by Jean Strouse
Even without knowing about the Minnesota transactions, nervous democrats saw in Morgan a symbol of everything they feared about the imperious power of Wall Street. In his annus mirabilis (also horribilis), he had organized the steel trust, halted the Northern Pacific panic, and set up a giant monopoly of railroads in the Northwest. The business community applauded Northern Securities as a constructive extension of Morganatic harmony. Most of the country condemned it as another nefarious trust, and feared that Morgan was indeed, as Henry Adams quipped, trying to swallow the sun. From London at the end of December, Clinton Dawkins condoled with his American partners about the “disagreeable and exasperating” time they were having, and sympathized “with Flitch [Morgan] over the interminable bother and trouble that the villainous raid on NP has brought in its train.”
* The Great Northern agreed to guarantee an issue of Northern Pacific mortgage bonds up to $175 million and, in return, to take half of Northern Pacific’s capital stock and appoint five of the road’s nine directors.
† The name change had to do with raising money. The original NP charter stipulated that the road could issue bonds only for equipment and construction, not for new financing. To get around that provision, Morgan’s lawyers found an unbuilt road in Wisconsin with a more liberal charter, the Superior & St. Croix; they bought the St. Croix, changed its named to the Northern Pacific Railway, and had it buy the NP Railroad.
Testifying about the road a few years later in court, Morgan needed help remembering its name. He said, “I made up my mind that it was essential that the Northern Pacific Railroad Company—railway, or whatever you call it—what is it?”
Mr. Stetson: “Railway.”
Morgan (continuing): “Railway …”
‡ National City and the First National merged in 1955 to become the First National City Bank of New York, predecessor of Citibank.
§ Schiff was at synagogue when the message reached him on Saturday, and most versions of this story say he did not execute the order out of obedience to Jewish laws forbidding work on the Sabbath. Yet if he could not buy stock on Saturday, he could have instructed the partner who brought him the message to do the job. Instead, he told the man not to buy the shares, since it was not necessary, and said he would take full responsibility for the decision.
‖ In the aftermath of these events, Gompers accused Shaffer of rejecting “the good will and kindly assurances of J. P. Morgan that the steel corporation might recognize the unions in a few years if the union would not now ‘attempt to drive him further than it was possible for him to go.’ ”
a Most early experiments with “welfare capitalism” collapsed during the depression of the 1930s. The evidence from more recent employee stock-ownership, profit sharing, and management-participation plans suggests that under the right circumstances they effectively increase worker income and satisfaction as well as productivity and innovation. (See Roger Alcaly, “Reinventing the Corporation,” The New York Review of Books, April 10, 1997.)
Chapter 22
TROUBLE
Disagreeable and exasperating” times for the house of Morgan were just beginning. On September 6, 1901, an anarchist named Leon Czolgosz had shot President McKinley at the Pan-American Exposition in Buffalo, New York. According to The New York Times, Morgan was about to leave his office late that afternoon—he was glancing over a ledger at a clerk’s desk, hat on, cane in hand—when a reporter ran in with the news. “What?” Morgan demanded, seizing the man’s arm and searching his face. The journalist repeated the story. Morgan dropped his cane, returned to his own desk, and asked an associate to confirm the report. For several minutes he sat in his office, staring at the carpet, until another newspaperman came in with an “extra” on the attempted assassination. Morgan read it slowly, then told the journalists, “This is sad, sad, very sad news.… There is nothing I can say at this time.”
Responding to rumors that he would call a conference of financiers that night, reporters stationed themselves outside his bank, Delmonico’s, the Fifth Avenue Hotel, and the Union, Metropolitan, and New York Yacht Clubs. The country’s unofficial central banker spent the night on Corsair, anchored in the Hudson. Police authorities were afraid that Czolgosz was part of a larger anarchist plot, and when Morgan arrived at 23 Wall Street the next morning he found the building guarded by half a dozen detectives. Later in the day he issued a statement to the press: “The financial situation is absolutely good. There is nothing to derange it. The banks will take care of that. You need not worry about it.”
On September 14, McKinley died.
Mark Hanna had warned the Republicans against putting Theodore Roosevelt on the ticket in 1900. A year later the man he called “that damned cowboy” was President of the United States.
Morgan had known and admired the senior Theodore Roosevelt, and supported the junior at the New York State Assembly in the early eighties. The Harvard-educated Knickerbocker from Oyster Bay had turned in a heroic performance for the Republican ticket and the gold standard in 1896, and Morgan reportedly gave $10,000 through Easy Boss Platt to Roosevelt’s 1898 gubernatorial campaign. Once in the Albany State House, Roosevelt made it clear that he, not Mr. Platt, would govern New York, and began to challenge the comfortable alliance between big business and party bosses that had come to be known as the “invisible government”—pushing through a corporate franchise tax over Wall Street’s protest and publicly criticizing the trusts. Platt promoted Roosevelt for Vice President in 1900 largely to get him out of New York.
A month after the Republican victory that fall, well aware that he alarmed his party’s “respectables,” Roosevelt made a gesture of deference to the Old Guard by giving a dinner in Morgan’s honor. He wrote to the Secretary of War, Elihu Root, on December 5: “I hope you can come to my dinner to J. Pierpont Morgan on the 29th inst. at the Union League Club.… You see it represents an effort on my part to become a conservative man, in touch with the influential classes, and I think I deserve encouragement. Hitherto I have given dinners only to professional politicans or more or less wild-eyed reformers. Now I am hard at work endeavoring to assume the Vice Presidential poise.”
Writing to the honoree about the event, Roosevelt addressed him as “My dear Mr. Morgan,” signed his note “with great regard,” then added that Jack was invited as well—“I have always known him as ‘Jack’ and I am not certain whether he is J. Pierpont Morgan Jr. or not.”
Morgan left no account of the dinner at the Union League Club, nor of his thoughts on TR as the country’s second in command, but the “Vice Presidential poise” in December 1900 was one thing, the presidential nine months later altogether another.
With McKinley in the Executive Office, Morgan had known more or less what to expect: minimal antitrust prosecution, regular consultation between Wall Street and Washington, virtual carte blanche to promote the market stability and economic policies favored by the conservative elite of both parties. As Morgan finished up the organization of U.S. Steel in 1901, Senator Beveridge of Indiana reported to George Perkins on a “bully talk” he had recently had with President McKinley, in which both men agreed that Morgan was “not only a financier but a statesman.”
From Roosevelt, however, widely regarded on Wall Street as a “bucking bronco,” Morgan had no idea what to expect. The new President was six weeks shy of forty-three when he took the oath of office—the youngest man yet to occupy the Executive Mansion. Radiating energy and determination, he had been a sickly, asthmatic child who schooled himself in strenuous altheticism. A moral idealist who had mastered pragmatic politics, he adored public life and glorified war (coming upon a dying Rough Rider at San Juan Hill, he grasped the man’s hand and said, “Well, old chap, isn’t this splendid?”), but was also drawn to remote wilds of nature, and was passionately devoted to his family. Romantic jingoist, militant imperialist, soldier, scholar, naturalist, hunter, author, crusader, dealmaker, dude—he had so many interests and facets that one friend called him “polygonal.”
Roosevelt kept his distance from the plutocrats. During the 1896 Republican victory celebrations he told his sister he could see “all of Brooks Adams’ gloomiest anticipations of our gold-ridden, capitalist-bestridden, usurer-mastered future” coming true. In 1897 he criticized the cozy relations between “corrupt wealth … the Pierpont Morgan type of men” and “powerful, unscrupulous politicians” such as Platt: “I am glad I am out of it.” He was not entirely out of it. He knew how to use Platt’s machine, accepted campaign contributions from Perkins’s New York Life and “the Pierpont Morgan type of men,” and courted Morgan himself as soon as he was elected Vice President.
Part of what made for Roosevelt’s political success was an unusual combination of intelligence, personal conviction, supple principles, superhuman energies, an instinct for centrist popular sentiment, and a conspicuous love of the limelight. “He would go to Halifax for half a chance to show off,” said Mark Twain, “and he would go to hell for a whole one.” Oliver Wendell Holmes, Jr., thought TR had the talent “of a first class megaphone.” With his glinting spectacles, barrel chest, toothy grin, upper-class accent, and rasping, articulate voice (someone said he “used adjectives like hammers”), Teddy was a favorite subject for cartoonists, which only increased his prominence. The English historian John Morley described him as “an interesting combination of St. Vitus and St. Paul,” as much a “wonder of nature” as Niagara Falls. Henry Adams reflected: “Power when wielded by abnormal energy is the most serious of facts, and all Roosevelt’s friends know that his restless and combative energy was more than abnormal. Roosevelt, more than any other man living within the range of notoriety … was pure act.” Adams admired thought more than action, but Roosevelt became the first President since Lincoln whose stature was commensurate with the office.
As Governor of New York he had advocated the regulation of big business, and the major question at the start of his presidency was whether he would continue McKinley’s laissez-faire policy toward the trusts. In early October 1901, with the country in mourning and Morgan attending the Episcopal Convention in San Francisco, Bob Bacon and George Perkins called on the new President at the White House. Roosevelt liked both men, especially Bacon, whom he had coaxed into the boxing ring at Harvard, reporting gleefully that he might have landed a punch if only his arms had been longer—or Bacon’s shorter. The sparring match at 1600 Pennsylvania Avenue in early October 1901 concerned the trusts. U.S. Steel had just issued its first quarterly report.
According to Roosevelt, Perkins asked him to retract various proposals he had made to turn a “searchlight” on the trusts, since corporations financed by the Morgan bank had voluntarily begun to disclose their earnings and losses: “Perkins wanted me to do nothing at all, and say nothing except platitudes,” the President told his businessman brother-in-law, Douglas Robinson, “accept the publication of what some particular company chooses to publish, as a favor, instead of demanding what we think ought to be published from all corporations as a right.” Although he considered the ambassadors from the house of Morgan to be men “of the highest character … genuine forces for good as well as men of strength and weight,” he thought “on this particular occasion they were arguing like attorneys for a bad case, and at the bottom of their hearts each would know this if he were not personally interested; and especially if he were not the representative of … so strong and dominant a character as Pierpont Morgan.”
Roosevelt, adept at playing both sides of the street, wrote a second letter to Douglas Robinson that day, marked “to give to Mr. Perkins.” In it he said he was “delighted to see the publication made by the steel company. It is in every way a good thing. I much enjoyed the visit from Perkins. I am particularly desirous to see him and Bacon as often as possible.”
When Mark Hanna and other Republican leaders urged TR to “go slow” about the trusts, he promised to follow McKinley’s lead. He showed a draft of his first message to Congress to Hanna, who took out a section on overcapitalization, but the speech as delivered on December 2, 1901, did address the problem of the trusts. Ignoring the Perkins-Bacon request, Roosevelt said that in order to protect the public’s general welfare, “the Government should have the right to inspect and examine the workings of the great corporations engaged in interstate business.” Still, he praised businessmen who were promoting economic stability and national prosperity, and insisted that he did not aim to “do away with corporations”—“on the contrary, these big aggregations are an inevitable development of modern industrialism, and the effort to destroy them” would be likely to “work the utmost mischief to the entire body politic.” He wanted to regulate big business, not annihilate it: “We draw the line against misconduct, not against wealth.”
Finley Peter Dunne’s Mr. Dooley immediately mocked the President’s temporizing: “ ‘The trusts,’ says [Roosevelt], ‘are heejous monsthers built up be th’ inlightened intherprise iv th’ men that have done so much to advance progress in our beloved counthry,’ he says. ‘On wan hand I wud stamp thim undher fut; on th’ other hand not so fast.’ ”
Eager to assert Washington’s power over Wall Street, however, Roosevelt did move “fast.” He took direct aim at what one historian has called “the very Sanhedrin of the nation’s financial oligarchy”—Morgan, Schiff, Stillman, William Rockefeller, Harriman, and Hill—the men responsible for the Northern Pacific panic and the latest giant trust. Working quietly with his Attorney General, Philander Knox, the President did not even consult the other members of his cabinet before he announced in February 1902 that his administration would prosecute the Northern Securities Company under the Sherman Act as an illegal restraint of trade.
The stock market shuddered. Morgan was stunned. His lawyers had put together Northern Securities with a careful eye on the antitrust law. He thought the President should have conferred with him, given him a chance to resolve their differences and make whatever adjustments might be in order, before publicly branding him an outlaw.
From London, Clinton Dawkins wondered by mail how the President reconciled his “brutal assault” on Northern Securities with “his fine language about ‘leaving unhampered the strong, forceful man, upon whom the success of business operations rests[.]’ ” Jack, also in London, pronounced himself “very sorry that Teddy did not stop to ask the opinion of someone interested before making an announcement of that sort,” as it had made things “extremely uncomfortable over here.”
In Washington, Henry Adams hooted to Elizabeth Cameron that “our stormy petrel of a President” had “suddenly, this week, without warning … hit Pierpont Morgan, the whole railway interest, and the whole Wall Street connection, a tremendous whack square on the nose. The wicked don’t want to quarrel with him, but they don’t like being hit that way.” Although Morgan was invited to a dinner at the White House for Prince Henry of Prussia, the brother of Kaiser Wilhelm, “the Wall Street people are in an ulcerated state of inflammation,” and “Pierpont has declined the White House dinner.”
Adams, who was no great admirer of Morgan and unable to resist any opportunity to make fun of his nose, nonetheless credited him with having more than self-interest at heart: “Pierpont is furious,” he told Mrs. Cameron, “because Theodore, suddenly, without warning, at a critical moment of the market when very large amounts of money were involved and borrowed on collateral, had hit him an awful blow square in the face.… Pierpont says that Roosevelt should have given him warning so that he could have had time to support the market.”
Morgan went immediately to Washington to confer with the President and the Attorney General. He arrived at the White House on February 23, accompanied by Senators Hanna and Depew. According to Roosevelt, who left the only surviving account of this meeting, Morgan wanted to know why he had not been warned.
Warning Wall Street, said Roosevelt, was “just what we did not want to do.”
Morgan: “If we have done anything wrong, send your man [Knox] to my man [Stetson] and they can fix it up.
”
Roosevelt: “That can’t be done.”
Knox: “We don’t want to fix it up, we want to stop it.”
Northern Securities was not the most vital concern at 23 Wall Street, and Morgan wanted to know how far the President intended to go. “Are you going to attack my other interests,” he asked, “the Steel Trust and the others?”
Roosevelt: “Certainly not, unless we find out … they have done something that we regard as wrong.”
The President, by his own account, told Knox as Morgan and his companions left the White House: “That is a most illuminating illustration of the Wall Street point of view. Mr. Morgan could not help regarding me as a big rival operator, who either intended to ruin all his interests or could be induced to come to an agreement to ruin none.”
The two men were essentially “big rival operators,” each convinced that he had the country’s long-term best interests at heart, and ready to use any means in his considerable arsenal to bring about the future he had in mind. One of them was President of the United States, looking forward to imperial dominance abroad and intent at home on publicly subjugating the “mighty industrial overlords of the country” to governmental authority. The other was a private banker who looked exclusively to economic efficacy, confident that military and political questions would take care of themselves if the United States had stable markets and steady productive growth.
