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

by Ron Chernow

  In the House of Commons, Dr. Russell Thomas protested to Chancellor of the Exchequer Kingsley Wood, “Will the right honorable gentleman consider that the payment tends to irritate the public temper, lowers the prestige of the Government, and opens up avenues of suspicion at a time when national unity is essential?”2 In defending the transfers, Kingsley Wood noted that Canada had maintained diplomatic relations with Vichy France and that Pétain was a head of state. Nevertheless, at some point, the transfers were stopped.

  After Pearl Harbor, Morgan et Compagnie was branded an enemy bank and assigned a special German overseer, Herr Caesar, who operated out of 18 place Vendôme. He insisted that the firm accept accounts from Nazi banks and businesses. To avoid this indignity, Pesson-Didion informed the Nazis that J. P. Morgan and Company had instructed him not to accept new accounts or expand old ones; if forced to break this rule, he said bluntly, he would have to liquidate the bank. This prearranged strategy worked, and the bank took no Nazi deposits.

  With Jewish accounts, Morgan et Compagnie had less success. The Nazis had assembled a special administrative team to ransack Jewish securities and accounts. At Morgans and other Paris banks, they emptied the accounts and safety deposit boxes of Jewish clients and looted Fr 11.5 million in all. Morgans lodged protests to no avail. It seems doubtful whether any bank could have operated during the occupation if it had resisted these efforts too strenuously.

  The most dramatic encounter with the Nazis occurred in 1944, when a Defense Corps—SS—officer marched into the bank and demanded money kept by a certain depositor. When the redoubtable Tuteleers resisted, the officer drew a gun and shoved it in his back, forcing him to limp out into the street. Tuteleers and Leonard Rist were taken to SS headquarters on the rue des Saussaies and informed that unless the depositor’s money were promptly handed over, they would be sent to a German prison camp. Prodded with gun butts and sequestered for an hour or two in a dark broom closet, the two were released when the $8,000 ransom was paid.

  On another occasion, defying threats of prison or deportation, Maurice Pesson-Didion refused to hand over some French Treasury bills. A Gestapo officer then demanded to see a list of securities owned by Morgan et Compagnie and was incredulous that aside from government securities, the bank owned so little. Evidently imbued with a sense of mythical Morgan power, he swore that Pesson-Didion must be mocking him and the Reich. Citing supposed Morgan influence over other French firms, the officer expected to find lists of huge holdings of Credit Lyonnais and other bank stocks. He wouldn’t abandon the belief that the House of Morgan held reams of French bank shares. Lamont later retold the story of what the German officer had said: ” ’If they did not, how in the world were they able to control all the banks?’ Pesson-Didion replied they held none. Then the German official asked him to explain ’the immense influence which the Morgan firms seemed to have all over the Continent and everywhere.’ Pesson-Didion replied quietly that he could think of no explanation unless it lay in the character of the men who made up the Morgan institutions.”3 Lamont may have embellished the tale, but Morgan et Compagnie doubtless exercised less influence in reality than in the overheated minds of Nazi officialdom. There was always a mistaken sense that the House of Morgan principally exerted power through direct-share ownership in companies rather than through exclusive banking and advisory relations. With the full panoply of J. P. Morgan and Company power behind it, Morgan et Compagnie didn’t need vast capital resources.

  Morgan et Compagnie was the sole American bank in Paris to stay open throughout the war. It even turned a small profit. Leonard Rist was smart enough to see that such success might smack of collaboration, or at least of moral corner cutting. Perhaps as a result, he frequently cited his decoration from General Eisenhower for “gallant service in assisting the escape of Allied soldiers from the enemy.”4 That the U.S. government approved Morgan et Compagnie’s wartime conduct was confirmed in late 1944 when the Treasury and War departments asked J. P. Morgan and Company to send senior Paris partner Dean Jay and other Americans back to the place Vendôme to restore a semblance of normality. Of the small, white-haired Dean Jay, it was said that American businessmen in France seldom made a major move without consulting him, and so his return carried symbolic weight. In the highest tribute of all, Morgan et Compagnie was assigned to handle deposits for American troops in liberated France.

  AS the lights went out across Europe in 1940, Tom Lamont made a last-ditch effort to steer Benito Mussolini away from Adolf Hitler. His faith in Mussolini had survived many atrocities. In January 1939, after Mussolini gassed villages in Libya and Ethiopia, Lamont was still reassuring the Morgan agent in Rome, Giovanni Fummi, of his “genuine admiration for the Duce’s extraordinary domestic achievements in behalf of his people.”5 He clung to the fiction prevalent on Wall Street in the 1920s that there were two Mussolinis—the good domestic manager and the bad foreign adventurer—who somehow coinhabited the same stocky body.

  By the spring of 1939, Lamont’s overtures to Mussolini were inextricably intertwined with U.S. government policy. In his last mission of the Diplomatic Age, he operated as a private diplomat for Roosevelt as he tried to pull Italy back from war. In serving the White House, Lamont had to overcome a hurdle—how to explain to FDR Fummi’s matchless access to Mussolini? However much the bank might cast Fummi as a neutral agent, for twenty years he had fulsomely praised il Duce. Fummi had predicted that Mussolini would make Italy a great Mediterranean power. Now Lamont trotted out the standard formula regarding Fummi: “While he is loyal to his Government, he is not a fascist.”6 Whether Roosevelt believed this or not, Lamont was an uncommonly handy intermediary between the United States and Italy.

  That spring, Lamont toyed with the idea of traveling to Rome and picknicking alfresco in the countryside. “I have every now and then a sort of longing or a nostalgia for the sunshine and brightness of Italy,” he told Fummi.7 But he canceled a proposed trip, fearing a reporter might spot his name on a steamship list. He jovially told Joe Kennedy that “the Duce’s antics in Albania”—Italy’s April 1939 conquest of Albania—lay behind his cancellation of a scheduled stay at the American Academy in Rome, an institution subsidized by Morgan partners since Pierpont’s days.8

  Instead of visiting, Lamont addressed a letter to the Italian government, warning that the United States would staunchly resist German—and, by implication, Italian—aggression. In the intricate ways of Morgan secret diplomacy, Fummi passed the letter to Bernardino Nogara, the Vatican’s financial secretary, who passed it to Azzolini at the Banca d’Italia. It thus arrived on Mussolini’s desk with the incontestable authority of God and money behind it.

  The Vatican figured importantly in both Lamont’s and Roosevelt’s efforts to sway Mussolini. In February 1939, Roosevelt had sent Joe Kennedy to the funeral of Pope Pius XI as a way of currying favor with the Vatican. A year later, he became the first president to assign a personal representative to the Vatican—Myron Taylor, former head of U.S. Steel and, in earlier years, an admirer of Mussolini. The Vatican feared its own political isolation if Hitler and Mussolini made an alliance, so it welcomed the Roosevelt opening, which aroused intense opposition from American Protestants.

  In the spring of 1940, Lamont made a final approach to Mussolini. He sent a letter that he cleared first over the telephone with Roosevelt and that Tom Catto also showed to the British foreign secretary, Lord Halifax. Lamont tried to puncture Mussolini’s delusion that in the event of war, he could count on faithful support from Italian-Americans. Lamont said that Italian-Americans were rabidly anti-Hitler and that Italy shouldn’t be fooled by American isolationists. He warned against a Nazi blitzkrieg. Once again, Fummi handed the message to Nogara at the Vatican, who promised to transmit its contents to Mussolini. Not only did the mission fail, but it perhaps backfired, planting the notion in Mussolini’s mind that Fummi, as a Morgan courier, could function as an Anglo-American spy. Lamont’s maneuvers coincided with a mission to Mussolini undertaken
by Undersecretary of State Sumner Welles for FDR. After a rather frigid interview with Welles, Mussolini told his son-in-law Galeazzo Ciano, “Between us and the Americans any kind of understanding is impossible because they judge problems on the surface while we go deeply into them.”9 Mussolini also rebuffed a mission undertaken by Francis Rodd of Morgan Grenfell, who believed that the British War Office was bungling the chance to co-opt il Duce. Shortly after the June 1940 evacuation of the British Expeditionary Force at Dunkirk, Mussolini permanently locked arms with Hitler.

  In September 1940, Mussolini ordered the arrest of Giovanni Fummi—his way of rewarding the House of Morgan for its years of thankless loyalty. According to Morgan records, Fummi was abducted from his Roman hotel and held incommunicado at the Regina Coeli prison. Mussolini was now a financial as well as a political renegade and no longer had to flatter Lamont. Two months before, Italy had defaulted on its municipal and government loans. Officially, Fummi was charged with expressing pro-British sentiments through the mail. This was a specious, legalistic indictment that thinly veiled a political vendetta. For Fummi, it was a crushing end to twenty years of selling Mussolini to Wall Street’s most powerful bankers. It was also an unmerited slap, for even after Mussolini embraced Hitler, Fummi still rationalized it as the only course left. Up until the war, both Lamont and Fummi had contended that Mussolini was driven into Hitler’s arms not by madness or megalomania, but by Western diplomatic ineptitude.

  Lamont, stunned and blindsided, felt personally responsible for securing Fummi’s release. The two men had had a close, if curiously unequal, relationship. Fummi would address him as Mr. Lamont, while Lamont would reply using the diminutive Nino. A professional hand-wringer, the sentimental, hypochondriacal Fummi had shared many trials with Lamont—his first wife’s death from cancer in 1930, several breakdowns from overwork, and arthritis. In Morgan annals of crisp business letters, Fummi’s notes stand apart as the musings of a tender, melancholic man who bared his grief in a most un-Morgan-like manner.

  Whether operating from the Via Veneto in Rome or a Saint-Tropez villa—made possible by his ample Morgan retainer—Fummi was always vulnerable to charges of his being a foreign agent. For twenty years, he had performed a tightrope act, balancing patriotism with professional necessity. Most of the time, he could serve both his Wall Street masters and Mussolini. But what if their interests clashed? Fummi often told Lamont that if a conflict ever arose, the bank would take precedence over Italy. Then, in 1939, he conceded that if war came, he would serve in the Italian army. He never resolved the confusion over his national identity.

  Compounding Fummi’s trouble was that in 1934 he had married Lady Anne Crawford, daughter of the Earl of Crawford and Balcarres and niece of Sir Ronald Lindsay, the British ambassador in Washington. This English veneer must have excited Mussolini’s suspicions. For Fummi’s wedding, the House of Morgan sent the couple a pair of George II silver mugs. In 1938, Fummi chattered happily about how Anglicized he had become, with “an English wife, an English secretary and an English nannie!”10 When war came, however, he knew he was in a ticklish situation and packed off his English wife, children, and nannie to Scotland while he stayed behind in Rome. Perhaps the arrest came as less than a total surprise.

  Lamont orchestrated Fummi’s release in a masterful way. First he got the State Department involved. Then, through Myron Taylor, he sent confidential messages to the papal secretary. There was good reason to expect Vatican sympathy: Fummi was a close confidant of Nogara, who headed the Vatican’s investment arm, the Special Administration of the Holy See. While Pope Piux XI was alive, it had even been assumed that Fummi would someday replace Nogara as the Vatican’s chief portfolio manager. It is also likely that Nogara was secretly hostile to the Germans, for neither before nor after the war would he invest Vatican funds in German securities. In addition, Lamont had once lunched with the new pope, Pius XII, in New York. Responding to Lamont’s pleas, the Vatican cabled back that they were doing “utmost privately and officially in order to obtain release friend.” The papacy underscored Mussolini’s personal involvement in the affair: “We understand ultimate decision has to be taken by Government chief.”11

  In the end, only a personal appeal to Mussolini by Lamont would work. It was as if the sadistic Duce wanted to extract one last tribute, one last insufferable humiliation, from his banker. Lamont had to check his anger and argue that Fummi had represented Italy to the House of Morgan and not the reverse. If there were more truth to this than Lamont would ever care to admit, it now had to be grossly overstated. He wrote:

  It was Fummi, and Fummi alone, who urged my original visit to Rome in 1923 and the subsequent visits which resulted in these favorable loan operations for your Government. On every occasion he was active in the negotiation and zealous to advance the good name of his Government and to protect it at every point. While it is true that Fummi was our own representative in Italy, yet it is even truer, so to speak, that he acted broadly and wisely as a financial ambassador for your Government.

  Far from evading the subject of Fummi’s marriage to an Englishwoman, Lamont rather brazenly advanced it as an extra guarantee of Fummi’s patriotism: “As time went on, we became more and more impressed with the fidelity which he did show and was bound to show towards his own Government and people. The fact of his having married Lady Anne Crawford only served to make him more meticulous in the manner in which he handled himself and in the correctness of his attitude toward his own Government.”

  It is noticeable that Lamont never directly accused Mussolini of arresting Fummi or of having prior knowledge. He wrote as if he were entreating a wise, neutral, and all-powerful arbiter. In the end, Lamont groveled one last time: “Finally, it is because of your kindly and generous attitude towards me personally in all our interviews, and perhaps especially because of the charming sense of proportion that you have always shown in such interviews, that I have ventured to address you this urgent personal appeal in Fummi’s behalf.”12

  About ten days after Fummi’s arrest, a cable arrived at Morgans from Vatican City. It reported that Fummi had been safely released and would be exiled to Switzerland. For Lamont, it was an ironic end to seventeen years of having scraped and bowed and hoped that Mussolini could be reformed. He wasn’t left with the dignity of any comforting illusions. As he wrote in a somber letter to Fummi in Saint-Moritz, Switzerland, “Some time or other, dear Nino, a new day will dawn and America and Italy will once more be friends. But before that day comes there will be fire and flame and sword, grief for us all.”13

  In February 1941, the Morgan office in Rome was closed. Two weeks later, the irrepressible Fummi popped up in London to supervise a secret transfer of Vatican gold bullion stored in a basement room at Morgan Grenfell. Throughout the 1930s, the Vatican had bought the gold at the fixed price of $35 an ounce, never selling any. Fummi would discreetly refer to it as the “special commodity.” For security reasons, the Vatican now decided to ship the gold to New York. The wartime transfer was carried out under the official aegis of Lord Halifax, until recently Britain’s foreign secretary. The gold ended up at the Federal Reserve Bank of New York. There it would dizzily appreciate in the postwar years.

  In 1942, Bernardino Nogara tried to call in his IOU for his help in the release of Leonard Rist and Giovanni Fummi. The Vatican held a large stake in a South American banking group, Sudameris, which was headquartered in Paris but had branches in Argentina, Brazil, and other Latin American countries. America’s wartime blacklist had produced heavy losses for the Brazilian bank, and it faced possible liquidation; Nogara wanted to get Sudameris off the list. To this end, he proposed that Morgans buy half of the company. In exchange, he said the House of Morgan would have final approval over its actions. Although Fummi was ready to go to New York to negotiate and Nogara promised to “guarantee the fullest respect of the Allied interests in the management of the South American branches of Sudameris,” Lamont explained the political and legal impossibilit
y of buying shares in foreign banks that had French and Italian backing.14 Vatican appeals to the State Department bore no fruit, either. But the discussion reveals an interesting example of the Vatican’s diplomatic independence in Axis Italy.

  IN May of 1940, Neville Chamberlain resigned in favor of Winston Churchill, a man with whom the House of Morgan had always had a peevish, family quarrel. Teddy Grenfell had been blind to Churchill’s merits, saying of him after the crash, “His record for thirty years has shown him to be the most unreliable of statesmen as well as the most unstable of friends . . . I wish he would change his party for the third time and go over to Ramsay MacDonald, or even further to the left.”15 During the summer of 1940, Nancy Astor grudgingly conceded to Tom Lamont that Churchill was doing a good job but regretted Lloyd George’s absence from the cabinet.

  In August 1940, the Battle of Britain began. Reported vividly to America by Edward R. Murrow’s broadcasts, the nightly blitz drove Londoners into the Underground. Morgan Grenfell had girded for war, adding air-raid shelters and gas-proof access to street and stairways. Although 23 Great Winchester escaped a direct hit, the square mile of the City was badly bombed, and the Dutch Church across the narrow lane from Morgan Grenfell was destroyed. When a parachute mine in its rubble exploded, the blast stripped wood panels from the Morgan partners’ room and blew out several doors. A nearby conflagration at Carpenters’ Hall was extinguished in time to save 23 Great Winchester. Later on, a V-1 missile fell in Old Broad Street, where George Peabody and Junius Morgan had once worked. After each such pounding of London, Harold Nicolson would send Charles Lindbergh a needling postcard, saying, “Do you still think we are soft?”16