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.
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). □