J. P. Morgan
John Pierpont Morgan Sr. was an American financier and investment banker who dominated corporate finance on Wall Street throughout the Gilded Age and Progressive Era. As the head of the banking firm that ultimately became known as JPMorgan Chase & Co., he was a driving force behind the wave of industrial consolidations in the United States at the turn of the twentieth century.
Over the course of his career on Wall Street, Morgan spearheaded the formation of several prominent multinational corporations including U.S. Steel, International Harvester, and General Electric. He and his partners also held controlling interests in numerous other American businesses including Aetna, Western Union, the Pullman Car Company, and 21 railroads. His grandfather Joseph Morgan was one of the co-founders of Aetna. Through his holdings, Morgan exercised enormous influence over capital markets in the United States. During the Panic of 1907, he organized a coalition of financiers that saved the American monetary system from collapse.
As the Progressive Era's leading banker, Morgan's dedication to efficiency and modernization helped transform the shape of the American economy. Adrian Wooldridge characterized Morgan as America's "greatest banker". Morgan died in Rome, Italy, in his sleep in 1913 at the age of 75, leaving his fortune and business to his son, J. P. Morgan Jr. Biographer Ron Chernow estimated his fortune at $80million.
Childhood and education
John Pierpont Morgan was born on April 17, 1837, in Hartford, Connecticut, to Junius Spencer Morgan, of the influential Morgan family., and Juliet Pierpont. His father, Junius, was then a partner at Howe Mather & Co., the largest dry goods wholesaler in Hartford. His mother Juliet was the daughter of the poet John Pierpont. His uncle James Lord Pierpont composed the famous Christmas song Jingle Bells. Morgan preferred to be called "Pierpont", as opposed to "John". In 1847, when Morgan was ten years old, his grandfather Joseph Morgan died and left the family a large fortune. He was educated in public and private schools in New England, where he attended West Middle School and Cheshire Academy. Junius soon became a senior partner at the rechristened Mather Morgan & Co. In September 1851, he passed the entrance exam for The English High School of Boston, which specialized in mathematics for careers in commerce. In April 1852, he suffered from rheumatic fever, an illness whose symptoms became more severe as his life progressed and ultimately left him in such pain that he could not walk. Junius sent him to the Azores to recover. He convalesced there for almost a year, then returned to Boston to resume his studies. In 1856, his father sent him to Bellerive, a school in the Swiss village of La Tour-de-Peilz, where he gained fluency in French. His father then sent him to the University of Göttingen to improve his German. He attained passable fluency and a degree in art history within six months, completing his studies in 1857.J.S. Morgan & Co.: 1858–1871
After completing his education, Morgan went to London in August 1857 to join his father, now a partner in the merchant banking firm George Peabody & Co. For the next fourteen years, he worked as his father's American representative in a series of affiliated New York City banking houses, learning the trade and lifestyle of a bank partner: Duncan, Sherman & Company, his own firm J. Pierpont Morgan & Co., and finally Dabney Morgan. Dabney, Morgan & Company was co-founded by Charles H. Dabney and Jim Goodwin.Duncan, Sherman & Company: 1858–1861
Morgan soon moved on to New York City to begin work at Duncan Sherman as a junior clerk. Through his father's reputation and his position as the obvious successor to the Peabody house, he was among the most sought-after young men on Wall Street and enjoyed the company of many of New York's leading citizens. Morgan held a great deal of independence in both his investment decisions and lifestyle, owing partly to his father's faith in Morgan's austere religious discipline. "Remember," J.S. Morgan wrote his son, "that there is an Eye above that is ever upon you and that for every act, word, and deed you will one day be called to give account." He adopted a serious, energetic approach to his work and was praised by his father's friends for his work ethic and capacity for business.At the time Morgan entered the firm, Peabody & Co. was struggling in the wake of the Panic of 1857, a rash of business failures which dramatically damaged investor confidence in American securities. Peabody & Co., whose business was focused on the United States, was particularly threatened when a few of its American correspondent banks were forced to suspend operations. The house's creditors, including Baring Brothers, demanded payment; Peabody defied them, daring his rivals to put him out of business, and turned to the Bank of England for a loan in November 1857. Morgan himself expressed surprise that the famed Barings house was not more accommodating. The loan secured the house's survival and the London office was stabilized, but Duncan Sherman came under criticism on Wall Street, and the Mercantile Agency recommended its dissolution. J. P. Morgan urged his father to stand by Duncan Sherman in the face of "outrageous" reports "of Browns & Barings getting the credit for what they never did".
While at Duncan Sherman, Morgan acquired experience in the financing and reorganization of railroads, including the major Ohio & Mississippi and Illinois Central lines, for which he personally negotiated the loans. Most of his work involved collecting and transmitting interest and dividend payments, executing orders on the New York Stock Exchange, and conducting credit checks on mercantile houses doing business with Peabody & Co.
Starting in early January 1859, Morgan spent several months in the South to visit the firm's correspondents in Georgia, Alabama, and Louisiana and to improve his knowledge of the cotton trade. He briefly visited Cuba, where he developed a lifelong taste for Cuban cigars. Most of his time in the South was spent in New Orleans, a leading cotton export hub. He received a stern warning from Duncan Sherman when he conducted an unauthorized trade of coffee at a profit, which he considered his first totally independent transaction. Later that summer, he visited his father in London. They discussed the prospects of Morgan's going into business for himself, and Morgan courted Amelia Sturges, whom he later married.
J. Pierpont Morgan & Co.: 1861–1864
As the American Civil War began, business slowed, delaying Morgan's efforts to open his own office. He opened J. Pierpont Morgan & Company some time between April and July 1861, conducting operations out of a one-room office at 53 Exchange Place. As he anticipated, most of his business was for his father and consistent with the work he had managed at Duncan Sherman. Morgan avoided serving during the war by paying a substitute $300 to take his place.The Civil War radically altered Morgan's focus by virtually eliminating his cotton business and drastically reducing iron imports for American railroads in favor of securities and foreign exchange operations. The Morgans, trading through J. P.'s New York office, made a large profit in the purchase and sale of Union bonds once the Battle of Antietam turned the war in the Union's favor. The Morgans also expanded their trade in European securities during a period of industrial expansion, financed by a large deposit from W. W. Corcoran after he liquidated his American holdings out of sympathy for the Confederate cause.
Morgan also profited in gold after specie payments were suspended in 1862; its price was largely pegged to the possibility of a Union victory. In October 1863, he and Edward B. Ketchum transferred $1.15 million in gold to England, forcing a price spike and allowing both men to sell their holdings at a large profit. Critics have long considered the deal a speculative effort to corner the American gold market and evidence of Morgan's insensitivity to the nation's financial situation, although the economic consequences were ultimately minor.
In 1862, Morgan made his cousin, James Goodwin, a partner. The firm received a serious boost when Morgan's father succeeded George Peabody as head of the London office. J.S. Morgan transferred all of the firm's remaining commercial credit and securities accounts from Duncan Sherman, and by the end of 1862, J. Pierpont Morgan & Co. was considered one of the stronger private banking houses on Wall Street.
Hall Carbine Affair
In August 1861, Morgan lent $20,000 to Simon Stevens, a well-connected New York City attorney and former secretary to Thaddeus Stevens. Stevens used the money to purchase five thousand carbines for resale to General John C. Frémont, commander of the Department of the West. The carbines in question were developed by John H. Hall and manufactured by Simeon North, purchased by the U.S. government, and resold to arms dealer Arthur M. Eastman for $3.50 apiece in June 1861. After the Union defeat at Bull Run placed a premium on arms, Stevens used the Morgan loan to purchase the rifles from Eastman at $11.50 apiece and immediately resold them to Frémont, a longtime acquaintance, at $22 each.During the loan's thirty-eight day duration, Morgan held title to the carbines and assumed responsibility for having their barrels replaced with rifled ones before shipment to Frémont. Stevens approached Morgan for another loan, which Morgan refused, instead asking Stevens for the $20,000 on the original loan and attempting to remove himself from the transaction. On September 14, Morgan received $55,000 from the Army for the carbines, deducted the face value of the loan plus expenses and interest, and passed the remainder to Stevens.
By September, when Morgan received payment, the deal was already controversial. Military officials felt Frémont had overpaid, and an 1863 House of Representatives report indicted the profiteers as "worse than traitors in arms". Though Morgan was neither criticized nor censured during contemporary investigations, his name remained connected with the Hall Carbine Affair for many years.
Debate over Morgan's knowledge and involvement became a cause célèbre within his lifetime, attracting a wide range of commentary, and the debate has persisted long after his death. Interest in Morgan's role in the affair was rekindled in 1910 with the publication of Gustavus Myers' History of the Great American Fortunes. Myers claimed the rifles were more likely to blow the rifleman's thumb off than they were to cause any damage to the enemy. An earlier version of the carbine rifle was known to be subject to this problem. R. Gordon Wasson, later the head of public relations for J.P. Morgan & Co., argued that there was no evidence Morgan knew that he was participating in a scheme to profit. Vincent Carosso, author of an academic history of the Morgan house, concurs that Stevens "used Morgan's name" to cover his greed and that "none of the evidence suggested that Morgan himself had been a party to the shabby contract or had participated in its profits," though he "failed to exercise the care and caution that he had demonstrated two years earlier in the New Orleans coffee deal". Matthew Josephson, who popularized the term "robber baron", asserted that Morgan certainly did know of the scheme, because he had presented the government with a bill for $58,175 before he delivered the remaining rifles that were being held as collateral. Reviewing the evidence, Charles Morris also concluded that it was "implausible" that Morgan did not know about the source of his profits.