The House of Morgan

by Ron Chernow

  That Vanderbilt chose the forty-two-year-old Pierpont to carry out this delicate operation probably stemmed from the House of Morgan’s Anglo-American structure. The principal concern was how to liquidate up to 250,000 shares without collapsing the stock’s price. The Morgan-led syndicate demanded that the Vanderbilts refrain from further sales for a year or until all syndicate shares were placed. Another technique to mask the high-volume sale was to sell shares abroad, and J. S. Morgan and Company took an initial 50,000-share block. Junius could act with a discretion impossible on Wall Street. But it was no easy sales job: British investors were still getting mauled by American railroads, and dozens more foundered that year. The world economy was still depressed, with a deep slump in foreign lending. And in the largely unregulated Baronial Age, stock prospectuses were comically skimpy. The New York Central prospectus, for instance, was grandly evasive: “The credit and status of the company are so well known, that it is scarcely necessary to make any public statement.”34 With so little information about a company, the reputation of the sponsoring bank was critically important.

  The New York Central deal had an unstated agenda. The syndicate allotted 20,000 shares to Jay Gould, 15,000 to Russell Sage, and 10,000 to Cyrus Field. The inclusion of the odious Gould was part of a truce between Vanderbilt’s New York Central and Gould’s Wabash, which had been feuding. At first, Vanderbilt wasn’t thrilled about this, but Gould effectively blackmailed his way into the syndicate by threatening to deprive the New York Central of Wabash traffic. Gould also felt this association with the Morgans might cloak him in a new respectability and perhaps entitle him to better credit in the future.

  When Pierpont announced that he had mysteriously sold the huge block of New York Central shares, much of it abroad, the financial world gaped with wonder. The commission was a colossal $3 million. As he had during the feud over the Albany and Susquehanna, Pierpont demanded a seat on the railroad’s board of directors. As Junius told a partner, Pierpont was “to represent the London interest”—that is, he would vote their proxies.35 Having long chafed at American railroad brigands—even organizing a $300,000 defense committee to protect their stake in Gould’s Scarlet Woman—European investors now exacted their revenge. They were tired of railroad shenanigans—bankruptcy, skipped dividends, poor management. So Pierpont Morgan would be their blunt instrument with which to bludgeon American railroads into responsible behavior. He had just the right clubman’s pedigree to inspire their trust. Once he chastised a railroad president by exclaiming, “Your roads! Your roads belong to my clients!”36 Because railroads required constant capital and exhausted the resources of lone entrepreneurs, they were ripe for such banker domination.

  As intended, the sale of William Vanderbilt’s stock dispersed ownership and New York State slackened its assault against the road. But what the legislators didn’t reckon on was that Pierpont would take those scattered shares and effectively recreate their combined power in himself. He began placing his golden manacles on the road. Besides voting all the London proxies, he insisted that the New York Central maintain its $8 dividend for five years, with the House of Morgan acting as fiscal agent to disburse those dividends in New York and London. Before long, the New York Central would be a Morgan road and the company whose shares were recommended most frequently by the Morgan family.

  In standing up foursquare for British creditors, Pierpont took the risky step of identifying himself with a foreign power, creating confusion in the popular mind as to his political loyalties. From this time on, he would often be criticized as a mere appendage of London bankers, “a sort of colonial administrator; a representative in America of the financial might of Britain.”37 This ambiguity regarding the bank’s Anglo-American character would not only foster considerable paranoia in the American heartland but would also create an identity crisis within the Morgan empire itself.

  In the meantime, while Wall Street buzzed over the New York Central affair, Pierpont seemed to derive little joy from it. Far from puffing up with pride, he sounded frazzled and dispirited. Yet again he contemplated giving up business. An 1880 letter to his cousin Jim Goodwin shows how explicitly he began to view himself as an instrument of larger purpose, the representative of masses of investors. He wrote in part,

  I am pressed beyond measure. I never have had such a winter—and although my health has been better than I have had for many winters, still, so far as time is concerned, I have had no leisure whatever. If it were simply my own affairs that were concerned, I would very soon settle the question, and give it up; but with the large interests of others on my shoulders, it cannot be done—and I do not suppose there is any reason why it should, except that I often think it would be very desirable if I could have more time for outside matters.38

  Several commentators have noted Pierpont’s “savior complex,” as seen in his private life by his marriage to the tubercular Mimi and in his business life by his crusades for the “London interests.” In his own mind, he often acted to benefit others, not simply for self-aggrandizement. This pronounced sense of martyrdom made him extremely sensitive to criticism and also shielded him from true self-knowledge. In more extreme moments, it could invite megalomania. It was too easy to camouflage selfish impulses by invoking a higher cause as the real cause. At the same time, he wasn’t motivated by purely selfish motives and had larger concerns than most bankers of his day. In future years, Morgan partisans would praise the bank’s high ethical standards and reputation for fairness, while critics would see the self-congratulatory rhetoric as sanctimonious and hypocritical. And both sides would prove right.

  CHAPTER FOUR

  CORSAIR

  IN 1882, Pierpont was making half a million dollars a year, and the power balance within the Morgan empire began to tip from London to New York. To mark their new financial status, Pierpont and Fanny sold their high-stooped house on East Fortieth Street and bought a brownstone formerly owned by Isaac N. Phelps (of Phelps, Dodge copper fame) at 219 Madison Avenue at the northeast corner of Thirty-sixth Street, still in Manhattan’s Murray Hill neighborhood. In this less crowded New York, the East River was still visible from the house. At a time of sybaritic indulgence, when businessmen wallowed in luxury and showy greed was all the rage, the Morgan home was imposing but unadorned. Its entryway was flanked by Ionic columns, and a bay window overlooked Madison Avenue. Heavy wood furniture and bric-a-brac filled the rooms. In his high-ceilinged library, paneled in Santo Domin-gan mahogany, Pierpont set his massive desk; it stood in the middle of the room as if the library were the partners’ room of a merchant bank. This library was a place of such forbidding gloom that the staff of twelve servants called it the “black library.”1

  A novel feature of the Morgan household was electricity: it was New York’s first electrically lighted private residence. Pierpont’s interest in the newly harnessed source of energy stemmed from a business deal: in 1878, Thomas Alva Edison had secured capital from the Morgan partners and other financiers to establish the Edison Electric Illuminating Company. Unfortunately, the infernal racket of the electrical generator was the bane of the Morgans’ neighbors. Downtown, Drexel, Morgan hosted early meetings of the Edison company and in 1882 became the first Wall Street office to draw electricity from Edison’s generating station at Pearl Street. Edison himself, in a Prince Albert coat, attended the debut of electric power at 23 Wall Street, and he kept his personal account at the bank.

  The decision to stay in Murray Hill said much about the Morgans, who scorned the nouveaux riches. When they opted for that neighborhood, the “quality” were already moving uptown. Along Fifth Avenue, exhibitionist moguls built gaudy palaces, their styles plundered from European chateaus. From Fifty-first to Fifty-second streets, in elephantine splendor, rose William Henry Vanderbilt’s mansion. Between Fifty-seventh and Fifty-eighth streets, Cornelius Vanderbilt II, son of William Henry, built another palace on the present site of Bergdorf Goodman.

  Matthew Josephson has offered an unforgettable p
ortrait of Gilded Age vulgarity:

  At Delmonico’s the Silver, Gold and Diamond dinners of the socially prominent succeeded each other unfailingly. At one, each lady present, opening her napkin, found a gold bracelet with the monogram of the host. At another, cigarettes rolled in hundred-dollar bills were passed around after coffee and consumed with an authentic thrill. . . . One man gave a dinner to his dog, and presented him with a diamond collar worth $ 15,000. At another dinner, costing $20,000, each guest discovered in one of his oysters a magnificent black pearl. Another distracted individual longing for diversion had little holes bored into his teeth, into which a tooth expert inserted twin rows of diamonds; when he walked abroad his smile flashed and sparkled in the sunlight. . . . ”2

  A cross between Connecticut Yankees and London aristocrats, the Morgans shrank from extravagance and shielded their lives from the newspapers. Like European haute banque families, the Morgans were very private. Pierpont was fanatic about his privacy and created an enduring image of a top-hatted tycoon snarling and brandishing a stick at photographers. He belonged to nineteen private clubs, most of the sort restricted to Anglo-Saxon Christian men, and liked to mingle with old money. Unlike most members, he preferred building clubs to using them. When some friends were blackballed from the Union Club, he had Stanford White design the Metropolitan Club, which acquired the tag of the Millionaire’s Club. Morgan was the first president. He was never a champion of social justice or equality. When Theodore Seligman, son of one of New York’s most prominent Jewish bankers, was blackballed from the Union League Club in 1893, Pierpont didn’t protest the exclusion.

  For Pierpont, a gentleman wasn’t a rich man but a member of a social caste. He is associated with two statements about yachting that sum up his philosophy. The first is that “you can do business with anyone but you can only sail a boat with a gentleman,”3 and the second (perhaps apocryphal) that anyone who asked about the cost of maintaining a yacht shouldn’t buy one. He had no time for bounders or upstarts and despised the rich idle young men about town who pursued women in clubs and cafés. The Morgans would always be strong believers in the work ethic and the duties of the rich. They shunned the snobbish version of high society embodied by Mrs. Astor and Ward McAllister’s “Four Hundred”—supposedly the crème de la crème of New York society. In bluff, manly style, Pierpont would have thought their balls prissy or vulgar.

  A stuffed shirt, Pierpont liked to play chess or whist in the company of older, settled men. He believed in convention and always wore social uniforms suitable to the occasion—a bowler in winter, a Panama hat in summer, for instance. Even when he toured Egypt in 1877 he wore knickerbockers, watch chain, and pith helmet—the approved dress for the imperial tourist. “Physically and intellectually, Morgan reproduced the traditional old-time London banker,” said Alexander Dana Noyes.4 At the office, sitting at his rolltop desk, he wore stiff winged collars, ascots, and heavily starched shirts—trademarks of the serious banker. Only on sweltering days would he peel off his coat in the clublike atmosphere. Like his father, he called himself a merchant and his firm a countinghouse.

  The early 1880s saw Pierpont’s metamorphosis from a dashing, muscular young man into the portly tycoon with fierce visage and blown-up nose. Now in his forties, he had graying hair and eyebrows and still sported a handlebar mustache. The acne rosacea that had troubled him since adolescence took root in his nose, enlarging and inflaming it until it became Wall Street’s most talked-about protuberance. Over the years, it would take on a cauliflower texture. Many people would notice a link between the nose and Pierpont’s fiery temper. The nose certainly contributed to an insecurity and lack of social ease that were thinly masked by a barking voice and tyrannical manner. The blustery tone warned the world not to stare at the face. The nose must have been a terrible handicap for a shy, self-conscious man with a tremendous need for female admiration.

  The body swelled with the face. In the 1880s, a generation of Wall Street bankers was doomed by the wisdom of one William Evarts, who credited his longevity to “never under any circumstance having taken exercise. ”5 Pierpont usually played cards at a club after work rather than join in a game of tennis. He occasionally lifted dumbbells, but in the late 1880s a medical sage advised him to “stop exercise in every form. Never even walk when you can take a cab.”6 Pierpont loyally followed doctor’s orders, doing so while smoking Havana cigars so big and black that they were dubbed Hercules’ clubs.7 A teetotaler by day—the Morgan banks, by tradition, never served alcohol at lunch—he compensated for this abstinence at night, progressing from predinner cocktails to sherry or claret with meals and then to brandy or port afterward. More than husky, he began to develop the sleek girth that symbolized contemporary tycoons.

  Although a retiring person beneath his bossy manner, Pierpont maintained an acquaintance with an extensive number of people. As a merchant banker, he had to cultivate clients, and his business life was necessarily social. As a later Baring Brothers chairman remarked of the business, “One of the facets of the art is that if you do not get on with the people you are trying to advise, then you find yourselves out the door.”8 And Pierpont engaged in a constant whirl of dinners and civic functions.

  These social pressures took their toll on his marriage, which had already begun to turn into a cold, empty charade. Fanny Morgan was bashful and lacked all relish for the social duties incumbent upon a merchant banker’s wife. Sad and anxious, sweet and pious, she preferred reading, gossiping with friends, talking about religion, and discussing social questions. She would be more popular with both their children and their grandchildren than would the dagger-eyed Pierpont. As his world grew larger, Fanny’s spirit was either not large enough or not willing enough to fill that space with him. One also suspects that the couple clashed as a result of their very similarity. Both were sensitive and high-strung and too melancholic to provide much solace for the other. Fanny wasn’t a tonic to Pierpont’s habitual moodiness, and he was doubtless much too busy to attend to her needs. The practical marriage, the supposed antidote to the Mimi affair, turned out to be dangerously impractical.

  When Junius returned to London after his 1877 dinner, Pierpont followed. It was the first Christmas he spent away from his children. The next year, Fanny didn’t join him for the annual spring trip abroad, and he thereafter developed the habit of traveling to Europe with one of his daughters, spending months apart from his wife each year. These trips combined business and pleasure, and provided cover for infidelity. As a high Victorian, he was proper and respectful toward Fanny in public, even as their separations lengthened. Over time, she would become morose and something of an invalid, pouring her heart out, to her son Jack, among others.

  Pierpont wasn’t the sort to suffer a loveless marriage lightly. As revealed by his love for Mimi, he was highly romantic. He made pilgrimages to Mimi’s grave in Fairfield, Connecticut, traveling there on the anniversary of their wedding or of her death.9 His eyes cloudy and troubled, he had the soul of a voluptuary beneath a banker’s custom-made suit. Even as he scared people away, he was a lonely man, carrying around a vast despair that he couldn’t share with anyone. His unhappy marriage probably plunged him deeper into business while also denying him the pleasure of his triumphs.

  PIERPONT’S connections in the realm of charity were almost as extensive as his business interests. He preferred to give to religious, cultural, and educational causes, not to social welfare agencies. He never tried to solve the problem of poverty. He wanted to build institutions that were private and elite. He was an original patron of the Metropolitan Museum of Art and the American Museum of Natural History, had a box within the Metropolitan Opera’s Golden Horseshoe (he liked romantic, florid operas, especially Il Trovatore), and was a major contributor to Saint Luke’s Hospital. After Junius took in S. Endicott Pea-body (a distant relative of George’s) as a partner in London, Pierpont helped his son, the Reverend Endicott Peabody, to buy ninety acres north of Boston for a new prep school, Grot
on. Modeled after Rugby, it was supposed to develop a good, manly, Christian character in its pupils. Ironically, it spawned that arch enemy of the House of Morgan—Franklin Delano Roosevelt.

  Through his friend and personal physician, Dr. James W. Markoe, Pierpont gave one of his rare gifts to the immigrant masses then streaming into New York’s Lower East Side. In 1893, Markoe told him of an operation he had performed in a tenement kitchen to save an immigrant mother and her baby. Pierpont counted out three hundred-dollar bills. “See that she gets the proper care,” he said, handing the money to the doctor.10 Eventually Dr. Markoe persuaded him to contribute over $1 million to erect a new building for the New York Lying-in Hospital, where nurses would provide poor pregnant women with food, milk, and prenatal care. Dr. Markoe became the director. As Pierpont became more of a philanderer, his concern for unwed mothers would be the subject of wisecracks about town, as well as stories of doctors at the hospital who married Pierpont’s mistresses.

  But the institution that most absorbed Pierpont was the Episcopal church, which was part of the Anglican Communion. Religion united his values—beauty, order, hierarchical relationships, veneration of the past, pageantry and pomp. As New York’s most influential Episcopal layman, he attended the church’s triennial conventions and participated in its abstruse debates. Religion logically accompanied the moralism that drove him at work and lay at the bottom of his indignation at American business practices. His maternal grandfather was a preacher, his paternal grandfather a lusty hymn-singer, and his father’s banking maxims were phrased in the epigrammatic style of sermons, Junius often sounded like a frustrated clergyman: “Self-approbation and a feeling that God approves will bring a far greater happiness than all the wealth the world can give.”11 And Pierpont himself was wont to pontificate at 23 Wall Street.