The House of Morgan

by Ron Chernow

  Untermyer: You do not think you have any power in any department or industry in this country, do you?

  Morgan: I do not.

  Untermyer: Not the slightest?

  Morgan: Not the slightest.46

  One senses that Untermyer, far from being displeased, gladly used such intransigence to showcase Pierpont’s arrogance.

  Untermyer: Your firm is run by you, is it not?

  Morgan: No, sir.

  Untermyer: It is not?

  Morgan: No, sir.

  Untermyer: You are the final authority, are you not?

  Morgan: No, sir.47

  Despite a mass of circumstantial evidence, the Pujo committee never proved a Money Trust in a strict conspiratorial sense. Rather, it found a “community of interest” that concentrated “the control of credit and money in the hands of a few men, of which J.P. Morgan &. Co. are the recognized leaders.”48 It said that six houses—J.P. Morgan and Company, First National, National City, and Kuhn, Loeb along with Boston’s Lee, Higginson and Kidder, Peabody—acted in concert in sponsoring securities of prime corporations and governments. It was hard for large companies to market bonds without this group or for rivals to take business away from them.

  The Pujo Committee documented the gentlemanly rules of conduct among old-line Wall Street banks. They competed, but in a manner as formal and ritualized as a minuet. They wouldn’t bid against each other for bond issues. Rather, a single house would privately negotiate a deal and then assign syndicate allotments to other firms. Over time, these allotments tended to be unvarying for a particular company. As Jacob Schiff told Pujo, “It was not good form to create unreasonable interference of competition. Good practices did not justify competition for security issues.”49 Whether this was a barefaced plot to bar outsiders or just a natural response to market conditions would be debated for the next forty years. The issue would not be settled until the Medina trial of the early 1950s, when the House of Morgan would again be branded the kingpin of the conspiracy.

  The Pujo hearings had one immediate consequence that seemed to threaten Morgan power. In December 1913, President Wilson signed the Federal Reserve Act, providing the government with a central bank and freeing it of reliance on the House of Morgan in emergencies; the new Federal Reserve System was a hybrid institution, with private regional reserve banks and a public Federal Reserve Board in Washington. Yet the House of Morgan moved so artfully to form an alliance with the Federal Reserve Bank of New York that for the next twenty years it would actually gain power from the new financial system. The bankers had not yet been tamed.

  AFTER the Pujo hearings, Jack and his sister Louisa sat with their father in a private railroad car as he recovered from the strain of his testimony. As soon as servants had brought their luggage from the hotel, they all returned to New York. Jack lauded his father’s testimony—thought him “perfectly frank, very helpful to situation”—but developed a visceral loathing for Untermyer, whom he tagged the Beast.50 He thought the Pujo hearings a blatant assault on the Morgan bank, with other bankers only drawn in as a smokescreen. From Yankee pride, both father and son professed to be immune to the whin-ings of such little men. Striking a brave tone, Jack said, “We have all here maintained the note which [Pierpont] struck so well in Washington that he was much too big to be annoyed by miserable little things like that.”51 The reality, however, was that Senior never recuperated from the ordeal of this public inquisition.

  Pierpont was too thin-skinned to be philosophical about political attacks and didn’t recognize himself as the ogre of the newspaper cartoons. He thought himself a generous, paternalistic boss and an avuncular grandfather, not a bloodthirsty monster. He was baffled by the new public scrutiny of businessmen and predicted that “the time is coming when all business will have to be done with glass pockets.”52 He thought Jack might fare better in the new environment. In his last months, Pierpont possessed a melancholy sense of history as having passed him by. He told a visitor in 1913, “When you see Mr. Wilson, tell him for me that if there should ever come a time when he thinks any influence or resources that I have can be used for the country, they are wholly at his disposal.”53 Such a time never came.

  Fleeing up the Nile with Louisa, Pierpont could find no respite from his troubles. As always, his ailments were a mass of amorphous symptoms rather than a definable illness. Louisa privately reported to Jack on his digestive upsets, depression, insomnia, and nervous attacks. “Bilious attack practically overcome but result months of strain very apparent now,” she cabled as they sailed to Luxor.54 Jack—always in the wrong place, always full of yearning—now wished to join Pierpont. But theirs was no ordinary father-son relationship. A political succession—no less momentous than a presidential transition—was underway, and Louisa reported that executive power was being placed in his hands. “Your suggestion coming yourself has touched and pleased him, but he is anxious you should remember how much depends upon your being on the spot in New York—how many interests are in your hands. He is too weak make decision; he wishes leave it you.”55 It was the first time Pierpont had ever explicitly delegated top authority to his son.

  As Pierpont weakened, fresh doctors were shipped out from New York. The corpulent banker fancied that fresh butter and cream from Cragston might restore him and asked Jack to send some. The final siege came in a $500-a-day suite of Rome’s Grand Hotel. News of Pier-pont’s terminal illness rattled the art world, which braced for a general collapse of prices. The ground floor of the Grand Hotel teemed with art dealers, antiquarians, foppish noblemen, shabby peddlers—all trying to unload a last painting or statue on the dying financier. So zealous were their assaults that the New York Times described them as being “repulsed with the regularity of surf on the beach.”56 Meanwhile, Pierpont’s condition required that politics and business not be mentioned. He was groggy but sleepless. Even grains of morphine couldn’t soothe his tormented mind or slow his racing pulse. On the night of March 31, he grew delirious and mumbled about his boyhood. Imagining himself back at school in Hartford or Switzerland, he praised “a fine lot of boys” in his class. Before he died, he said, “I’ve got to go up the hill.”57 He died shortly after midnight. Within twelve hours, the pope and 3,697 other people had telegraphed their regrets to the Grand Hotel.

  The Morgan partners attributed the death to Pujo. The charge may be overstated. Pierpont was seventy-five when he died. Almost twenty years before, worried doctors wouldn’t approve a life insurance policy in his name. He smoked dozens of cigars daily, stowed away huge breakfasts, drank heavily, and refused to exercise. If Jack lost weight, Pierpont would grow alarmed. When Jack began playing squash regularly, Pierpont said, “Rather he than I.”58 From boyhood, he had been chronically sick, often spending several days in bed each month. Hardly a period of his life was free of illness and depression. That he lasted until seventy-five, with his myriad ailments and resolutely bad habits, is close to miraculous, testimony to a powerful constitution. Then, in his last years, there were numerous disappointments—the Titanic, the U.S. Steel and International Harvester suits, Woodrow Wilson s attacks on the Money Trust, and so on—that may have created unbearable stress.

  But at Morgans, everybody knew Untermyer was the murderous scoundrel. As Lamont told historian Henry Steele Commager, “Within three or four months, out of a seemingly clear sky, his health failed and after a two weeks’ illness, from no particular malady, he died.”59 Certainly, the hearings hastened Pierpont’s death, but who can say they caused it? Nevertheless, the belief was widespread at the bank and only hardened partners’ feelings toward politicians and reformers. Jack began to follow Untermyer’s affairs with a morbid curiosity. When a senator attacked the lawyer in 1914, he fairly gloated: “I enjoyed reading every account of it . . . and the more I see him caught in the machinery of his evil deeds, the better pleased I am.”60

  How much had Pierpont amassed? Apart from his art collection, his estate came to $68.3 million, of which about $30 million rep
resented his share in the New York and Philadelphia banks. (Pierpont’s $68.3 million estate would be equivalent to $802 million in 1989 dollars.) The value of his art collection was estimated by the Duveens at $50 million. It was testimony to Pierpont’s Olympian standing that the release of the figures occasioned some disbelief, even some pity. Andrew Carnegie was truly saddened by the revelation of poor Pierpont’s poverty. “And to think he was not a rich man,” he sighed.61 Pierpont’s fortune didn’t approach those of the great industrialists—Carnegie, Rockefeller, Ford, or Harriman—and he didn’t quite edge out Jay Gould. One magazine writer even saw the paltry estate as proof that Pierpont hadn’t profited from inside information at his disposal.

  When Pierpont’s will was disclosed, it contained many surprises. Overflowing with religious fervor, it had a florid opening, in which he committed his soul into the hands of Jesus Christ. He distributed money with great liberality. Besides the Morgan bank capital, lack was bequeathed S3 million outright, the Corsair, the property at Princes Gate and Dover House, and that inestimable jewel, the Morgan collection. Daughters Louisa Satterlee and Juliet Hamilton received $1 million apiece, with an extra million thrown in for their husbands. The long-suffering Fanny received Cragston, the Madison Avenue house, a $100,-000 guaranteed annuity, and a $l-million trust fund. She survived until 1924, faithfully attended by Jack. There was friction in the family regarding Anne Morgan’s award of $3 million. Since she would have no children and planned to donate the money to philanthropic activities, some thought she should have received much less.

  For Morgan retainers, it was a red-letter day, fulfilling their most delirious dreams. Librarian Belle da Costa Greene got her first Morgan bequest of $50,000—Jack would later match it—plus a guarantee of continued employment at the library. Dr. James Markoe, who pumped Pierpont with medication during the 1907 panic, received a $25,000 annuity, which was to revert to his pretty wife, Annette, should she outlive him. (This bequest, along with legends claiming that doctors at the Lying-in Hospital married Pierpont’s former mistresses, kept alive rumors that Annette Markoe had been a mistress of Pierpont’s.) Even Pierpont’s sailing master, Captain W. B. Porter, received $15,000. In the most astounding act of paternalism, every J. P. Morgan and Company and Morgan Grenfell employee received a free year’s salary. (When the bill came due, Jack paid out $373,000.) There was close to $10 million in charitable bequests, including $1.35 million to Dr. Markoe’s New York Lying-in Hospital, $1 million to Harvard, $560,000 to Saint George’s Church, and $500,000 for the Cathedral of Saint John the Divine in New York City.

  By no coincidence, Pierpont’s last rites resembled the Anglo-American tribute he had arranged for Junius. He turned his own funeral into a last act of father worship. As Jack said, Pierpont had “left full instructions in regard to funeral which is to be as like his Father’s as possible.”62 Again, the mourning was transatlantic, with Pierpont honored by both a memorial service at Westminster Abbey and the closing of the New York Stock Exchange. At sea, flags of the shipping trust flew at half-mast. Back in New York, his body lay in state at the Morgan Library. For the funeral service at Saint George’s, a full complement of Episcopal bishops—one each from New York, Connecticut, and Massachusetts—came in response to a summons in Pierpont’s will. Harry T. Burleigh, a black baritone, the grandson of an escaped slave, and a favorite of Pierpont’s, sang the hymns. Pierpont was buried in the family mausoleum at Hartford’s Cedar Hill Cemetery, according to his wishes: “opposite the place where my father’s remains are interred.”63

  Perhaps no other event of the year 1913 received as many lines of newspaper copy as Pierpont Morgan’s death. Momentarily the critical drumbeat—which had grown so loud and insistent with the Pujo hearings—was silenced. In lengthy obituaries, no analogy was too large to encompass the personage who had just died. The Economist called Pierpont “the Napoleon of Wall Street.”64 The Wall Street Journal said, “Such men have no successors. . . . There were no successors to Napoleon, Bismarck, Cecil Rhodes or E. H. Harriman, and their authority was not perpetuated.”65 These articles suggested that the last titan had died, and the world of banking would never again see a figure of such scope.

  From our later perspective, Pierpont Morgan seems large because of certain characteristics of the Baronial Age. The companies Pierpont Morgan controlled were weak and primitive by today’s standards, without a vast, highly trained managerial corps. Many firms had just graduated from the regional to the national level and needed Wall Street bankers in order to obtain broader financing. Even the governments Pierpont lent money to were relatively unsophisticated and lacked the central banks, systems of taxation, and large treasuries of today. Despite the multinational reach of Pierpont’s empire, his great exploits—the 1895 rescue of the gold standard, the creation of U.S. Steel, the cornering of Northern Pacific, the negotiations in the 1907 panic—were exclusively American in character.

  After Pierpont Morgan’s death, the House of Morgan would become less autocratic, less identified with a single individual. Power would be diffused among several partners, although Jack Morgan would remain as figurehead. In the new Diplomatic Age, the bank’s influence would not diminish. Rather, it would break from its domestic shackles and become a global power, sharing financial leadership with central banks and governments and profiting in unexpected ways from the partnership. What nobody could have foreseen in 1913 was that Jack Morgan—shy, awkward, shambling Jack who had cowered in the corners of Pierpont’s life—would preside over an institution of perhaps even larger power than the one ruled by his willful, rambunctious father.

  PART TWO

  The Diplomatic Age

  1913-1948

  CHAPTER NINE

  METAMORPHOSIS

  IN early 1912, the House of Morgan bought 23 Wall Street and its property from Elizabeth Drexel. The hallowed soil fetched the highest price per square foot ever recorded for a real estate deal. A month after Pierpont’s death, wrecking crews demolished the old brownish-gray Drexel Building to clear the way for a new marble palace. Never ones to stint, the Morgan partners bought a quarry of Tennessee marble to guarantee a supply of high-quality construction material.

  Pierpont had insisted the new building retain a catercorner entrance, facing both Broad and Wall streets. On his last trip to Rome, he had planned to bring home triumphal columns to frame the entrance. Although he never set eyes on the Italian Renaissance building, designed by Trowbridge and Livingston, it preserved his spirit. On December 30, 1913, Jack set the cornerstone, which contained a special copper box. Sealed inside, like saintly relics, were Pierpont’s will, a copy of his Pujo testimony, the articles of partnership, and an appropriate merchant-banking touch—the form used for letters of credit. It was a homage to the past even as the firm moved ahead.

  Oddly, the angular building, completed in 1914, was smaller than its predecessor. “I wonder what people will think in 300 years or less as to the progress made by Morgans in 35 years,” Teddy Grenfell said slyly to Lamont. In shrinking the building’s size, the firm expelled other tenants, keeping the Corner to itself. Dwarfed by skyscrapers, the short building made extravagant use of such precious land, as if the bank wished to flaunt its immunity to everyday concerns of cost.

  The new building was compact and mysterious, reflecting the bank’s penchant for privacy. Curtains always shrouded its deeply inset windows. As the Times said, “The men of the House of Morgan keep in the background as far as possible. They shun the limelight as they would a plague.”1 Whereas the old Drexel building had the firm’s name over the doorway, the bank now reverted to London tradition and posted no name.

  The interior reflected the layout of London merchant banks, with an open banking floor on the street level. Set off by a marble-and-glass partition, a double row of partners’ rolltop desks and brass spitoons stood along the Broad Street side. There were dark wood walls and mosaic panels. Fires blazed at the back of the partners’ room, beneath a portrait of Pierpont. Upstai
rs, each partner had a private office, lined in English oak, and a fireplace. The upper floors housed a private dining room and Jack Morgan’s barber shop.

  When Jack arrived for his inaugural day as the new Senior, his office was heaped with roses. Now forty-six, he must have taken charge with some trepidation. He was milder, less truculent than his father—he griped and grumbled where his father barked. One journalist wrote that there was in Jack “a suavity . . . that was missing in his father,” and Wall Street scuttlebutt compared him with Pierpont unfavorably.2 As we have seen, his confidence hadn’t been bolstered by his father. And for a Morgan partner, he had been mixed up in a surprising number of fiascoes, including the shipping trust. When he solicited a gold loan in Paris during the 1907 panic, the Banque de France rebuffed him—a hard knock for Junius Morgan’s grandson. Wall Street wits said that after returning to New York in 1905, Jack’s chief innovation at the Corner was introducing English afternoon tea. He was seen as pleasant, friendly, but second-rate.

  Jack handled the succession in an intelligent, self-protective way. He did what Pierpont could never do—presided in a relaxed manner, delegating authority to Davison, Lamont, and others. Not hampered by his father’s flaming temper or ego, he didn’t feel threatened by talented men of his own age and prided himself on his stable of prima donnas. The way he restructured the bank suited the needs of the Diplomatic Age, which required a team of strong, independent partners to undertake government missions. The general caliber of the partners would improve measurably under Jack’s tutelage.

  Decisions were reached by consensus. Where Pierpont held no regular meetings until the 1907 panic, Jack scheduled daily partners’ meetings in the informal style of a British merchant bank. No stenographer was present, and no minutes were kept, only lists of attending partners. Where Pierpont preferred subservient partners, Jack would create a bank almost top-heavy with executive talent. Whether from insecurity, shrewdness, tact, or sheer laziness, he put together a symphony orchestra that could, if necessary, play without a conductor.