The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance

by Ron Chernow

  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.

  Even with this looser grip on the business, Jack could still yank the leash and take control. He held $32.3 million in Morgan capital, which was the bank’s major cushion. He also reserved his father’s extraordinary powers, which included the right to allocate profits among partners, arbitrate disputes, fire partners, and determine a fired partner’s departing share of capital. These were the trump cards in a private partnership. So long as he was alive, Jack insisted upon certain central Morgan values—such as conservative management, avoidance of speculation, and loyalty to Britain—that set invisible but real fences around his lieutenants.

  Financial partnerships are combustible affairs that frequently blow up as a result of personality clashes and disputes over money. Yet the House of Morgan was always marked by harmony among the partners. If Jack Morgan was devoid of unhealthy egotism and bashful to a fault, his lieutenants, Harry Davison and Tom Lamont, were genial and deferential toward him. A tacit bargain was struck: they would treat Jack with impeccable courtesy, bow to his wishes on important matters, and venerate the Morgan name. In return, they would enjoy day-to-day executive control. Had there been management consultants in those days, they couldn’t have devised a better or wiser compromise.

  This wasn’t a polite charade in which the partners smirked behind the boss’s back; they had genuine affection for Jack. Years later, Morgan partner and then chairman George Whitney would say:

  I always find that I have to guard myself because of a fear that I will sound soft and foolish, but he was a great gentleman, a cultured gentleman, if you know what I mean . . . and he’d deny it like hell if he ever heard me say it to anyone. He was a simple and just as sweet a man as you ever saw. . . . As I say, he was never given credit, because he was shy, but he kept that bunch of primadonnas working, the partners, and he was the unquestioned boss and there was never any argument about it. . . . He wasn’t a buccaneer like his father, but he was a hell of a guy.3

  Had there been rebellion in Jack’s nature, it would have surfaced after Pierpont’s death. Instead, he plunged into a Morgan specialty—father worship. Even after having nursed his mother through her dreadful marriage, he cared for the Hartford grave site of Mimi Sturges Morgan, Pierpont’s first wife. With his New England sense of self-reliance, he didn’t think it sporting or fair to blame one’s parents for one’s troubles; he was no more prone to introversion than Pierpont had been. In 1916, he said of Charles Francis Adams’s autobiographical work, “The depressed and gloomy point of view, and the anger at everyone who had anything to do with his bringing up, because he feels himself not a complete success, are rather distressing.”4 And he docilely accepted the dynastic nature of merchant banking, nudging his eldest son, Junius, into the bank just as he was pushed by Pierpont. “Junius is not going into the firm,” he told a friend, “but he is coming into the office to see if he is fit to go into the firm later on, which I hope and trust he will be.”5

  In many respects, Jack’s life evolved into an eerie act of homage as he tried to metamorphose into his father. If children identify with parents to relieve their fear of them, as some psychologists suggest, then Jack must have had a great deal of fear, for he tried very hard to resemble his father. As a New Yorker columnist said, “His similarity to his father in thought and outlook is almost weird.”6 To encourage the confusion, Jack dropped the Jr. from his name after Pierpont’s death—a common practice—and took to being called Senior—the name that had been Pierpont’s. Only Tom Lamont and, later, Russell Leffingwell, called him Jack.

  That Jack successfully mimicked Pierpont had much to do with their sheer resemblance. There were differences: Jack’s mustache was smaller and trimmer than Pierpont’s walrus affair, and his eyes were gentler and less forbidding than the Senior’s. Jack also had a peculiar stoop, his shoulders hunching forward as if he were muscle-bound or ducking to pass through a low doorway. But the similarities were more striking. Both were six foot two, broad shouldered, and burly—cartoonists scarcely had to alter their sketches of the pear-shaped, top-hatted tycoon. Jack even wore Pierpont’s bloodstone on his watch chain—a favorite touch of the radical caricaturists, who had added it to the iconography of paunchy plutocrats. The strong Morgan nose remained, though without Pierpont’s skin disease.

  Contemporaries said the two J. P. Morgans even walked and talked alike. Occasionally, one sees a snapshot of “J. P. Morgan” threatening a reporter with his stick and momentarily cannot tell which Morgan it is. Both were high-strung, thin-skinned, moody, and prone to melancholic self-pity. Deeply emotional, they feared their ungovernable passions. A gruff, snappish way of relieving tension and dealing with disappointment was also conspicuous in both.

  It is fascinating to follow Jack as he assumed his father’s trappings. A sampler: In 1915, he wrote a Piccadilly hat shop for “another hat (felt) of the same shape as those you used to make for the late Mr. Pierpont Morgan.”7 Like his father, he went for his London tailoring to Henry Poole and Company of Savile Row and to Brooks Brothers in New York. He adopted his father’s yen for gigantic cigars, ordering five thousand at a time. As his caterer, he retained Louis Sherry, who distributed to favored partners fifty bottles of brandy, one hundred of Musigny, and one hundred of Madeira at a clip. He maintained Pierpont’s tradition of sending chests of Chinese tea to friends at Christmastime, wrapped in pretty paper covers. This special Morgan blend, Mandarin Mixture, came from a tiny garden on an inland Chinese plantation. On Christmas Eve, Jack perpetuated the ritual of reading to Morgan children from Dickens’s Christmas Carol—using the author’s own manuscript.

  In religion, Jack was pious but less mystical than Pierpont. He, too, became a vestryman of Saint George’s Church, sailed with bishops aboard the Corsair III, and resumed Morgan patronage of the Episcopal church, financing a revision of the American Book of Common Prayer. The New York Yacht Club got a new Commodore J. P. Morgan, while the Harvard Board of Overseers and the Metropolitan Museum of Art also got a new J. P. Morgan. New York City’s orphans lost nothing from generational change, Jack made up the annual $100,000 deficit at the New York Lying-in Hospital. (In view of his happy marriage, he was spared the cruel barbs that greeted Pierpont’s generosity.) As a philanthropist, Jack permitted small variations, so long as Morgan themes were preserved. Where Pierpont underwrote Egyptian excavations, Jack specialized in Aztec digs for the American Museum of Natural History. More an Anglophile than his father, Jack joined Lamont in an anonymous donation to Britain’s National Trust to buy the land surrounding Stonehenge, saving the area from development.

  Before Pierpont’s death, Jack hadn’t shown a particular interest in the library. But soon he developed his father’s habit of leafing through its treasures each morning. Jack lacked the capital to mimic Pierpont’s sweeping romps through European culture—Pierpont’s own collecting had precluded that—so he concentrated instead on books and manuscripts, his specialty being incunabula, books printed before 1500.

  Under Pierpont’s strict instructions, Jack retained librarian Belle da Costa Greene, who never fully recovered from Pierpont’s death; over time, Greene’s bright banter would enchant the son as much as it had the father. And over time another amusing generational resemblance between the two became evident—the bullheaded way in which the Morgan men cornered the market in one artist after another. In 1905, Jack had given his father a manuscript version of Thackeray’s Vanity Fair and later rounded up remaining Thackerays on the market. Then he marched on Tennyson, eliciting a memor
able remark from Greene: “In regard to the Tennyson items which, personally, I loathe, it is a question of perfecting your already very large and fine collection of imbecilities.” No less than Pierpont, Jack found the librarian’s fresh mouth piquant. He replied, “I reluctantly confirm that we ought to have the Tennyson idiocies.”8

  With less of a gypsy nature than Pierpont, Jack concentrated on creating stately residences. In 1909, he paid $10,000 for barren East Island off the North Shore of Long Island, near Glen Cove. To make the grounds fertile, he had manure shipped in by the bargeload. And after constructing a stone bridge to the mainland, Jack built a $2.5-million red-brick chateau, modeled after Denham Place, a Buckinghamshire mansion, and called Matinicock Point (sometimes spelled Matinecock). Set on an estate of 250 acres, the mansion was graced with a columned entrance, dormer windows, and high chimneys. It had forty-five rooms in all, including twelve bedrooms, thirteen bathrooms, eighteen marble fireplaces, a sixteen-car garage, and even a small gymnasium.9 After Jack and Jessie moved there in 1911 (while still retaining their Madison Avenue brownstone), Pierpont had twitted his son about his proximity to Teddy Roosevelt’s estate. “I too regret my nearness to Oyster Bay,” Jack cabled back, “but expect outlive the troublesome neighbor.”10 Jack commuted to Wall Street by water each morning, pulling up at the New York Yacht Club’s pier at East Twentieth Street.

  Jack was an inveterate hunter and loved the world of English country houses. With his friend Eric Hambro, Jack bought Gannochy, a shooting lodge with seventeen thousand acres of highland moors in east central Scotland. It was a romantic spot, covered with heather and crossed by deep gorges and salmon-filled streams. Each August, Jack joined the merchant bankers and aristocrats who headed north to Scotland for grouse shooting. His guests sometimes bagged up to a thousand birds a day, while Jack’s daughters, watching from an upstairs lodge window, cheered every missed shot. The Gannochy shoots, which later would include King George VI, helped to seal a new intimacy between England and the House of Morgan.

  Jack and Jessie Morgan spent up to six months of each year in England. Fortune magazine left a portrait of their assimilation into British life, starting with their first stay, from 1898 to 1905: “They lived for eight years in England not as exiled Americans but as all but naturalized Englishmen. Mrs. Morgan by background and training took easily to English country ways, English houses, English gardens—the whole domestic economy of a life of which the life in Boston was merely a more meager copy. And her husband found . . . that the life of a gentleman and an Episcopalian could be more gracefully and naturally led in London than on Wall Street in New York.”11

  Socially, Jack shared his father’s snobbery and disdained the hurly-burly of American life. He never tried to broaden his social sphere or enlarge his sympathies. He might switch from the Union Club to the Union League Club, but that was the extent of his social experimentation. He had a special horror of arrivistes. Summering in Newport might be fine for others, but for Jack the place was “swamped by the horrid vulgar lot who make or rather ruin the reputation of it.”12

  The most conspicuous difference between Jack and his father was in their attitude toward the sexes. Both frowned on divorce among partners or employees and preferred male secretaries in the bank. (Until about the 1940s, women who married had to leave the bank, a regulation that led to several secret marriages.) But Jack was also puritanical in private—it is hard to imagine him swearing or telling off-color stories—and he once blushed to tell his children the facts of life. Perhaps reacting to his father’s lechery, he was courtly with women, and he remained absolutely faithful to Jessie, a pretty, somewhat matronly woman.

  Jack and Jessie’s marriage was almost suffocatingly close. Jessie filled that little spot of doubt inside her husband. Confident and decisive, she propped up his ego, and he relied implicitly on her judgment in many matters. Jessie was strict with the four children and ran the estates with a firm, expert hand. She was cool and businesslike, and her daughters found it easier to take their problems to their father. But to Jack, Jessie was the supportive presence who compensated for his lifelong insecurity and guaranteed he would be spared his father’s terribly loveless fate.

  AS the new lord of the House of Morgan, Jack instantly faced two crises inherited from Pierpont. Coming on the heels of the Pujo hearings, they would further embitter him toward the public and confirm his sense of national ingratitude toward Morgan bounty. The first crisis involved his father’s art collection, whose disposition Pierpont had left to him in his will.

  Originally, most of the paintings and decorative objects were housed at Princes Gate, which, for lack of sufficient space, Pierpont had despaired of turning into a museum. (The books and manuscripts had always been under Belle Greene’s care in New York.) And until 1909, American import duties made it prohibitively expensive to bring home this “foreign” wing of the Morgan collection; then Pierpont, who was big enough to move congressional mountains, spurred the enactment of a duty-free exemption for works of art more than one hundred years old. The decision to transport the collection was hastened by another consideration: if it were in London when Pierpont died, his heirs would have to pay heavy death duties. So in 1912, thousands of pieces of art were packed in giant crates and shipped to New York. To please Morgan, U.S. customs inspectors were sent to London to speed the process.

  Since Pierpont had expressed a desire to keep his collection together, its eventual destination was a matter of great speculation. At first, he had bequeathed it to the Metropolitan Museum, of which he was president. As a precondition, however, he asked New York City to appropriate money for a special Morgan wing. This was a rich man’s way of asking for a token of respect and gratitude. Instead, it provoked a vituperative campaign, spearheaded by the Hearst newspapers and some city officials, who excoriated Pierpont for not providing the funds himself.

  In this year of the Money Trust campaign, taxpayers were ripe for Morgan-baiting and prepared to believe that his bank account was bottomless. Stung by the campaign, Pierpont told shocked Metropolitan officials in late 1912 that they might not receive the collection after all. Easily injured, he could be sulky and childish when his pride was hurt. So he left the final decision to Jack. It would be his son’s first large posthumous decision. Under a new state law, Jack had two years from the time of Pierpont’s death to donate the art if he wished to receive an exemption from the inheritance tax.

  While pondering his decision, Jack temporarily permitted the collection to be exhibited at the Metropolitan Museum. It was a breathtaking event that brought together 4,100 works from London and New York—the one time the complete Morgan collection could be viewed in its entirety. America had never seen artistic riches in such profusion. The word exhibition didn’t capture its scope: it was like the unveiling of a major museum, revealing the fruits of the most frenzied buying spree in art history. There were 550 enamels, 260 Renaissance bronzes, nearly 700 pieces of porcelain from the eighteenth century, 39 tapestries, 900 miniatures, more than 50 European paintings. By glimpsing these treasures, the public developed not only a fuller sense of their worth but a possessive feeling toward them as well.

  Now Jack had to weigh the competing claims of his bank and American culture. He and other Morgan partners recalled the unpleasant suspense each year as they wondered whether the Senior’s balance would cover the bills pouring in from London and Paris. And now Jack wondered whether he could cover the $3 million in inheritance taxes and the $20 million in individual bequests mandated by Pierpont’s will. The approximately $20 million in liquid assets in the estate simply did not match the scale of Pierpont’s generosity. While he required liquid capital for bequests, estate taxes, and his business, Jack held, instead, mostly illiquid art masterpieces. What to do?

  The answer came in February 1915 and scandalized the art world: Jack decided to dismantle the collection. First he sold the Chinese porcelains for $3 million to Duveen Brothers, who resold them to Henry Clay Frick. Then Fra
gonard’s magnificent Progress of Love, four panels executed for Mme du Barry, went for $1.25 million, also to Frick, who adorned a room of his Fifth Avenue mansion with them. Frick’s new ascendancy as foremost American collector, heir to Pierpont, evidently pleased Jack, who said he had been kinder to him than any of Pierpont’s other business associates. Sugar baron H. O. Havemeyer bought the Vermeer that had captivated Pierpont. “It seems we need the money,” Belle Greene sighed.13

  By the end of this avalanche of sales—during which Greene battled tenaciously for higher prices—$8 million worth of art had changed hands at handsome prices. Pierpont’s death hadn’t devastated the art market—the new fortunes being amassed by munitions makers in the World War, fortunes often awarded by the Morgan bank itself, picked up the slack. Greene’s friend Bernard Berenson commented that Pierpont might be dead, “but his soul goes marching on.”14

  The cognoscenti were horrified by the sale, which they portrayed as a brutal, unfeeling massacre of the world’s premiere art collection. Profiting from it, Joseph Duveen nonetheless classified the breakup “with that other great artistic tragedy, the dispersal by the Commonwealth of the carefully chosen treasures of King Charles the First.”15 As a salve for bruised feelings, the Metropolitan was given 40 percent of the collection, a monumental bequest of about seven thousand objects, including Raphael’s Colonna Madonna, which was the world’s most expensive painting when purchased by Pierpont for £100,000. For all the disappointment, this was the biggest windfall in the museum’s history, forming the heart of its medieval collection.

  Pierpont’s literary collection—about twenty thousand items, including Gutenberg Bibles, papyruses, and manuscripts by Keats, Shelley, Swift, and Dr. Johnson—stayed intact at the library, as did many splendid oddities, such as Marie-Antoinette’s fan, which Jack would give to the French government in 1925. The other major beneficiary was the Morgan Memorial at the Wadsworth Atheneum in Hartford, which Pierpont had built in tribute to Junius. (As Pierpont had insisted, portraits of him and Junius hung side by side at the head of the museum’s grand staircase.) In 1917, Jack gave the museum such a massive bequest of ancient bronzes and European decorative arts—more than thirteen hundred items—that the Wadsworth at once leapt into fifth place among American museums.