John Morgan

 

John Pierpont "J. P." Morgan (April 17, 1837 – March 31, 1913) was an American financier, banker, philanthropist and art collector who dominated corporate finance and industrial consolidation during his time. In 1892 Morgan arranged the merger of Edison General Electricand Thomson-Houston Electric Company to form General Electric. After financing the creation of the Federal Steel Company, he merged in 1901 with the Carnegie Steel Company and several other steel and iron businesses, including Consolidated Steel and Wire Company owned by William Edenborn, to form the United States Steel Corporation.

Morgan died in Rome, Italy, in his sleep in 1913 at the age of 75, leaving his fortune and business to his son, John Pierpont "Jack" Morgan, Jr., and bequeathing his mansion and large book collections to The Morgan Library & Museum in New York.

At the height of Morgan's career during the early 1900s, he and his partners had financial investments in many large corporations and were accused by critics of controlling the nation's high finance. He directed the banking coalition that stopped the Panic of 1907. He was the leading financier of the Progressive Era, and his dedication to efficiency and modernization helped transform American business.

 

Childhood and education

J. P. Morgan was born and raised in Hartford, Connecticut, to Junius Spencer Morgan (1813–1890) and Juliet Pierpont (1816–1884) of Boston, Massachusetts. Pierpont, as he preferred to be known, had a varied education due in part to interference by his father, Junius. In the fall of 1848, Pierpont transferred to the Hartford Public School and then to the Episcopal Academy in Cheshire, Connecticut, (now called Cheshire Academy), boarding with the principal. In September 1851, Morgan passed the entrance exam for the English High School of Boston, a school specializing in mathematics to prepare young men for careers in commerce.

In the spring of 1852, illness that was to become more common as his life progressed struck; rheumatic fever left him in so much pain that he could not walk. Junius sent Pierpont to theAzores (Portuguese islands in the Atlantic) in order for him to recover. After convalescing for almost a year, Pierpont returned to the English High School in Boston to resume his studies. After graduating, his father sent him to Bellerive, a school near the Swiss village of Vevey. When Morgan had attained fluency in French, his father sent him to the University of Göttingen in order to improve his German. Attaining a passable level of German within six months and also a degree in art history, Morgan traveled back to London via Wiesbaden, with his education complete.

 

 

Morgan went into banking in 1857 at his father's London branch, moving to New York City in 1858 where he worked at the banking house of Duncan, Sherman & Company, the American representatives of George Peabody & Company. From 1860 to 1864, as J. Pierpont Morgan & Company, he acted as agent in New York for his father's firm. By 1864–1872, 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. Anthony J. Drexel became Pierpont's mentor at the request of Junius Morgan.

 

J.P. Morgan & Company  

After the 1893 death of Anthony Drexel, the firm was rechristened "J. P. Morgan & Company" in 1895, and retained 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 most powerful banking houses of the world, carrying through many deals especially reorganizations and consolidations. Morgan had many partners over the years, such as George W. Perkins, but remained firmly in charge.

 

Modernizing management

Morgan's process of taking over troubled businesses to reorganize them was known as "Morganization". Morgan reorganized business structures and management in order to return them to profitability. His reputation as a banker and financier also helped bring interest from investors to the businesses he took over.

 

Newspapers

In 1896, Adolph Simon Ochs, who owned the Chattanooga Times, secured financing from Morgan to purchase the financially struggling New York Times. It became the standard for American journalism by cutting prices, investing in news gathering, and insisting on the highest quality of writing and reporting.

 

Treasury gold

In 1895, at the depths of the Panic of 1893, the Federal Treasury was nearly out of gold. President Grover Cleveland accepted Morgan's offer to join with the Rothschilds and supply the U.S. Treasury with 3.5 million ounces of gold to restore the treasury surplus in exchange for a 30-year bond issue. The episode saved the Treasury] but hurt Cleveland 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 reelected in 1900.

 

Steel

After the death of his father in 1890, Morgan took control of J. S. Morgan & Co. which was renamed Morgan, Grenfell & Company in 1910. Morgan began talks with Charles M. Schwab, president of Carnegie Co., and businessman Andrew Carnegie in 1900. The goal was to buy out Carnegie's steel business and merge it with several other steel, coal, mining and shipping firms to create the United States Steel Corporation. His goal was almost completed in late 1900 while negotiating a deal with Robert D. Tobin and Theodore Price III, but was then retracted immediately. In 1901 U.S. Steel was the first billion-dollar company in the world, having an authorized capitalization of $1.4 billion, which was much larger than any other industrial firm and comparable in size to the largest railroads.

U.S. Steel aimed to achieve greater economies of scale, reduce transportation and resource costs, expand product lines, and improve distribution. It was also planned to allow the United States to compete globally with Britain and Germany. U.S. Steel's size was claimed by Charles M. Schwab and others to allow the company to pursue distant international markets-globalization. U.S. Steel was regarded as a monopoly by critics, as the business was attempting to dominate not only steel but also the construction of bridges, ships, railroad cars and rails, wire, nails, and a host of other products. With U.S. Steel, Morgan had captured two-thirds of the steel market, and Schwab was confident that the company would soon hold a 75 percent market share. However, after 1901 the businesses' market share dropped. Schwab resigned from U.S. Steel in 1903 to form Bethlehem Steel, which became the second largest U.S. producer on the strength of such innovations as the wide flange "H" beam—precursor to the I-beam—widely used in construction.

Labor policy was a contentious issue. U.S. Steel was non-union and experienced steel producers, led by Schwab, wanted to keep it that way with aggressive tactics to identify and root out trouble makers. The lawyers and bankers who had organized the merger, notably Morgan and the CEO Elbert "Judge" Gary were more concerned with long-run 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 finally unionized in the late 1930s.

 

1907 Panic

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 personally and took charge, resolving the crisis.Treasury Secretary George B. Cortelyou earmarked $35 million of federal money to quell the storm but had no easy way to use it. Morgan now took personal charge, meeting with the nation's leading financiers in his New York mansion; 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 plummeting stocks of healthy corporations.

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. Judge 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. Vowing to never let it happen again, and realizing that in a future crisis there was not likely to be another Morgan, banking and political leaders, led by Senator Nelson Aldrich devised a plan that became theFederal Reserve System in 1913. The crisis underscored the need for a powerful mechanism, and Morgan supported the move to create the Federal Reserve System. 

 

Critics

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

Enemies of banking attacked Morgan for the terms of his loan of gold to the federal government in the 1895 crisis and 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 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.

 

Tesla and Wardenclyffe

In 1900 Morgan invested with $150,000 in inventor Nikola Tesla's Wardenclyffe Tower, a high power transatlantic radio transmission project. By 1903 Tesla had spent the initial investment without completing the project, and with Guglielmo Marconi already making regular transatlantic transmissions with far less expensive equipment, Morgan declined to fund Tesla any further. Tesla tried to generate more interest in Wardenclyffe by revealing its ability to transmit wireless electricity, but the loss of Morgan as a backer, and the 1903 "rich man's panic" on Wall Street, dried up any further investment.

 

 

London Subways

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 an underground road that would have competed with "Tube" lines controlled by Yerkes. Morgan called Yerkes' coup "the greatest rascality and conspiracy I ever heard of".

 

 

International Mercantile Marine

In 1902, J.P. Morgan & Co. financed the formation of International Mercantile Marine Company, an Atlantic shipping combine which absorbed several major American and British lines. IMM 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 IMM'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 IMM, which was forced to apply for bankruptcy protection in 1915. Analysis of financial records shows that IMM was overleveraged and suffered from inadequate cash flow that caused it to default on bond interest payments. Saved by World War I, IMM eventually reemerged as the United States Lines, which itself went bankrupt in 1986.

 

Morgan corporations

In 1890–1913, 42 major corporations were organized or their securities were underwritten, in whole or part, by J.P. Morgan and Company.

Industrials

• American Bridge Company
• American Telephone & Telegraph
• Associated Merchants
• Atlas Portland Cement
• Boomer Coal & Coke
• Federal Steel Company
• General Electric
• Hartford Carpet Corporation
• Inspiration Consolidated Copper
• International Harvester
• International Mercantile Marine
• J. I. Case Threshing Machine
• National Tube
• United Dry Goods

Railroads

• Atchison, Topeka and Santa Fe Railway
• Atlantic Coast Line
• Central of Georgia Railroad
• Chesapeake & Ohio Railroad
• Chicago & Western Indiana Railroad
• Chicago, Burlington & Quincy
• Chicago Great Western Railway
• Chicago, Indianapolis & Louisville Railroad
• Elgin, Joliet & Eastern Railway
• Erie Railroad
• Florida East Coast Railway
• Hocking Valley Railway
• Lehigh Valley Railroad
• Louisville and Nashville Railroad
• New York Central System
• New York, New Haven & Hartford Railroad
• New York, Ontario and Western Railway
• Northern Pacific Railway
• Pennsylvania Railroad
• Pere Marquette Railroad
• Reading Railroad
• St. Louis & San Francisco Railroad
• Southern Railway
• Terminal Railroad Association of St. Louis

 

Later years

After the death of his father in 1890, Morgan gained control of J. S. Morgan & Co (renamed Morgan, Grenfell & Company in 1910). Morgan began conversations with Charles M. Schwab, president of Carnegie Co., and businessman Andrew Carnegie in 1900 with the intention of buying Carnegie's business and several other steel and iron businesses to consolidate them to create the United States Steel Corporation. Carnegie agreed to sell the business to Morgan for $487 million. The deal was closed without lawyers and without a written contract. News of the industrial consolidation arrived to newspapers in mid-January 1901. U.S. Steel was founded later that year and was the first billion-dollar company in the world with an authorized capitalization of $1.4 billion.

Morgan was the founder of the Metropolitan Club of New York and its president from 1891 to 1900. When his friend, Erie Railroadpresident John King, whom he had proposed, was black-balled by the Union Club, Morgan resigned from the Union Club, and then organized the Metropolitan Club. He donated the land on 5th Avenue and 60th Street at a cost of $125,000, and commanded Stanford White, "Build me a club fit for gentlemen. Forget the expense." He invited King as a charter member.

 

 

Personal life

Morgan was a lifelong member of the Episcopal Church, and by 1890 was one of its most influential leaders.

In 1861, he married Amelia Sturges, a.k.a. Mimi (1835–1862). Three years after her death, 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)
• John Pierpont Morgan (1867–1943) who married Jane Norton Grew
• Juliet Pierpont Morgan (1870–1952) who married William Pierson Hamilton (1869–1950)
• Anne Tracy Morgan (1873–1952).

He 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." Morgan was physically large with massive shoulders, piercing eyes and a purple nose, because of a chronic skin disease, rosacea. 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." Surgeons could have shaved away the rhinophymous growth of sebaceous tissue during Morgan's lifetime, but as a child Morgan 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. 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. 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.

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

His house on Madison Avenue was the first electrically lit private residence in New York. His interest in the new technology was a result of his financing Thomas Edison's Edison Electric Illuminating Company in 1878. It was at 219 Madison avenue that a reception of 1000 people was held for the marriage of Juliet Morgan and William Pierson Hamilton on April 12, 1894, where they were gifted a favorite clock of Morgan. Morgan also owned East Island in Glen Cove, New York, where he had a large summer house.

An avid yachtsman, Morgan owned several sizeable yachts. 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 accuracy of the story is unconfirmed.

Morgan was scheduled to travel on the maiden voyage of the RMS Titanic, but canceled at the last minute, choosing to remain at a resort in Aix-les-Baines, France. White Star Line, Titanic's operator, 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 tragedy, Morgan purportedly said, "Monetary losses amount to nothing in life. It is the loss of life that counts. It is that frightful death."

Morgan died while traveling abroad on March 31, 1913, just shy of his 76th birthday. He died in his sleep at the Grand Hotel in Rome, Italy. Flags on Wall Street flew at half-staff; the stock market closed for two hours when his body passed through.

At the time of his death, he only held 19% of his own net worth, an estate worth $68.3 million ($1.39 billion in today's dollars based on CPI, or $25.2 billion based on 'relative share of GDP'), of which about $30 million represented his share in the New York and Philadelphia banks. The value of his art collection was estimated at $50 million.

His remains were interred in the Cedar Hill Cemetery in his birthplace of Hartford, Connecticut. His son, J. P. Morgan, Jr., inherited the banking business.

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

 

Collector of art, books, and gemstones

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. 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. Morgan was painted by many artists including the Peruvian Carlos Baca-Flor and the Swiss-born American Adolfo Müller-Ury, who also painted a double portrait of Morgan with his favorite grandchild Mabel Satterlee that for some years stood on an easel in the Satterlee mansion but has now disappeared.

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.

 

Gem collector

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 1000 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.

George Frederick Kunz then continued to build a second, even finer, collection which was exhibited in Paris in 1900. 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. In 1911 Kunz named a newly found gem after his best customer: morganite.

 

Photography

Morgan was also a patron to photographer Edward S. Curtis, offering Curtis $75,000 in 1906, to create a series on the Native Americans. Curtis eventually published a 20-volume work titled The North American Indian. Curtis went on to produce 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 composerHenry F. Gilbert.

 

Legacy

His son, J. P. Morgan, Jr., took over the business at his father's death, but was never as influential. As required by the 1933 Glass–Steagall Act, the "House of Morgan" became three entities: J.P. Morgan & Co., which later became Morgan Guaranty Trust; Morgan Stanley, an investment house; and Morgan Grenfell in London, an overseas securities house.

The gemstone Morganite was named in his honor.

 

Popular culture

"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.[47]

• A contemporary literary biography of Morgan is used as an allegory for the financial environment in America after WWI in the second volume, Nineteen Nineteen, of John Dos Passos' U.S.A. trilogy.
• Morgan appears as a character in Caleb Carr's novel The Alienist, and in Steven S. Drachman's novel, The Ghosts of Watt O'Hugh.
• Morgan appears in E. L. Doctorow's novel Ragtime, and in the Broadway musical of the same name.
• A satirical version of Morgan appears in Matt Fraction and Steven Sanders' graphic novel The Five Fists of Science
• In Arthur Miller's play Death of a Salesman, Morgan is mentioned as an example of how one does not have to be likeable to be successful in business, which runs counter to protagonist Willy Loman's ideas.
• Morgan is believed to have been the model for Walter Parks Thatcher (played by George Coulouris), guardian of the young Citizen Kane(film directed by Orson Welles) with whom he has a tense relationship—Kane blaming Thatcher for destroying his childhood.
• In his satirical history of the United States, It All Started with Columbus, Richard Armour commented that, "Morgan, who was a direct sort of person, made his money in money... He became immensely wealthy because of his financial interests, most of which were around eight or ten percent... This Morgan is usually spoken of as 'J.P.' to distinguish him from Henry Morgan, the pirate."
• According to Phil Orbanes, former Vice President of Parker Brothers, Rich Uncle Pennybags of the American version of the board game Monopoly is modeled after J. P. Morgan.
• Morgan's career is highlighted in episodes three and four of the History Channel's The Men Who Built America.