J. P. Morgan

American financier and philanthropist

• Born: April 17, 1837
• Birthplace: Hartford, Connecticut
• Died: March 31, 1913
• Place of death: Rome, Italy

As an extraordinarily successful investment banker and a conspicuous philanthropist, and one of the most prominent art collectors of his day, Morgan symbolized an era of aggressive capitalism.

Early Life

John Pierpont Morgan had remarkable parents. His father, Junius Spencer Morgan (1813-1890), owned part of a large mercantile house in Hartford, advanced to a larger one in Boston, and finally became partner, then successor to the wealthy George Peabody, an American who made his career banking in London. Junius settled there in 1854 and lived in England for the remainder of his life. Morgan’s mother, Sarah Pierpont, came from the family of a brilliant preacher in Boston, much given to abolitionism and other reforms.

Young Morgan received his formal education in Hartford, in Boston, in Vevey, Switzerland, and at the University of Göttingen. Seriously ill as a teenager, he had a long and successful convalescence in the Azores. At the age of twenty, he began his career as a clerk in Duncan, Sherman, and Company in New York. Two years later, while traveling in the Caribbean to study the sugar and cotton markets, he bought, without authorization, a cargo of unwanted coffee with a draft on his employers. They complained but accepted the profit of several thousand he earned by wholesaling the coffee in New Orleans.

In 1860, Morgan set up his own company. He had plenty of business from his father in London and also took advantage of many opportunities to buy and sell in the booming commercial city of New York. In 1861, he married Amelia Sturges, after courting her for several years. She was clearly in the advanced stages of tuberculosis, but Morgan, daring in love as well as in business, gave up all commercial activities and took his stricken bride to Algiers and then to Nice, hoping to cure her. He failed, returning to the United States as a widower in 1862. He formed a partnership with his cousin, Jim Goodwin, and called the firm J. P. Morgan and Company, Bankers.

Writers hostile to Morgan claim that he selfishly pursued profit during the Civil War years, trading in gold against the government’s fluctuating greenbacks, buying a substitute for three hundred dollars under the Conscription Act, and on one occasion buying obsolete arms from the federal government in the East and then selling them to General John C. Frémont in the West at an enormous profit.

Morgan never apologized for his own actions, but writers friendly to him have argued that recurrent fainting spells, from which he suffered as a young man, made him unfit for military duty; that he served the Union cause well as an agent for Junius Morgan, who was staunchly pro-Union and placed United States bonds in England; and, finally, that two other men arranged and carried out the affair of the arms. Morgan was involved only as their banker, extending a short-term loan. Furthermore, the weapons were improved by rifling the barrels, and the young entrepreneurs, whatever their motives, did what the disorganized Department of the Army could not manage: They delivered arms at a reasonable price to the desperately needy Western army.

On one point, however, there is no dispute: Morgan spent that part of the war that followed his disastrous first marriage in making money as rapidly as he could. In September, 1864, he took in new partners and reorganized as Dabney, Morgan and Company. At twenty-seven, he was a leader in the financial life of the largest U.S. city. However, he was already launched in his career of philanthropy, helping to raise money for the wounded and widowed and working effectively to establish and enlarge the Young Men’s Christian Association (YMCA). In 1865, he married Frances Tracy, one of the six daughters of attorney Charles Tracy. The Tracys were fellow communicants at St. George’s Episcopal Church in the Bowery, which Morgan had joined in 1861 and attended for the remainder of his life.

Largely free, at this point, of the illnesses and spells that had marred his youth, Morgan stood well over six feet, with powerful shoulders, penetrating eyes, and the air of one born to command. In later life, he would grow portly and suffer painfully from acne rosacea, an inflammation of the skin which settled especially in his nose. He doted on his and Frances’s four children, Louisa, Jack (John Pierpont Morgan, Jr.), Juliet, and Anne. In the summer of 1869, Morgan and his wife, accompanied by two relatives, rode the new transcontinental railroad to Utah and to California, where they toured extensively by stagecoach and horseback. Returning East, the Morgans occupied a comfortable new home at Six West Fortieth Street. In 1871, troubled by nervous disorders, Morgan briefly considered retiring. Instead, he accepted a new partnership with the powerful Drexels of Philadelphia. He would be a full partner and would head their New York office under the title of Drexel, Morgan, and Company.

Life’s Work

To understand the later fame of Morgan, the investment banker, one must first understand how and why he became involved with the railroads of the United States. From their earliest beginnings around 1830 to the Civil War, American railroads were generally small affairs, connecting neighboring cities or connecting cities with important rivers or seaports. Most companies supposed that they could not manage more than five hundred miles of track. The two systems that thoroughly refuted this thinking, the New York Central and the Pennsylvania, were quite exceptional until Congress, offering large land grants, encouraged the building of transcontinental railroads.

Some firms can begin business with little capital investment and grow on earnings; others, including railroads and electric power systems, are expensive to build and cannot be put into operation or earn money until everything is in place, including the employees. Thus, the quantities of federal land given to the Western railroads were not the source of huge profits that they have been claimed to be. The railroads had to be built and operating, and the land had to be well along toward settlement, before any of those lands were salable. Railroads, the most important and transforming feature of the American economy in the nineteenth century, relied entirely on borrowed capital for their construction and initial operation. Furthermore, they had to be public corporations, their stock for sale in markets throughout the world; otherwise, the enormous sums required would not be forthcoming. This feature led almost inevitably to the separation of management from stockholders, too numerous and too scattered to exercise a coherent will on railroad affairs.

Stockholders all had one thing in common: They wished to protect their investments. It was therefore logical that investment bankers, whose income derived largely from marketing stocks and bonds, would wish to protect their own business positions by assuring the quality of the stocks and bonds being sold. Morgan was thus drawn into railroad affairs by a desire, born of necessity, to see that railroads were properly and efficiently managed, so that the stockholders and bondholders would be properly rewarded for their investments. Furthermore, he clearly saw what Cornelius Vanderbilt, Thomas A. Scott, and Jay Gould had seen earlier: The future of American railroading lay in building large, integrated systems, in which a single corporation controlled not only trunk lines but also feeders and operated without competition.

Morgan’s first adventure was a colorful skirmish with the most notorious railroad pirates of the age, Gould and Diamond Jim Fisk, in a battle for the control of the Albany and Susquehanna. There is a legend that Morgan kept control of a crucial stockholders meeting by hurling the burly Fisk down a flight of stairs, scattering his henchmen as though they were tenpins. If true, this was the only time Morgan gained control of a railroad by hand-to-hand combat. In 1879, he performed a more sedate but much more lucrative feat in marketing William Vanderbilt’s 250,000 shares (87 percent of those in existence) of New York Central Stock without suffering any depreciation or exciting any move to displace the railroad’s management.

The year 1880 brought another enormous challenge, converted into enormous profits, not because Drexel, Morgan, and Company charged high brokerage fees but because it was handling so much money. In this case, it was a question of marketing forty million dollars in bonds for the improvement of the Northern Pacific, a transcontinental that had suffered bankruptcy and reorganization in the Panic of 1873 . Great though his resources were, Morgan could not finance such enormous sales of stocks and bonds entirely through his own and his father’s partnerships. He brought in other major banking houses, in the United States and abroad, discreetly organized in syndicates. To help protect the investments so arranged, Morgan, or one of his trusted partners or friends, became director of the refinanced railroad. Morgan later helped to finance and manage dozens of railroads.

Morgan was involved in the finances of the federal government on four major occasions. With other leading bankers, he helped refinance the federal debt under President Ulysses S. Grant . In the summer of 1877, Morgan committed another of his unexpected and extraordinary moves: He lent the army money with which to pay its troops, largely engaged in the Western Indian wars, after a distracted Congress had adjourned without renewing their appropriation. Because the army was not authorized to borrow, Morgan had paid out more than two million dollars at his own risk; Congress, however, appropriated funds to repay the banker. Much more effort was required to save the United States Treasury’s gold reserve in the depression of 1893.

A combination of laws, more popular than wise, had forced the Treasury to sell gold until it was on the brink of bankruptcy; the Panic of 1893 had further started a general flight of gold back to Europe. To save the situation, Morgan had to form a syndicate of American and European bankers both to loan gold to the government at acceptable rates and to check the flow of gold from the Treasury out of the country. Furthermore, Grover Cleveland, whose party was rapidly coming under the control of Populists and Bryanites, was extremely reluctant to accept help from the only people who could give it, the “monied interests of Wall Street.”

Morgan’s greatest triumphs and defeats came toward the end of his life. In 1901, he formed a combination to buy out Andrew Carnegie and merge his steel colossus with several other companies. The resulting United States Steel Corporation , the first “billion dollar corporation,” renewed charges of monopoly and chicanery. Morgan then turned to a merger of the Northern Pacific with its regional rival, the Great Northern, by means of a holding company, the Northern Securities Company . Theodore Roosevelt, the Progressive president, ordered a prosecution that the government won in 1904, and the merger fell apart.

Ever the patriot, Morgan returned in 1907 to lead yet another syndicate of bankers to prevent a financial panic. One of the New York banks saved on that occasion had chiefly working people for its depositors. Morgan ordered his company to save them even if he lost money; in fact, he did. In the last year of his life, Morgan was summoned before the Pujo Committee, which charged him with destroying competition by controlling all the large banks, railroads, and steel companies of the United States through interlocking directorships and stock proxies. Morgan stoutly denied the charge, claiming that his methods guaranteed the proper management of business by men of high character.

At St. George’s Church, Morgan led the vestry in hiring W. S. Rainsford, an Emerson-inspired Progressive who introduced a community center, a house for deaconesses (Episcopal women doing social work, in this case), an industrial school, a summer camp, and a seaside resort for working-class women and children, all of which Morgan helped plan and most of which he financed. He also helped maintain the church near his summer home, served on the committee that planned the cathedral, and attended every national triennial convention of his church until his death.

Always something of a collector, Morgan began buying rare and old works of art on a stupendous scale after the death of his father. As a collector, Morgan displayed the decisiveness and flair that had characterized his business career. A trustee of the Metropolitan Museum from its fledgling days, he became its most active member in the last fifteen years of his life and left it priceless collections of paintings, ceramics, armor, and other objets d’art. For his collection of rare manuscripts and books, he built his own library next to the home at 219 Madison Avenue that he had built in 1881. It would later be administered as a public reference library. Collecting art went nicely with Morgan’s lifelong habit of traveling abroad. He spent almost every summer in England, France, Italy, and, on several occasions, Egypt, where he often visited archaeological digs. He died during one of his periods of travel in Rome, Italy, on March 31, 1913.

Significance

J. P. Morgan’s power grew because of the unusual combination of boldness and good sense, ruthlessness and responsibility, that made up his complex personality. The failure of the American people, between 1836 and 1913, to have any sort of central bank created rare opportunities for investment bankers with strong connections to foreign centers of capital. Hating waste, inefficiency, and conflict, Morgan used his growing financial power to impose order on the railroad and steel industries, reducing competition and calling into question the Adam Smith economics that most educated people took seriously. Democrats also feared the growing power of rich men who appeared responsible to no one but themselves. Morgan, thus, stirred up controversy and antagonism; yet, on his death in 1913, he left a legacy of responsibility in business and civic affairs and a priceless collection of art for the enjoyment of, literally, millions.

Bibliography

Allen, Frederick Lewis. The Great Pierpont Morgan. New York: Harper and Brothers, 1949. A readable biography that does justice to Morgan while stating the full case against him.

Canfield, Cass. The Incredible Pierpont Morgan: Financier and Art Collector. New York: Harper and Row, 1974. Richly illustrated and with superb color plates, this is a delightful book on Morgan.

Chandler, Alfred D., Jr. The Visible Hand: The Managerial Revolution in American Business. Cambridge, Mass.: Belknap Press of Harvard University Press, 1977. A comprehensive business history, placing Morgan exactly in context.

Chernow, Ron. The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance. New York: Simon & Schuster, 1991. A meticulously detailed and well-written chronicle of four generations of Morgans, tracing the family’s banking empire from its beginning in Victorian London to the stock market crash of 1987. Also describes the influence that the Morgan banks have exerted on the Western economy for the past two centuries. Winner of the National Book Award.

Gras, N. S. B., and Henrietta Larson. “J. P. Morgan: 1837-1913.” In The Coming of Managerial Capitalism: A Casebook on the History of American Economic Institutions, edited by A. D. Chandler and R. S. Tedlow. Homewood, Ill.: Richard D. Irwin, 1985. An outstanding short treatment of Morgan’s business affairs and their significance.

Hughes, Jonathan. The Vital Few: American Economic Progress and Its Protagonists. Boston: Houghton Mifflin, 1966. A splendid interpretive history with a graceful chapter on Morgan.

Rainsford, W. S. The Story of a Varied Life: An Autobiography. Garden City, N.Y.: Doubleday, Page, 1922. Rainsford was rector of Morgan’s church for twenty-two years and, for all of his spiritual condescension, the only informed witness to Morgan’s strenuous service.

Satterlee, Herbert L. J. Pierpont Morgan: An Intimate Portrait. New York: Macmillan, 1939. A narrative chronicle by Morgan’s son-in-law, in whose eyes the financier was a great and good man. Dull, but full of family information not available elsewhere.

Sinclair, Andrew. Corsair: The Life of J. Pierpont Morgan. Boston: Little, Brown, 1981. A stylishly written book in the muckraking tradition, slightly marred by the repetition of the unlikely theory that Morgan resented his rich and powerful father right up to the old gentleman’s death in 1890.

Strouse, Jean. Morgan: American Financier. New York: Random House, 1999. A balanced, detailed account of Morgan’s life, describing his business dealings, social life, personality, and interests, such as his art collection. Strouse explains complex financial material in an easily understandable style.

Tomkins, Calvin. Merchants and Masterpieces: The Story of the Metropolitan Museum of Art. New York: E. P. Dutton, 1970. Richly illustrated, this work places Morgan’s collecting and ambitions for the museum in proper context.