J. P. Morgan

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.[9][10][11][12] Morgan had avoided serving during the war by paying a substitute $300 to take his place.[9] 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.[13]

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 world's most powerful banking houses, focused primarily on reorganizations and consolidations.

Morgan had many partners over the years, such as George W. Perkins, but always remained firmly in charge.[14] He often took over troubled business and reorganized their structures and management to return them to profitability, a process that became known as "Morganization".[15] His reputation as a banker and financier drew interest from investors to the businesses that he took over.[16]

Bond of the New Jersey Junction Railroad Company, issued 30. June 1886, reverse side with signatures of John Pierpont Morgan and Harris C. Fahnestock as trustees

In his ascent to power, Morgan focused on railroads, America's largest business enterprises.[17] He wrested control of the Albany and Susquehanna Railroad from Jay Gould and Jim Fisk in 1869; led the syndicate that broke the government-financing privileges of Jay Cooke; and developed and financed a railroad empire by reorganization and consolidation in all parts of the United States. He raised large sums in Europe; but rather than participating solely as a financier, he helped the railroads reorganize and achieve greater efficiency. He fought speculators interested only in profit and built a vision of an integrated transportation system. He successfully marketed a large part of William H. Vanderbilt's New York Central holdings in 1883. In 1885 he reorganized the New York, West Shore & Buffalo Railroad, leasing it to the New York Central.[18] In 1886 he reorganized the Philadelphia & Reading, and in 1888 the Chesapeake & Ohio. After Congress passed the Interstate Commerce Act in 1887, Morgan set up conferences in 1889 and 1890 that brought together railroad presidents to help the industry follow the new laws and write agreements for the maintenance of "public, reasonable, uniform and stable rates". The first of their kind, the conferences created a community of interest among competing lines, paving the way for the great consolidations of the early 20th century. In addition, J P Morgan & Co, and the banking houses which it succeeded, reorganized a large number of railroads between 1869 and 1899. Morgan also financed street railways, especially in New York City.[19]

A major political debacle came in 1904. The Northern Pacific Railway went bankrupt in the great depression of 1893. The bankruptcy wiped out the railroad's bondholders, leaving it free of debt, and a complex financial battle for its control ensued. In 1901, a compromise was reached between Morgan, New York financier E. H. Harriman and St. Paul, MN railroad builder James J. Hill. To reduce expensive competition in the Midwest, they created the Northern Securities Company to consolidate the operations of three of the region's most important railways: the Northern Pacific Railway, the Great Northern Railway, and the Chicago, Burlington and Quincy Railroad. The consolidators ran into unexpected opposition, however, from President Theodore Roosevelt. An energetic trustbuster, Roosevelt considered the giant merger bad for consumers and a violation of the (until then) seldom-enforced Sherman Antitrust Act of 1890. In 1902, Roosevelt ordered his Justice Department to sue to break it up. In 1904 the Supreme Court dissolved the Northern Security company and the railroads had to go their separate, competitive ways. Morgan did not lose money on the project, but his all-powerful political reputation suffered.[20]

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,[21] to restore the treasury surplus, in exchange for a 30-year bond issue.[22] 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.[23]

J. P. Morgan in his earlier years

After his father's death in 1890, Morgan took control of J. S. Morgan & Co. (renamed Morgan, Grenfell & Company in 1910). He began talks with Charles M. Schwab, president of Carnegie Co., and businessman Andrew Carnegie in 1900, with the goal of buying Carnegie's steel business and merging it with several other steel, coal, mining and shipping firms. After financing the creation of the Federal Steel Company, he merged it in 1901 with the Carnegie Steel Company and several other steel and iron businesses (including William Edenbirn's Consolidated Steel and Wire Company), forming the United States Steel Corporation. In 1901, U.S. Steel was the world's first billion-dollar company, with an authorized capitalization of $1.4 billion, much larger than any other industrial firm and comparable in size to the largest railroads.

U.S. Steel's goals were to achieve greater economies of scale, reduce transportation and resource costs, expand product lines, and improve distribution[24] to allow the United States to compete globally with the United Kingdom and Germany. Schwab and others claimed the company's size would enable it to be more aggressive and effective in pursuing distant international markets ("globalization").[24] U.S. Steel was regarded as a monopoly by critics, as it afternoon to dominate not only steel but the construction of bridges, ships, railroad cars and rails, wire, nails, and many other products. With U.S. Steel, Morgan captured two-thirds of the steel market, and Schwab was confident that the company would soon hold a 75% market share.[24] However, after 1901, its market share dropped; and in 1903, Schwab resigned to form Bethlehem Steel, which became the second largest U.S. steel producer.

Labor policy was a contentious issue. U.S. Steel was non-union, and experienced steel producers, led by Schwab, used aggressive tactics to identify and root out pro-union "troublemakers". The lawyers and bankers who had organized the merger—notably Morgan and CEO Elbert Gary—were more concerned with long-range profits, stability, good public relations, and avoiding trouble. The bankers' views generally prevailed, and the result was a "paternalistic" labor policy. (U.S. Steel was eventually unionized in the late 1930s.)[25]

Morgan's role in the economy was denounced as overpowering in this political cartoon

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.[26][27] Treasury Secretary George B. Cortelyou earmarked $35 million of federal money to deposit in New York banks.[28] 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.[26]

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.[26]

Vowing never to 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 Aldrich, devised a plan that resulted in the creation of the Federal Reserve System in 1913.[29]

"I Like a Little Competition"—J. P. Morgan by Art Young. Cartoon relating to the answer Morgan gave when asked whether he disliked competition at the Pujo Committee.[30]

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.[31] Morgan redefined conservatism in terms of financial prowess coupled with strong commitments to religion and high culture.[32]

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.[33]

In 1900, the inventor Nikola Tesla convinced Morgan he could build a trans-Atlantic wireless communication system (eventually sited at Wardenclyffe) that would outperform the short range radio wave-based wireless telegraph system then being demonstrated by Guglielmo Marconi. Morgan agreed to give Tesla $150,000 (equivalent to $4,609,800 in 2019) to build the system in return for a 51% control of the patents. Almost as soon as the contract was signed Tesla decided to scale up the facility to include his ideas of terrestrial wireless power transmission to make what he thought was a more competitive system.[34] Morgan considered Tesla's changes, and requests for the additional amounts of money to build it, a breach of contract and refused to fund the changes. With no additional investment capital available, the project at Wardenclyffe was abandoned in 1906, and never became operational.[34][35]

Morgan suffered a rare business defeat in 1902 when he attempted to enter the London Underground field. Transit magnate Charles Tyson Yerkes thwarted Morgan's effort to obtain parliamentary authority to build the Piccadilly, City and North East London Railway, a subway line that would have competed with "Tube" lines controlled by Yerkes. Morgan called Yerkes' coup "the greatest rascality and conspiracy I ever heard of".[36]

In 1902, J.P. Morgan & Co. financed the formation of International Mercantile Marine Company (IMMC), an Atlantic shipping company which absorbed several major American and British lines in an attempt to monopolize the shipping trade. IMMC was a holding company that controlled subsidiary corporations that had their own operating subsidiaries. Morgan hoped to dominate transatlantic shipping through interlocking directorates and contractual arrangements with the railroads, but that proved impossible because of the unscheduled nature of sea transport, American antitrust legislation, and an agreement with the British government. One of IMMC's subsidiaries was the White Star Line, which owned the RMS Titanic. The ship's famous sinking in 1912, the year before Morgan's death, was a financial disaster for IMMC, which was forced to apply for bankruptcy protection in 1915. Analysis of financial records shows that IMMC was over-leveraged and suffered from inadequate cash flow causing it to default on bond interest payments. Saved by World War I, IMMC eventually re-emerged as the United States Lines, which went bankrupt in 1986.[37][38]

In 1861, Morgan married Amelia Sturges, called Mimi (1835–1862). She died the following year. He married Frances Louisa Tracy, known as Fanny (1842–1924), on May 31, 1865. They had four children:

• Louisa Pierpont Morgan (1866–1946), who married Herbert L. Satterlee; (1863–1947)[44]
• J. P. Morgan Jr. (1867–1943), who married Jane Norton Grew
• Juliet Pierpont Morgan (1870–1952), who married William Pierson Hamilton (1869–1950)
• Anne Tracy Morgan (1873–1952), philanthropist

Self-conscious about his rosacea, Morgan hated being photographed.

Morgan often had a tremendous physical effect on people; one man said that a visit from Morgan left him feeling "as if a gale had blown through the house."[4] Morgan was physically large with massive shoulders, piercing eyes, and a purple nose. He was known to dislike publicity and hated being photographed; as a result of his self-consciousness of his rosacea, all of his professional portraits were retouched.[45] His deformed nose was due to a disease called rhinophyma, which can result from rosacea. As the deformity worsens, pits, nodules, fissures, lobulations, and pedunculation contort the nose. This condition inspired the crude taunt "Johnny Morgan's nasal organ has a purple hue."[46] Surgeons could have shaved away the rhinophymous growth of sebaceous tissue during Morgan's lifetime, but as a child he suffered from infantile seizures, and Morgan's son-in-law, Herbert L. Satterlee, has speculated that he did not seek surgery for his nose because he feared the seizures would return.[47] His social and professional self-confidence were too well established to be undermined by this affliction. It appeared as if he dared people to meet him squarely and not shrink from the sight, asserting the force of his character over the ugliness of his face.[48]

Morgan smoked dozens of cigars per day and favored large Havana cigars dubbed Hercules' Clubs by observers.[49]

Morgan was a lifelong member of the Episcopal Church, and by 1890 was one of its most influential leaders.[50] He was a founding member of the Church Club of New York, an Episcopal private member's club in Manhattan.[51] In 1910, the General Convention of the Episcopal Church established a commission, proposed by Bishop Charles Brent, to implement a world conference of churches to address their differences in their “faith and order.” Morgan was so impressed by the proposal for such a conference that he contributed $100,000 to finance the commission's work.[52]

Early view (c. 1855) of 229, 225 and 219 Madison Avenue before the street was paved

His house at 219 Madison Avenue was originally built in 1853 by John Jay Phelps and purchased by Morgan in 1882.[53] It became the first electrically lit private residence in New York. His interest in the new technology was a result of his financing Thomas Alva Edison's Edison Electric Illuminating Company in 1878.[54] It was there that a reception of 1,000 people was held for the marriage of Juliet Morgan and William Pierson Hamilton on April 12, 1894, where they were given a favorite clock of Morgan's. Morgan also owned East Island in Glen Cove, New York, where he had a large summer house.

The original steam yacht Corsair

J. P. Morgan's yacht Corsair II, later bought by the U.S. Government and renamed the USS Gloucester to serve in the Spanish–American War. Photograph by J. S. Johnston

An avid yachtsman, Morgan owned several large yachts, the first being the Corsair, built by William Cramp & Sons for Charles J. Osborn (1837-1885) and launched on May 26, 1880. Charles J. Osborn was Jay Gould's private banker. Morgan bought the yacht in 1882.[55] 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.[56] 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.[57] 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."[58]

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 Avenue in New York City.

For a number of years the British artist and art critic Roger Fry worked for the Museum, and in effect for Morgan, as a collector.[59]

His son, J. P. Morgan Jr., made the Pierpont 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.[60]

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.

U.S. gemstones from the Morgan collection

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.[61]

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.[62] 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.[63] Curtis eventually published a 20-volume work entitled The North American Indian.[64] 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.[65]