Morgan
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Though Junius thought the property too expensive, Pierpont told Fanny he hoped they would find 219 Madison Avenue “just the house we desire and if we don’t we can tear it down and build again.” He would have preferred something “more modern,” but had seen nothing else that would satisfy them both in Murray Hill.
In the end, he decided to modernize the house rather than tear it down. Since the Stokes and Dodge families wanted to preserve the uniform look of the block, Morgan changed the exterior only slightly—he had the entrance moved around the corner from Madison to 36th, replacing the original door with a wide bay, and left the grounds and brick stables much as they were. Over the next two years, however, he changed almost everything about the inside of the house. The firm of Herter Brothers did the structural and decorative work. Christian Herter, who had studied design in Paris, now led the firm—he became the leading cabinetmaker and interior designer of the Gilded Age. Fanny made suggestions about fabrics and colors, but Pierpont took charge of all decisions as to layout, furniture, and architectural design. During the two years of renovations, he often stopped by to consult as Herter tore out the 1850s interior at 219 and started over.
After the Morgan/Drexel firms moved out of government finance, they devoted most of their time and energy to railroads. U.S. railroad construction boomed as the long depression came to an end—75,000 miles of new track were laid in the 1880s, more than in any previous decade anywhere in the world. The capital invested in American railroads rose from $2.5 billion in 1870 to $10 billion by 1890. Only a few banks could mobilize this kind of money, and they divided into two groups: Yankee houses such as Drexel, Morgan; Winslow, Lanier; Kidder, Peabody; and Lee, Higginson—and the German-Jewish firms, Kuhn, Loeb and J. & W. Seligman.
Financiers played a far more active role in railroad affairs than bankers earlier in the century had in the small-scale enterprises owned and managed by men like Joseph Morgan. By 1880 a few privately owned giants such as Carnegie Steel and Standard Oil were generating so much profit that they did not need the capital markets, but the railroads depended on bankers who could tap repeatedly into investor savings. Unlike Carnegie and Rockefeller, the thousands of widely dispersed stock- and bondholders who “owned” railroad companies did not run them, and had no effective control over the managers who did. The bankers stepped into that breach. Morgan allegedly once reminded a recalcitrant railroad president that “your roads belong to my clients.”
Answerable to their still largely foreign clientele for billions of dollars in long-term investment, the Morgans kept watch over the users of this money. In practice, their guardianship came to mean everything from giving financial advice and bailing out bankrupt roads to firing and hiring managers, appointing new directors, fighting off hostile takeover attempts, and trying to control duplicate building and “ruinous” competition. For a railroad the name of a respected banker on its finance committee meant continued access to funds. In a period of explosive economic growth and spectacular risk, the bankers’ power—and profits—derived from a combination of expertise and pragmatic principle. If they abused their authority for private gain, they could not function in this specialized market—which is what Junius had been saying all along, and what Pierpont meant years later when he identified “character” as the basis of investment banking.
The Morgans’ work with the Cairo & Vincennes Railroad was an early case in point. J. S. Morgan & Co. had sponsored £700,000 of first-mortgage bonds for this Illinois road in 1872, and a year later rescued the company from default. The C&V had been run into bankruptcy by its president, former Civil War general Ambrose Burnside (whose tonsorial habits gave rise to the term “sideburns”), and the bankers, acting for their client/bondholders, reorganized the company entirely. When they installed a new board of directors, Junius insisted on a majority of “our friends” to ensure “our absolute control which must be undoubted.” The new board consisted of Pierpont (president), Tony Drexel, their partner J. Norris Robinson, Jim Goodwin, railroad banker Morris K. Jesup, Solon Humphreys of E. D. Morgan & Co., and three men from Illinois. Fanny’s father was appointed New York attorney for the road. Burnside stayed on in the “nominal presidency always acting under control our friends,” and voting “according our instructions.”
Over the next eight years, the banker-dominated board settled lawsuits, retired the floating debt, and authorized the purchase of connecting lines and new equipment (including a locomotive called the J.S. Morgan). An ethical question arose in 1875. The European board of directors wanted to set up a fund with which to control the market for C&V securities. Pierpont, outraged, warned Junius that if their colleagues persisted in this folly the American directors would resign: “We all know that if it was announced that the directors had appropriated a fund to be used for operating in the stocks and bonds of the company – the credit of the company would be entirely destroyed.”
The C&V was a long-term headache, and in 1881 the bankers leased it to Jay Gould’s Wabash, St. Louis, & Pacific Railway. For their efforts they had lost £472,500—over $2 million. Pierpont’s work with this road taught him more than he might have wanted to know about bankruptcy, mismanagement, and how not to run a railroad, but it also strengthened the investing community’s perception that his house would “stand by its goods” and look out for the interests of its clients.
Morgan tried wherever he could to prevent the unnecessary building that escalated competitive warfare. His bank had issued hundreds of thousands of dollars’ worth of bonds for the Chicago & Alton Railroad in the early 1870s, and when the road’s directors wanted to issue $3 million in new stock to pay for an extension through Illinois and Missouri to Kansas City, he argued against it: there were three lines already covering that route, he told a C&A official, none of them paying a dividend. “We have had for several years past a fever for building and extending competitive lines,” he went on, “and nearly every company that has undertaken it has suffered accordingly. If the lesson of the last few years is to be disregarded and it is the desire of the Alton stockholders to allow themselves to be saddled with an encumbrance of $3 million more – then I say only let them do it and they will suffer in consequence by the decline of their stock.” If the directors went ahead with the plan—which Junius considered “suicidal”—Pierpont threatened to “sell my stock and retire” from any further responsibility for its welfare. The C&A did not build the Kansas City extension.
This kind of meticulous supervison maintained the Morgans’ access to European capital markets, and it won them a major new client at the end of 1879. William Henry Vanderbilt, Pierpont’s 40th Street neighbor, had inherited nearly 75 percent of the stock in the New York Central Railroad when his father, the Commodore, died in 1877. The Vanderbilts were the last single-family owners of a great American trunk line.
Before his death, the swashbuckling old Commodore had added extensive branching lines to the New York Central system, which now covered 4,500 miles and was the major carrier between New York and Chicago. Much of his empire-building had come in response to competitive threats from his old enemy Jay Gould, who by this time controlled the Union Pacific in the West, the Wabash in the Midwest, and several smaller roads in the East. Probably only death could have ended the Commodore’s fight with Gould, but his son decided in the fall of 1879 to give up the costly struggle and sell most of his New York Central stock—in part because he wanted to cash in his fortune (William was fifty-eight), but also because a bill before the New York State legislature threatened to make single-family ownership of major transport lines illegal. Vanderbilt’s lawyer, Chauncey Depew, advised him to sell. Hoping to keep his exit a secret so as not to depress the stock price, Vanderbilt asked Pierpont to take the company public.
The Morgan bank quietly organized an international syndicate to buy 150,000 shares of Vanderbilt’s stock at $120 per share, with an option on another 100,000 within two months. Public subscriptions opened in New York and London at $131 in January 1880—$11
over the syndicate’s cost—and the price immediately fell. Pierpont blamed market bears who “attacked” the transaction because “we did not use the customary … manipulation of bidding up the price and then saddling the stock upon the public at the fictitious value.” He tried but failed to steady the market. In March a subsyndicate bought the unsold stock, and slowly placed Vanderbilt’s 250,000 shares.†
Taking the New York Central public transferred control of the road from the Vanderbilts to the board of directors, and as a condition for handling the underwriting Morgan took a seat on the board. He also secured seats for two Gould allies he trusted, Cyrus Field and Solon Humphreys—their inclusion was seen on Wall Street as a declaration of peace between warring giants. Vanderbilt said he had made a choice “between continuing the competition for western connections and making its members my friends. I thought it wise to do the latter.” The New York Tribune hailed the alliance as “the most powerful railway combination ever known.”
The most powerful railway combination ever known could not control the price of New York Central shares, but Pierpont hoped it might curb competition. In February 1880, just a month after the initial stock offering, the heads of the New York Central, Wabash, and Erie roads met in New York, he reported to Junius, “with a view of making permanent running arrangements”—that is, agreeing to divide up traffic rather than wage war. As part of this mediated peace, he wanted an exclusive contract between Gould’s Wabash system—just about to reach Buffalo from the Midwest—and the New York Central (which he now, as its banker and director, referred to as “we”).
That summer, Gould contracted with a New York Central rival to build a competing line upstate. Pierpont was disappointed but not surprised: “I had thought I could gradually bring about such an understanding between them all as to secure for the New York Central the traffic which will now go elsewhere,” he told Junius. He did not blame Gould alone: Vanderbilt had “irritated and harrassed” men he ought to be coming to terms with, and engaged in “legal quibbles which would be disgraceful to any Bowery lawyer.” Pierpont was “not very anxious, myself, to have much to do with either one or the other.”
At the beginning of 1881 a bank panic roiled the markets and threatened to reverse the economic recovery. The junior Morgan tried “navigating the ship thro’ the storm,” he told the senior (using the preferred paternal trope): “I have been through several severe times here – but I never saw anything look as black as it did on Friday … as I telegraphed Mr. Drexel, I saw but one thing to do, and that was to haul in sail and await developments.” His friend George Baker once said there was nothing so bad about a panic—“you just have to keep your head and you can make a lot of money”—but Pierpont in 1881 pointedly chose not to take advantage of the situation. “We could, probably, have made a good deal of money by buying stocks and Exchange,” he continued to his father, “but I think you will agree with me that in such times, no profit pays for the anxiety and the uncertainty attending all such transactions.” From the speculator who had manipulated the gold market with Edward Ketchum during the Civil War, this was a radical change.
The panic of 1881 proved relatively short-lived, but the attendant anxiety and uncertainty, plus a bad head cold, had Pierpont once again thinking of quitting Wall Street. He felt “about as depressed and worn out as … possible,” he told Junius, and was longing to give up. This time, however, it was his own sense of obligation rather than paternal stricture that kept him at his post. Where in the past he had invoked dictates of duty to his health or family to justify whatever he chose to do, he now defined his responsibility in the larger terms Junius had always urged. Sounding a solemn note that underlined his sense of calling, he sighed to Jim Goodwin: “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.… I often think it would be very desirable if I could have more time for outside matters.”
If, as Junius observed, duty was a word whose definition could be made to conform to almost anything one wanted to do, Pierpont’s problem from now on would be that he wanted both time for “outside matters” and the large responsibilities of his job.
At the end of 1881, Morgan shrugged out of harness and went abroad for six months without his family. He sailed from New York on the Cunarder Servia, which he liked much less well than the White Star ships—after this trip, he took the White Star line whenever he could.
He spent Christmas with his parents in London—Juliet was as wretched as ever—then went off early in January with Junius to cruise the Mediterranean on a chartered steam yacht, the British Royal Squadron’s Pandora. Their party consisted of Colonel and Mrs. Stanley Clarke (she was the daughter of Levi Morton’s London partner, Sir John Rose), a Scots couple named Balfour, Pierpont’s favorite sister, Mary Burns, and a beautiful American widow named Alice Mason.
A Beacon Hill Bostonian, Alice Mason had lost her first husband, William Sturgis Hooper, in the Civil War, which left her alone at twenty-five with a small daughter. She stayed in Boston for two years, then went to live with her father-in-law, Massachusetts Congressman Samuel Hooper, in Washington. Alice had blue eyes, flawless skin, silky brown hair, a slender figure, and ample means furnished by her husband’s wealthy family and her own. A circle of admirers soon surrounded her in Washington, among them the Speaker of the House, Schuyler Colfax, and the chairman of the Senate Foreign Relations Committee, Massachusetts Senator Charles Sumner.
Sumner had had a distinguished career as an antislavery senator, adviser to Lincoln, and, after the war, as a Radical Republican leader. He was, however, nearly three decades Alice’s senior—a portly fifty-five-year-old bachelor—and when the couple announced their engagement in the summer of 1866, their friends were surprised. They were married quietly in Boston that fall. In Washington, they entertained politicians, foreign diplomats, and intellectuals (“Mrs. Sumner is remarkable for her genius as a leader of this kind of society,” reported the Boston Transcript), and were the center of attention whenever they went out. “Sumner and his beautiful wife are themselves history and romance,” wrote one enchanted spectator: “they ought to be handsomely bound and opened a page at a time.” The fable quickly lost its magic.
Sumner spent long hours on Capitol Hill early that winter, hoping to unseat President Johnson and get on with Reconstruction. Alice found him boring—“always reading, writing and snoring,” she complained—as well as rigid and self-righteous, with no sense of humor and no idea how to live with a young wife and a child. Sumner’s mind was “a pathological study,” said Henry Adams—“… it contained nothing but itself.” Others noted the senator’s “unmanly and brutal” treatment of Alice, and complete lack of “natural feelings and sympathies.” His defenders said she was dictatorial and foul-mouthed.
In February 1867 Mrs. Sumner began to be seen around town with an elegant Prussian diplomat, Baron Friedrich von Holstein, which generated gossip and humiliated her husband. In April Holstein was recalled to Berlin (Alice thought Sumner had arranged it, an accusation he denied). In June she took her daughter away for the summer to Lenox, Massachusetts. She and Sumner never spoke again.
Victorian America might ignore flirtation carried out under cover of marriage, but it did not countenance leaving a respectable husband. Boston society closed ranks against Alice: “Ladies of standing do not call upon her,” Samuel Gridley Howe told Sumner. Her Hooper father-in-law cut her out of his will. Alice Mason Hooper Sumner eventually got a divorce, took back her maiden name (calling herself “Mrs. Mason”), and moved, like Countess Olenska in Edith Wharton’s Age of Innocence, to Europe. Emerson visited her, Sargent painted her,‡ Henry Adams looked back fondly on her “outrageous youth.” Henry James admired “her great beauty (which on horseback is enormous),” and also her “honesty, frankness and naturalness.”
In 1879 Alice’s daughter, Isabella Hooper, married Edward Balfour, a young man in the Liverp
ool foreign trade whose family came from Balbirnie, Scotland.§ And at some point in her European travels, Alice met Junius Morgan. He was sixty-eight and she forty-three—a year younger than Pierpont—when she accompanied him on the Mediterranean cruise, with her daughter’s in-laws, at the beginning of 1882. By all measures except social convention this match made sense. Alice was engaging, worldly, interested in art, more alone than ever after her daughter’s marriage, and though she had resources of her own, probably not insensible to the allure of a handsome fortune. Junius, still extremely attractive, did not subscribe to Boston’s rigid moral codes, and his marriage had been a vacant shell for twenty-five years. In the manner of European aristocrats, he traveled openly with “Mrs. Mason,” often in the company of his son and understanding friends.
In January 1882 the Morgan Mediterranean tour started at Nice. Pierpont drove alone one morning to the Villa St. Georges, the site of Memie’s death. “There it lay just as quietly and retired as it did 20 years ago,” he wrote to Fanny. “It seems hardly credible that so many years and such happy years too have gone by since those sad days, which must ever make that spot full of tender sadness to me.” He picked pansies in the garden, enclosed them with his letter, and asked Fanny to give them to Mary Sturges “with my love.”
Two days later he and his companions set off under clear skies to cruise down the west coast of Corsica, past Napoleon’s birthplace at Ajaccio, and through the Strait of Bonifacio to Sicily. Pierpont’s original letters from this trip have not survived, but Fanny copied out forty-two pages of extracts in what amounts to a running journal. Palermo, he wrote, was “protected on all sides by mountains, so that it lies in a sort of amphitheatre,” its streets paved with large blocks of stone. The Sicilian capital had endured centuries of foreign conquest. The Normans after 1072 made it the center of trade between Europe and Asia, and its architecture reflected its polycultural history—Sicily was called the archaeological museum of Europe. Pierpont especially enjoyed the cathedral, erected in the twelfth century by an English archbishop on the site of an older church—“one could walk for hours outside admiring the carvings, twisted columns, capitals, &c.” Inside, he liked only a chapel containing richly carved porphyry sarcophagi of medieval kings and queens: Frederick II, King of Sicily and Holy Roman Emperor (1215–50), was wrapped in sumptuous robes with Arabic inscriptions.