J. P. Morgan

Duncan, Sherman & Company: 1858–1861

Morgan quickly moved on to New York City to begin work at Duncan Sherman as a junior clerk.^[16] Through his father's reputation and his position as the obvious successor to the Peabody house, he was quickly among the most sought-after young men on Wall Street and enjoyed the company of many of New York's leading citizens.^[16] Morgan had 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."^[16] 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.^[16]

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 hurt 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.^[14] 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.^[14] 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."^[14]

While at Duncan Sherman, Morgan gained early 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.^[17][16]

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.^[18] He briefly visited Cuba, where he developed a lifelong taste for Cuban cigars.^[16] 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.^[16] 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.^[16]

J. Pierpont Morgan & Co.: 1861–1864

As the American Civil War began, business slowed, delaying Morgan's efforts to open his own office.^[16] He opened J. Pierpont Morgan & Company some time between April and July 1861,^[16] 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.^[19] Morgan avoided serving during the war by paying a substitute $300 to take his place.^[20]

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.^[20] 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.^[21] 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.^[22]

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 (equivalent to $22,355,000 in 2023) 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.^[23]

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.^[20]

Dabney, Morgan & Co.: 1864–1872

On October 1, 1864, George Peabody retired completely from the rechristened J. S. Morgan & Co. and agreed to reinvest his share of the partnership with the firm. In an effort to expand the business internationally, Junius Morgan hired Dabney on November 15 as a senior partner. Dabney, a fifty-seven-year-old partner at Duncan Sherman, was widely respected in the business community for his accounting skill and integrity. In the reconfigured firm, J. P. Morgan took on primary responsibility for recruiting new business.^[30]

Both Dabney Morgan and J.S. Morgan & Co. remained focused on merchant banking and commodities into the 1870s. Between 1863 and 1873, the firm's profits from its securities business only exceeded its commissions on trade in 1865.^[31] Dabney Morgan traded globally in a variety of commodities, including iron rails, American cotton, Philippine tobacco, Brazilian coffee, and Peruvian guano. Beginning on the advice of Levi P. Morton in 1865, J. P. Morgan secured an exclusive four-year contract with the Peruvian government to export guano, used in the production of fertilizer and gunpowder, at a two-and-a-half percent commission.^{[citation needed]}

To the extent the firm engaged in securities trading, the focus was railroad stock and government bonds. However, railroad construction had halted during the Civil War. Construction did not recover until after 1867, when the firm of Jay Cooke & Company in Philadelphia dominated in getting American government financing.^[31] In 1866, J. S. Morgan & Co. did make a "considerable sum" selling shares of the Atlantic Telegraph Company after the trans-Atlantic telegraph wire was laid. Despite this success, the firm's creditor, Brown Shipley, declined to expand Morgan's line of credit, stating the company was no better than a speculative trader in securities.^{[citation needed]}

Railroad investments and management

In his ascent to power, Morgan focused on America's largest business enterprises: railroads.^[34] He led the syndicate that broke the government-financing privileges of Jay Cooke^[when?] and developed and financed a national railroad empire by reorganization and consolidation. He raised large sums in Europe. Rather than participating solely as a financier, he actively managed and reorganized the railroad corporations, increasing efficiency^[35] and acting as an early pioneer in the practice of private equity investing, a process that became known as "Morganization."^[36]

In 1883, Morgan successfully marketed a large part of William H. Vanderbilt's New York Central holdings. In 1885, he reorganized the New York, West Shore & Buffalo Railroad and leased it to the New York Central.^[37] In 1887, Congress passed the Interstate Commerce Act. Morgan set up industry conferences in 1889 and 1890 which paved the way for a wave of consolidations in the early 20th century. In an unprecedented move, he brought together railroad presidents to 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.^[38][39]

Panic of 1893 and election of 1896

At the depths of the Panic of 1893, around 1895, the U.S. Treasury nearly depleted its gold reserves. Morgan 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 government bonds directly to the general public. Morgan demanded a meeting with President Grover Cleveland, where he claimed the United States government could default that day if action was not taken.^{[citation needed]}

Morgan came up with a plan to use an old civil war statute^[which?] that allowed Morgan and the Rothschilds to sell 3.5 million ounces^[42] of gold directly to the U.S. Treasury in exchange for a 30-year bond issue.^[43] The episode saved the Treasury but hurt Cleveland's standing with the populist agrarian wing of the Democratic Party, ensuring his political career was over. In the 1896 United States presidential election, bankers came under a withering attack from William Jennings Bryan, and Morgan was among many who donated heavily to Republican William McKinley.^[44]

Nikola Tesla's Wardenclyffe station: 1900

In 1900, the inventor Nikola Tesla convinced Morgan he could build a trans-Atlantic wireless communication system based on his theories of Earth and atmospheric electrical conduction (eventually sited at Wardenclyffe) that would outperform the short range radio wave-based wireless telegraph system then being demonstrated by Guglielmo Marconi. In what may have been a philanthropic investment,^[45] Morgan gave Tesla $150,000 (equivalent to $5,493,600 in 2023) to build the system and Tesla offered him a 51% control of the patents. Almost as soon as the letter of agreement 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.^[46] Morgan refused to give Tesla any further money towards the project and, with Tesla unable to secure further investment capital, Wardenclyffe's development stalled and the site was abandoned by 1906.^[46][47]

Northern Securities: 1901–1904

The Northern Pacific Railway went bankrupt in the Panic 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 Minnesota railroad builder James J. Hill. To reduce competition in the Midwest, they created the Northern Securities Company to merge three of the region's most important railways: the Northern Pacific Railway, the Great Northern Railway, and the Chicago, Burlington and Quincy Railroad. The parties ran into unexpected opposition from President Theodore Roosevelt, who considered the merger bad for consumers and a violation of the seldom enforced Sherman Antitrust Act of 1890. In 1902, Roosevelt ordered Attorney General Philander Knox to sue to break it up. In 1904, the Supreme Court dissolved the Northern Security company; though Morgan did not lose money, his all-powerful political reputation suffered.^{[48][49][50][51]}

U.S. Steel: 1901–1913

In 1900, Morgan began talks to purchase Andrew Carnegie's steel business and merge it with several other steel, coal, mining and shipping firms. After financing the creation of the Federal Steel Company, Morgan merged it with the Carnegie Steel Company and several other steel and iron businesses (including William Edenbirn's Consolidated Steel and Wire Company) in 1901, forming the United States Steel Corporation. 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.^{[citation needed]}

U.S. Steel's goals were to achieve greater economies of scale, reduce transportation and resource costs, expand product lines, and improve distribution to allow the United States to compete globally with the United Kingdom and Germany.^[52] U.S. Steel president Charles M. Schwab and others claimed the company's size would enable it to be more aggressive and effective in pursuing distant international markets.^[52] Critics regarded U.S. Steel as a monopoly, as it sought to dominate not only steel, but also the construction of bridges, ships, railroad cars, 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.^[52]

U.S. Steel also faced criticism for its labor policies. U.S. Steel was non-union and used aggressive tactics to identify and root out pro-union "troublemakers." The lawyers and bankers who had organized the merger, including Morgan, were more concerned with long-range profits, stability, good public relations, and avoiding trouble. His views generally prevailed, and the result was a "paternalistic" labor policy.^{[[[Wikipedia:Citing_sources|page needed]]]}-41" style="counter-reset: mw-Ref 40;" class="reference-link">[40]

Failed London Underground line: 1902

Morgan suffered a rare business defeat in 1902 when he attempted to build and operate a line on the London Underground. 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.^[53] Morgan called Yerkes' coup "the greatest rascality and conspiracy I ever heard of".^[54]

International Mercantile Marine and RMS Titanic: 1902–1913

In 1902, J.P. Morgan & Co. financed the formation of International Mercantile Marine Co. (IMMC), an Atlantic shipping company which absorbed several major American and British lines, in an attempt to monopolize the shipping trade. 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.^{[citation needed]}

Morgan had booked a luxury suite with a private promenade deck on the RMS Titanic and scheduled to sail on the ill-fated maiden voyage of the ship, which was owned by an IMMC subsidiary, White Star Line, but those plans were later changed.^[55][56] The ship's famous sinking was a financial disaster for IMMC. Analysis of financial records shows that IMMC was over-leveraged and suffered from inadequate cash flow causing it to default on bond interest payments.^[b][57][58]

In response to the sinking, Morgan purportedly said:

Monetary losses amount to nothing in life. It is the loss of life that counts. It is that frightful death.^[59]

Panic of 1907

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.^{[60][[[Wikipedia:Citing_sources|page needed]]]}-63" style="counter-reset: mw-Ref 61;" class="reference-link">[61] To ease the crisis, Secretary of the Treasury George B. Cortelyou earmarked $35 million of federal money to deposit in New York banks.^[62] 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.^[60]

A delicate issue arose regarding the brokerage firm of Moore and Schley, which was deeply invested in the Tennessee Coal, Iron and Railroad Company (TCI). Moore and Schley had used over $6 million of TCI stock as collateral for loans to Wall Street banks, which the firm now could not pay. If Moore and Schley failed, it could precipitate a larger crisis. Thus, Morgan proposed merging the TCI with U.S. Steel, one of its chief competitors.^{[citation needed]}

U.S. Steel president Elbert Gary agreed, but was concerned that antitrust implications could obstruct the merger. 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.^[60]

Criticisms and investigations

While conservatives hailed Morgan for civic responsibility, strengthening the national economy, and devotion to the arts and religion, critics of banking and consolidation viewed him as one of the leading figures in the system they rejected.^{[[[Wikipedia:Citing_sources|page needed]]]}-66" style="counter-reset: mw-Ref 64;" class="reference-link">[64]^{[[[Wikipedia:Citing_sources|page needed]]]}-67" style="counter-reset: mw-Ref 65;" class="reference-link">[65] They attacked Morgan for the terms of his 1895 loan of gold to the U.S. Treasury. Many,^[who?] including writer Upton Sinclair, attacked him for his handling of the Panic of 1907.^[how?]

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 compared to the value of all the property in the twenty-two states west of the Mississippi River.^[66]

In the early 2000s, an investigation by historian James Lide discovered that through parts of its business, JPMorgan Chase accepted thousands of slaves as collateral on loans made to plantation owners in the early 19th century, and that it ended up owning several hundred slaves.^[67] The banks in question, Citizens' Bank and Canal Bank, both now part of JPMorgan, served plantations from the 1830s until the American Civil War, and sometimes took ownership of slaves when the plantation owners defaulted on loans. JPMorgan estimated that between 1831 and 1865, the two banks accepted approximately 13,000 slaves as collateral and ended up owning about 1,250 slaves. An apology was made in compliance with a rule requiring companies to detail past dealings with the slave trade when doing business with the city of Chicago.^[68][69]

Manufacturing and construction industry

Railroads

Marriages and children

In October 1861, Morgan married Amelia "Memi" Sturges (1835–1862) at her home on 5 East Fourteenth Street. He had courted her for two years, and when they married, Memi was already seriously ill with tuberculosis. Morgan had to carry her to the drawing room for a small private ceremony and afterwards to the carriage which took them to the pier. They travelled to Algiers, where he hoped the warm climate would restore their health, but it did not, and she died in Nice in February 1862, four months and ten days after their marriage.^[71]

On May 31, 1865, Morgan married Frances Louisa "Fanny" Tracy (1842–1924), whom he met at St. George's Church. They had four children:

• Louisa Pierpont Morgan (1866–1946), who married Herbert L. Satterlee (1863–1947)^{[[[Wikipedia:Citing_sources|page needed]]]}-74" style="counter-reset: mw-Ref 72;" class="reference-link">[72]
• J. P. Morgan Jr. (1867–1943), who succeeded his father and married Jane Norton Grew
• Juliet Pierpont Morgan (1870–1952), who married William Pierson Hamilton (1869–1950)
• Anne Tracy Morgan (1873–1952), philanthropist

Appearance

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] He was physically large with massive shoulders, piercing eyes, and a purple nose.^[73] He was known to dislike publicity and hated being photographed without his permission; as a result of his self-consciousness of his rosacea, all of his professional portraits were retouched.^[74] 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."^[75] 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.^[76]

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.^[77]

Morgan smoked dozens of cigars per day and favored large Havana cigars dubbed Hercules' Clubs by observers.^{[[[Wikipedia:Citing_sources|page needed]]]}-80" style="counter-reset: mw-Ref 78;" class="reference-link">[78]

Religion

Morgan was a lifelong member of the Episcopal Church, and by 1890 was one of its most influential leaders.^{[[[Wikipedia:Citing_sources|page needed]]]}-81" style="counter-reset: mw-Ref 79;" class="reference-link">[79] He was a founding member of the Church Club of New York, an Episcopal private member's club in Manhattan.^[80] Morgan was appointed as one of the first laymen on the committee that created the 1892 revision of the Book of Common Prayer, where he petitioned for the creation of a special limited collectible printing that he later financed.^[81] 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 (equivalent to $2,365,000 in 2023) to finance the commission's work.^[82]

Residences

His house at 219 Madison Avenue was originally built in 1853 by John Jay Phelps and purchased by Morgan in 1882.^[83] On June 6, 1882, it became the first electrically lit private residence in America. A coal-fueled steam engine provided power for two generators that produced the required electricity.^[84][85] His interest in the new technology was a result of his financing Thomas Alva Edison's Edison Electric Illuminating Company in 1878.^[86] 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 the "Cragston" estate, located in Highland Falls, New York. His son, of the same name, was the owner of East Island in Glen Cove, New York.^{[citation needed]}

J. P. Morgan spent three months of every year in London and owned two houses there. His 'town' house, 13 Prince's Gate was inherited from his father and was later expanded by the acquisition of the neighbouring Number 14 to house his growing art collection. After his death the merged houses were offered to the US government for use as the residence of the US Ambassador, from 1929 to 1955. His other property was Dover House, Putney, which was later demolished and developed into the Dover House Estate.^{[citation needed]}

Social organizations and philanthropy

Morgan was a member of the Union Club in New York City. When a friend, Erie Railroad president John King, was blackballed, Morgan resigned and organized the Metropolitan Club of New York.^[87] He donated the land on 5th Avenue and 60th Street at a cost of $125,000, and commanded Stanford White to "...build me a club fit for gentlemen, forget the expense..."^{[[[Wikipedia:Citing_sources|page needed]]]}-66" style="counter-reset: mw-Ref 64;" class="reference-link">[64] He invited King in as a charter member and served as club president from 1891 to 1900.^[88]

Morgan was a benefactor of the Morgan Library and Museum, the American Museum of Natural History, the Metropolitan Museum of Art, the British Museum, 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.^{[citation needed]}

Yachting

Morgan was the Commodore of the New York Yacht Club (NYYC) and was present at a board meeting on October 27, 1898, to discuss the construction of a new clubhouse. Morgan offered to acquire a 75-by-100-foot (23 by 30 m) plot on 44th Street in midtown Manhattan ^[89][90] if the NYYC raised its annual membership dues from $25 to $50 and the new clubhouse occupied the entire site.^[90] The NYYC's board accepted his offer, and Morgan bought the lots the next day for $148,000 and donated to the club.^[91][92]

NYYC members hosted an informal housewarming party on January 29, 1901, giving Morgan a trophy in gratitude of his purchase of the site.^[93][94]

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.^[95] 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.^[96]

Collections

Morgan was a 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 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.^{[citation needed]}

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.^[97]

His son, J. P. Morgan Jr., made the Pierpont Morgan Library a public institution in 1924 as a memorial to his father, and appointed Belle da Costa Greene, his father's private librarian, as its first director.^{[[[Wikipedia:Citing_sources|page needed]]]}-100" style="counter-reset: mw-Ref 98;" class="reference-link">[98]

Photography

Morgan was a patron to photographer Edward S. Curtis, offering Curtis $75,000 in 1906 (equivalent to $1,906,500 in 2023) to create a series on the American Indians.^[101] Curtis eventually published a 20-volume work entitled The North American Indian.^[102] 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.^[103]

Legacy

His son, J. P. Morgan Jr., took over the business at his father's death, but he was never as influential. The 1933 Glass–Steagall Act forced the dissolution of the House of Morgan into three entities:

• J.P. Morgan & Co., which later became Morgan Guaranty Trust
• Morgan Stanley, an investment house formed by his grandson Henry Sturgis Morgan
• Morgan Grenfell in London, an overseas securities house^{[citation needed]}

The gemstone morganite was named in his honor.^[109]

The Cragston Dependencies, associated with his estate, Cragston (at Highlands, New York), was listed on the National Register of Historic Places in 1982.^[110]