by Jean Strouse
Senator Vest asked, “If that was your sole object, why did you specify in your telegraphic communication to Mr. Carlisle that your house, or you and Mr. Belmont, were to have exclusive control of the matter?”
Morgan: “Because it was absolutely impossible for more than one party to negotiate—to make the same negotiation for the same lot of gold. It would only have made competition.”
A skeptical Vest: “If the gold was abroad I take it for granted that anybody could get hold of it who had the means to do so. If you were actuated by the desire to prevent a panic, why were you not willing that other people should do it, if they wanted to?”
Morgan. “They could not do it.”
Theoretically, investors with access to good information buy securities on the merits. Yet taking into account the condition of the Treasury in 1895, unresolved currency questions, and the weakness of the Executive Office, Morgan thought large numbers of investors would buy bonds only if his name was on the deal.
He did what he did. It made sense to him. He insisted on control. He would not go into particulars. To his antagonists at the time and since, this reasoning seemed arrogant and self-serving. Yet his claim in response to Vest’s last question—that other people “could not do it”—was probably true. Another banker might have raised $65 million in gold, but probably no one else could have managed the markets and the men involved in them for six months as effectively as Morgan did. His power lay in his willingness to take on this kind of risk and responsibility, his knowledge of markets, his access to capital, and the record that had earned him the confidence of the world’s leading financiers.
Grover Cleveland years later recalled that when the syndicate contract expired he asked Morgan how he had known he could “command the cooperation of the great financial interests of Europe?”
“I simply told them that this was necessary for the maintenance of the public credit and the promotion of industrial peace,” Morgan replied, “and they did it.”
An inadvertent witness at the time testified both to the dubious profitability of the loans and to the unquestioning trust the international financial community now placed in Morgan. The London firm of C. J. Hambro & Son, on being offered a share in a new bond issue in January of 1896, told the Morgan bank that under present circumstances it did not have much hope of profits on the business, but would nonetheless “readily subscribe if you in any way wish.”
Other bankers did what Morgan told them to do because he was working for them all, to maintain the dollar’s value and the international credit of the United States. The President had not been able to stop the gold drain or calm the agitated markets in 1895, and Congress wouldn’t. Morgan alone seemed to have the power, motive, and will to end this crisis.
Contrary to his assertions before the senators, he had been careful from the outset to secure the syndicate’s profits—partly because he was in business for profit, and partly to offset the expenditures he would, and did, have to make to protect the reserve. In the political climate of 1896, however, he could not make that obvious point in public.
Once again, he did not question the equation of his own and the country’s best interests. The acute distress of farmers and workers probably seemed to him an unfortunate but inevitable side effect of business-cycle downturns, tight money, and rapid industrialization, and he was trying on several fronts to get the entire economy back on course. His own short-term profits in issuing the 1895 loan were immaterial next to the long-term growth that depended on stable U.S. credit, and it was in that light that he saw himself as having averted national disaster.‖
Just a few weeks after the syndicate contract expired in the summer of 1895—as Colonel Mann reported on the swirling Atlantic “nor-wester” involving a beautiful widow (Edith Randolph), a potential Democratic presidential candidate (Whitney), and an eminent financier (Morgan)—gold exports and the flight from the dollar resumed: further railroad bankruptcies and the prospect of more struggle over the U.S. currency prompted European investors once again to sell American stocks. The syndicate supplied the Treasury with another $2 million in gold, but a dejected Morgan cabled Walter Burns from Newport: “We must acknowledge defeat[,] accept the situation and lose prestige attained. Subject deepest regret to me for unfortunately I seem to be personally held [responsible] by public for whole business.”
Burns replied, with unintended comic understatement, “You cannot control US balance trade”—and tried to cheer his brother-in-law up: “Do not feel unhappy, our prestige firmly established by what you have done already.”
The gold reserve fell from $93 million in late September to $50 million by the end of January 1896. Morgan met quietly with Cleveland and Carlisle at the White House the day before Christmas, 1895, to discuss ways of protecting the money supply. Returning to New York that night, he began organizing a new international group to furnish the government with gold. The press, led by Pulitzer’s World, promptly attacked him and his syndicate of thieving “sharks.”
On January 4 Morgan wrote to the President “with great hesitation,” but “the gravity of the situation must be my excuse.” His recent visit to Washington had convinced him that Congress would not act, as he delicately put it, to “improve the methods at the disposal of the Executive.” Since Cleveland’s hands were tied, Morgan offered to raise another $200 million in gold: “I do not hesitate to affirm, in fact to urge that such a contract would in every way be for the best interests of the Government and the people.” Still, he knew that political opposition might prohibit another private loan. If Cleveland had to resort to a public bond issue, Morgan would “pledge to you every influence and effort in my power to assist the Government” and make the sale succeed.
Cleveland’s potential successor, William C. Whitney, urged the administration to work with Morgan on a new loan: “Personally,” he told War Secretary Daniel Lamont, “I think it very fortunate there is such an alliance to be had by the Government as Morgan & his great power.… If I were the President whatever I did I should do with Morgan—It will fail of the effect otherwise.”
Public sentiment that winter ran higher than ever against the syndicate. Henry Adams, writing at the end of 1895 to his brother Brooks, lumped together “Lombard Street, Wall Street, State Street, and all the other Judengassen” now running the world. Brooks in turn denounced Wall Street as “the final result of the corruptest society which ever trod the earth. I tell you,” he wound up, in a tirade that might have made Morgan, had he seen it, chuckle— “Rome was a blessed garden of paradise beside the rotten, unsexed, swindling, lying Jews, represented by J. P. Morgan and the gang who have been manipulating our country for the last four years.”
Even men who might have been expected to trust Morgan sided with his critics. The Reverend Endicott Peabody, the Groton headmaster who had enlisted the financier’s help in the founding of his school, did not “at all like Cleveland’s giving out this new loan to Mr. Morgan,” he told a friend early in 1896: “Nothing is more calculated to bring out dissatisfaction in the West—and it does not seem to me altogether above suspicion. I can’t quite understand a man like Mr. Morgan making money out of his country’s need.… The fewer of such men we have in this country the better I say. Dullness which is contented with smaller profits is better in the long run.”
As the din of condemnation swelled to a roar, Walter Burns cabled his brother-in-law from London: “I cannot bear thought your incurring such obloquy and annoyance as you had before for profit which at best doubtful and mostly reaped by others. Only object doing business is patriotism and gaining national credit.”
Morgan replied: “You have no idea situation here personal to myself from certain classes politicians others who desire wreck everything. Am watched & followed attacked papers—hence necessary very careful.”
Cleveland and Carlisle decided against a second private contract. On January 6 they announced a public sale of bonds to raise $100 million in gold. Morgan dissolved his new syndicate and,
as if he were the head of an allied independent state, urged its members to subscribe to the government’s loan: “I desire to sustain the Executive to the fullest extent in his efforts to maintain sound currency and the credit of the country,” he told them, “for which every loyal citizen should hold him in gratitude.”
When an irate Walter Burns declined to share in the loan, Morgan warned that they could not play Achilles: “In view our position here we cannot withdraw and appear to sulk.” He put together a smaller consortium to bid for the entire $100 million issue; the government awarded a third to his group. The bonds sold well, which Burns saw as likely to have “great influence restoring general confidence.”
Morgan went briefly to Europe that May. Louisa left Fanny in Germany to meet him in Paris on the ninth, noting in her diary, “Father arrived this morning looking very well & seeming cheerful.” Morgan père et fille dined with friends and shopped at Worth’s, then crossed to London. Louisa accompanied friends to Scotland for two weeks while her father tended to his London business. On June 3 she returned to her mother, he to New York: “Dearest Father!” she wrote in her diary, “he has seemed like his old self these last days. The queer strain of this spring was quite gone.”
The new gold did not stay in the Treasury. As the fight over the currency continued, the reserve dropped from $128 million at the end of March to $101 million by July, when the Democrats met to nominate a presidential candidate.
The 1896 election generated greater national excitement than any since the Civil War, and most of it centered on the economy. The Republicans had taken control of Congress by a large majority in 1894, promising economic recovery from the Cleveland-era depression, while Democrats and Populists across the country were voted out. Still, the Populists’ numerical tally rose 42 percent between 1892 and 1894. In 1896, the Democratic Party split along sectional lines, just as it had in 1860: this time, agrarian Democrats in the South and West allied with Populists to support silver and oppose the “conspiracy” of goldbugs, led by the apostate Cleveland, in the conservative Northeast.
The leading candidate for the Republican nomination was William McKinley, a former congressman and two-term governor of Ohio. Courtly, heavyset, and handsome—the wide V of his eyebrows gave him the look of an amiable falcon—McKinley had a formidable asset in his friend Mark Hanna, a wealthy Ohio industrialist turned political boss. For more than a year, Republican Party chairman Hanna had been spending all of his time and much of his own money in the effort to put McKinley in the White House.
Because the candidate from Ohio was willing to work for international bimetallism—a double standard of silver and gold—the eastern wing of the party judged him a “Straddle-bug.” Hanna called him the “advance agent of prosperity.” To Morgan, a president not firmly committed to gold looked like the advance agent of disaster.
Shortly before the Republican convention in June, Ohio banker and state party leader Myron Herrick called on Morgan and found the banker “violent” in his views. According to Herrick, Morgan declared McKinley’s waffling on the currency question “nauseating,” and said that if the candidate did not have a “backbone of jelly” he ought to come out squarely for gold.
Herrick pointed out that the election was not entirely up to Wall Street: politicians had to answer to larger constituencies, and the country was sharply divided over gold. Political expediency dictated that McKinley hedge now in order to get elected. “If the bankers are on one side and the politicians on the other,” warned Herrick, “you will divide the country at the Mississippi, and we shall lose.”
To help get the bankers and the politicians on the same side, Herrick arranged for Mark Hanna to meet Morgan on board Corsair that night. In the yacht’s oak-paneled dining saloon, Morgan delivered an impromptu lecture on the gold standard. Hanna in turn made out the case for McKinley, promised to stiffen the candidate’s backbone on gold, and asked his host to help underwrite the campaign. By the time the trio left the yacht late that night, Morgan had agreed to raise money for the Republican ticket. McKinley won the nomination on the first ballot in June, on a Hanna-engineered platform committed to protectionism and gold.
A month later, silver Democrats took over their party’s convention in Chicago. They overwhelmingly rejected the Old Guard represented by Cleveland and Whitney, with speeches denouncing gold, the trusts, national banks, the Morgan loan, and the Supreme Court. The “new” Democrats nominated the relatively unknown William Jennings Bryan, on a platform committed to unlimited coinage of silver.
It was at this convention that Bryan delivered his famous speech: “We have petitioned, and our petitions have been scorned; we have entreated, and our entreaties have been disregarded; we have begged, and they have mocked when our calamity came. We beg no longer; we entreat no more; we petition no more. We defy them.… Having behind us the producing masses of this nation and the world, supported by the commercial interests, the laboring interests, and the toilers everywhere, we will answer their demand for a gold standard by saying to them: You shall not press down upon the brow of labor this crown of thorns, you shall not crucify mankind upon a cross of gold.”
The “Cross of Gold” speech brought the convention to its feet—delegates cheered, cried, shouted, and applauded for thirty-five minutes. Two weeks later, in St. Louis, the Populists also nominated Bryan, with a different vice presidential candidate. Gold Democrats bolted their party. The day after the Chicago convention, 150 Democratic members of the New York Stock Exchange waving American flags marched to the rostrum and put on McKinley buttons, shouting “Down with the red flag” and “up with the Stars and Stripes.” The World somewhat prematurely concluded that “the sceptre of political power has passed from the strong certain hands of the East to the feverish, headstrong mob of the West and South.”
One Southern Democrat who believed in “the strong certain hands of the East” was a young German-Jewish newspaperman from Chattanooga, Tennessee, named Adolph Simon Ochs. His Chattanooga Times had come out squarely for gold, and in the summer of 1896, Ochs made a bid for the country’s leading metropolitan newspaper, The New York Times. Founded in 1851, the Times had been staunchly Republican during and after the Civil War; when its “Mugwump” editors backed Cleveland against Blaine in 1884, however, Republican readers and advertisers defected in droves. Democrats took over the paper, but with poor management and lively competition—especially from the new, scandal-mongering “yellow” press such as Pulitzer’s World and Hearst’s Journal—it had gone deeply into debt. By 1896 its paid circulation had fallen to nine thousand and it was losing $2,500 a week.
The combination of Ochs’s success in Tennessee, his credible ambitions, his stalwart support of gold, and a letter of endorsement from Grover Cleveland persuaded the owners of the Times to sell him a controlling interest in the paper for a quarter of the stock’s face value. Next, Ochs asked the principal bondholders, including Morgan, to exchange their securities for new ones paying lower interest. He later recalled his terror at the prospect of approaching the formidable financier. To his amazement, when he arrived at the inner sanctum at 23 Wall Street, Morgan—who specialized in refinancing debt—rose to greet him, shook his hand, and said warmly, “So you’re the young man I have heard about. Now, where do I sign the papers?”
In his first issue as publisher of the Times on August 19, 1896, Ochs announced that he would publish the news “impartially, without fear or favor, regardless of party, sect, or interests involved,” and would not depart from the policies that distinguished the Times as a “non-partisan newspaper—unless it be, if possible, to intensify its devotion to the cause of sound money and tariff reform, opposition to wastefulness and peculation in administering public affairs, and in its advocacy of the lowest tax consistent with good government, and no more government than is absolutely necessary.” It was a measure of the moment’s moral absolutism that an honest proponent of sound money and small government could call them nonpartisan issues.
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sp; Morgan, Belmont, and Jacob Schiff each held $25,000 worth of the Times’s $600,000 debt, which the new owners eventually bought back and retired. That the men involved in the resuscitation of the paper shared a commitment to gold was taken for conspiracy. Rumors that Morgan owned The New York Times haunted the paper and the banker for years.
The Populist movement, growing out of the Grange associations, Greenback Party, and Farmers’ Alliances, tried to redirect the course of American economic development. According to one of its leading historians, Lawrence Goodwyn, it was “the largest democratic mass movement in American history.” Relentlessly squeezed by falling crop prices, high railroad rates, and the rising cost of debt, America’s farmers and their urban allies had in the early nineties proposed a range of measures to take power away from the “money centers” and giant corporations of the Northeast, and to expand government authority over finance, transportation, and land. The United States eventually adopted many of those measures, but in 1896 silverites gained control of the Populist/Democratic “fusion,” and focused the campaign on a single panacea.
Throughout the summer and fall, Bryan traveled across the country speaking to large crowds. In clear, powerful language he denounced a complacent plutocracy that appeared to be governing the country in predatory self-interest, and promised more money to people who did not have enough—higher crop prices, easy credit, cheaper (silver) dollars available in abundance. His appeal was personal as well as ideological. Ellen Maury Slayden, the wife of a Democratic congressman from Texas, found Bryan’s conversation “easy, unpretentious, and amazingly humorous for such a dead-in-earnest person.” She thought his hair too long (“the usual weakness of Western statesmen”) and his clothes “queer, but I didn’t notice them until he was on the stage. I saw only his clear, steel-blue eyes with black brows and lashes, very Irish, his straight uncompromising mouth, and well-kept teeth.” He addressed a crowd of Texans with “the most perfect voice I ever heard,” continued Mrs. Slayden. “The audience went wild. When he finished people swarmed around him, shaking his hands, touching his shoulders, almost kissing the hem of his garment. How can a man retain his sanity amid such adulation?”
