as president of the United States decided to move against Morgan's creation of the Northern Securities Corporation without consulting him personally, Morgan (who did not regard himself as unprincipled) decided that Roosevelt was "not a gentleman." And when Roosevelt, retired from office, was about to go hunting lions in Africa, Morgan commented, "I hope the first lion he meets does his duty."

With regard to social or national considerations, Morgan was, in the words of one great commentator on America's business history, "a Bourbon to the end." But his brand of aristocratic conservatism made him fit squarely into the ranks of those whom Charles Francis Adams condemned as "robber barons."

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