Morgan

by Jean Strouse

  Morgan himself had been “unchangeably pledged” to what he regarded as “efforts for public welfare” all his professional life. He had raised money in Europe to refinance the Civil War debt and build railroads, secured gold for the Treasury in 1895, assured investors and bankers on both sides of the Atlantic that the enormous amounts of money they put up for his industrial underwritings would be relatively safe, and furnished liquidity to stop the recent panic. In 1877 Junius had announced to the country’s financial elite that “the future is in our own hands.” Thirty years later, the events of 1907 convinced Pierpont more than ever that the country’s economic welfare was in the hands of his own generation’s leading financiers, and that he had a mandate to consolidate control of its industrial and capital resources. The same events convinced other people, however, that the country’s economic welfare could no longer be left to private bankers, and that Morgan’s extraordinary authority endangered the public welfare. Between 1908 and 1912, the progressive movement united radical dissidents, liberal reformers, and a range of conservatives in opposition to the concentrated power of Wall Street and the trusts. Morgan paid no attention.

  There were threats against his life. At the end of January 1908, Jack forwarded to New York’s police commissioner a letter promising to eliminate New York’s “High Financiers, Trust Magnates, and Trust Builders” by “causing them to pass out of the world without anyone suspecting foul play.” Jack asked the commissioner to reply to him and not his father, “whom we generally do not allow to be bothered with such matters if it can be avoided.”

  A month later Morgan was on his way to Europe when Minnesota Senator Knute Nelson scoffed that U.S. Steel officials had “bushwhacked” Roosevelt over TC&I, and that “the only way the bankers stopped the panic was by violating the law and holding up depositors.”

  In London that March the American banker showed Queen Alexandra and her sister, the Dowager Empress of Russia, through his collections at Princes Gate. In Rome in April he met with Italy’s royal family and the Pope, who wrote in Italian: “We hope that God will impart every prosperity to J. P. Morgan and his family.” At Aix Morgan secured Stillman’s “cordial endorsement of the trio,” then met Adelaide in Paris in May, and returned home in time to receive an honorary degree from Yale in June. Fanny, touring the American West that spring, was in the care of a “nerve specialist” named M. Allen Starr.*

  At the Republican convention in Chicago on June 19, Roosevelt resisted a 49-minute ovation and refused to run again. The party nominated his designated successor, the conservative, genial, three-hundred-pound Secretary of War, William Howard Taft. A graduate of Yale, Taft had been solicitor general, a federal judge, and governor of the Philippines before TR appointed him to take Root’s place at the War Department in 1904. Cynics said that the candidate’s last name stood for “Take Advice from Theodore.”

  Five days after the convention, when Yale awarded honorary degrees to Morgan and Taft, The New York Times reported that the financier attracted as much attention as the Republican candidate. Journalists joked about Morgan’s LLD (££D, £.s.d, LL$). The professor who conferred it compared the recipient to Alexander the Great—“but for the fact that Alexander was a free trader”—and went on, to cheers from the crowd: “Great governments lean upon him in military and financial crises; his consolidations of industrial and transportation properties cover continent and ocean; his art collections vie with those of royal houses.… But his colossal power is both honorable and beneficent.… It was but recently given to Mr. Morgan—another Sheridan at another Winchester—to stay the fury of a financial panic which threatened disaster. He did not forget, nor did we, the words of a man who had not where to lay his head, and yet spake as never man spake: ‘Unto whomsoever much is given, of him shall be much required; and to whom men have committed much, of him they will ask more.’ ”

  A few months later the London Times, calling Morgan’s library “one of the wonders of the world,” compared the American banker to Lorenzo the Magnificent, and announced that in the current age of millionaires, “one out of ten has taste; one out of a hundred has genius. Mr. Frick, Mr. Altman, Mr. Widener in America, and the late Rodolphe Kann in Paris, come under the former category; but the man of genius is Mr. Pierpont Morgan.”

  Analogies to Alexander the Great, Sheridan at Winchester, and Lorenzo de’ Medici were only a notch less extravagant than the biblical allusions, some humorous, some in earnest, now piling up—Berenson’s Saint Francis holding up the falling Church, Jack’s “let us praise famous men,” Yale’s “Unto whomsoever much is given,” and Percival Roberts’s “I think his name is legion.”

  With such encomia at hand it was easy for Morgan to shrug off his detractors. The extremity of both the praise and the attacks after 1907, along with his distrust of politics, his age, and his sense of high calling, increased the distance he had always kept from the American public. While he acknowledged that business in the twentieth century would have to be conducted with “glass pockets,” he remained reluctant to display the contents of his own pockets—or his mind. Toward the end of 1908 his refusal to address a dinner held in his honor in Chicago prompted the Tribune to announce, MONEY TALKS BUT MORGAN DOESN’T.

  The next day, however, in an uncharacteristically expansive mood, he gave a statement to The New York Times: “My father told me to follow my own bent in business but whatever that business was to work hard. One thing he said I was always to remember, not to discount the future of America. ‘Remember my son,’ he said, ‘that any man who is a bear on the future of this country will go broke. There may be times when things are dark and cloudy in America, when uncertainty will cause some to distrust and others to think there is too much production, too much building of railroads, and too much development in other enterprises. In such times and at all times remember that the growth of that vast country will take care of all.’ ”

  By 1908 many people in the United States had more interest in the troubles of the present than in the promise of the future, and did not share Morgan’s Hamiltonian faith in economic growth. What he said about himself was true, as far as it went, but so stiff and sanctimonious, and so alien to the skeptical national mood, that it invited derision.

  The Democrats that summer once again nominated William Jennings Bryan—this time on a reformist platform that proposed stronger antitrust laws, lower tariffs, increased railroad legislation, and strong pro-union measures, which secured an endorsement from the ordinarily nonpartisan AFL. Campaigning against the East Coast plutocracy, Bryan repeatedly denounced Roosevelt’s assent to the TC&I deal. Herbert C. Pell, later a Democratic congressman from Manhattan, refused to vote: “I couldn’t see much difference in the candidates,” he recalled. “One had a big head and no brains, and the other had a big belly and no guts.” The Morgan bank contributed $30,000 to Taft’s campaign, and the man with the big belly won with 52 percent of the vote, as against 43 percent for Bryan, and 3 percent for Eugene Debs. Taft’s margin of victory over Bryan (9 percent) was much smaller than TR’s over Alton Parker in 1904 (20 percent); the Republicans lost three House seats, as well as several state and local elections.

  Morgan telegraphed Taft on November 3: “I wish to express to you my heartfelt congratulations on to-day’s splendid results.” The London Morgan partners cabled 23 Wall Street on the fourth: “Heartiest congratulations Presidential Election. Hope now we can have peace quiet and good business.” Roosevelt went to Africa to hunt.

  Republican insider George Perkins informed Morgan in February 1909 that Taft’s inaugural address would be “in all respects conciliatory and harmonizing in its tone.” Five months later, Perkins added that he personally had chosen key members of the new cabinet—Chicago banker Franklin MacVeagh for Treasury Secretary, New York corporate lawyer George Wickersham for Attorney General—and that “other places are filled to our entire satisfaction.”

  Jack had a cheerful suggestion for Perkins in the midst of all this wheeling and dealin
g. Worried about the increasing strength of German Jews on Wall Street, Jack wrote, “I think that if we are going on with business, some of us will have to turn Jew, and as you are such a good politician you are sure to be elected to that position, so you might as well choose your surgeon now.”

  Perkins’s optimism was misplaced. Taft sought Wall Street’s help with dollar diplomacy ventures abroad, but refused to “take advice from Theodore” about the trusts. Roosevelt had brought fifty-seven antitrust prosecutions in the course of two terms; Taft would bring ninety in just one. And though the new chief executive had none of his predecessor’s political skill or charismatic personality, he went further than TR did in establishing government authority over economic affairs: he endorsed stringent new railroad legislation, expanded the powers of the ICC, imposed federal regulation on telephone and telegraph companies, and authorized an income tax.

  In November 1909, Henry Cabot Lodge reported to the traveling Roosevelt that Morgan was “very much disappointed in Taft,” although Lodge did not think there was “anybody in the country who is more anxious for Taft’s success than Morgan.” The financier made a quiet visit to the President’s summer cottage in Beverly, Massachusetts, one July afternoon in 1910—he arrived by motorboat, dressed for yachting, “and seemed as anxious to avoid publicity as did the President,” recalled a Taft aide. “They had a talk for nearly an hour, but I have not heard as yet what the old fellow wanted. The President has more regard for him than any man of his class and set, but thinks it bad policy to see him often.”

  Even the Republican Old Guard now supported some form of corporate accountability and government regulation. Colleagues who had dismissed Morgan as a “back number” had changed their minds after the 1907 panic, but popular antipathy to Wall Street was running so high that a President who conditionally respected “the old fellow” considered it bad politics to see him.

  The most valuable asset Morgan gained from the panic of 1907 was not TC&I but Henry Pomeroy Davison. Throughout the two long weeks of the crisis, and afterward as an adviser to Aldrich on the National Monetary Commission, Davison appeared uniquely qualified to become Morgan’s professional heir. The official position had of course to go to Jack, but Davison shared more of the senior Morgan’s instincts and abilities than the junior Morgan did.

  According to Satterlee, at a bankers’ dinner one night in 1908, Morgan turned to Baker and said, “George, will you do something for me?”

  Baker: “Of course, yes—anything you want.”

  Morgan: “All right—I want you to let me have Harry Davison for my firm.”

  Davison left First National at the end of 1908 to join J. P. Morgan & Co. He had worked his way up from small-town Pennsylvania origins to prominent positions in white-shoe New York firms, and was as much at ease shooting rhinos in the Sudan as he was consulting the heads of European banks and dining on Morgan’s yacht. Personally trained by Baker, he had a reputation for conservative straight dealing, and shared his new senior partner’s faith in industrial consolidation and banker control. He once dreamed he was still a bank clerk in Pennsylvania, unable to balance the books. Told he would be horsewhipped if he failed to get the figures right, he broke out in a cold sweat. “What happened then?” asked his wife when he woke up. “I finally solved the problem,” he said. “I bought the bank.”

  Morgan finally solved the problem of his succession by adopting George Baker’s professional “son.” He took Davison fully into his confidence, summoning him to conferences in Europe and cruises in Maine, granting him round-the-clock access to the Up-Town Branch in New York, seeking him out for companionship as well as professional talk. Although the scope of the bank’s work had grown tremendously since the formation of J. P. Morgan & Co. in 1895, the number of partners had increased only from ten to eleven. And with Davison, Morgan for the first time had a lieutenant he was willing to place in a position of real command as he directed most of his own energies back to travel and art.

  The other two members of the Trio at the beginning of 1909 also turned management of their banks over to younger men. Baker, age sixty-eight, ceded the presidency of the First National to Francis L. Hine, and took a new title as chairman of the board. Stillman stepped down as the City Bank president and became chairman of its board, moving to Paris—where Mary Cassatt was advising him about collecting art; Frank Vanderlip, who had been the City’s vice president since 1901, moved up to become president.

  The Trio had agreed in 1908 that the originating house in any new issue of securities would take 50 percent and give 25 percent to each of the other two. Between 1898 and 1908, the City Bank had shared in just one underwriting with J. P. Morgan & Co. and none with First National. From 1908 to 1912, the three houses acting together bought or underwrote 36 new issues—for the Interborough Rapid Transit Company, New York Central, U.S. Steel, and the Atchison Topeka & Santa Fe, among others—amounting to nearly $500 million. Acting with other banks, they sponsored another 51, for a total of 87 new issues worth over $1.3 billion. The Trio’s reach horrified the opponents of financial concentration, yet the value of the new issues sponsored by the three houses over four years came to slightly less than Morgan’s 1901 capitalization of U.S. Steel.

  Morgan was compressing all his New York activities into the few months between his summer yacht cruises and long sojourns in Europe. “He is the most exhausting person I know,” Belle Greene complained to Berenson in August of 1909: “He often tells me he ‘likes my personality,’ and yet when I leave him I feel utterly divested of it—as of a glove one draws off and gives to a friend because he likes it.”

  The ailing E. H. Harriman asked Morgan to come see him that August, and the two men worked out some sort of peace just before Harriman died. The Morgan bank bought his majority interest in the giant Guaranty Trust, which Davison quickly merged with the Fifth Avenue and the Morton Trusts to create the largest trust company in the country, with capital resources of $26 million and deposits of $147 million.

  When the Guaranty moved to take over the Morton Trust, Levi Morton—now eighty-six years old and “mentally breaking up very fast,” according to the company’s vice president Charles H. Allen—objected to the loss of his name. According to Allen, Morgan said: “This is the thing for you to do, Morton. We will make you ‘Chairman of the Board,’ and you will become associated with one of the greatest financial institutions in the world. I’ll make that stock worth $1000 a share.” Allen observed: “The last delicate allusion to the sentimental side of the question dried his tears, and he thereafter—for a few hours—became an enthusiastic advocate of the plan.”

  Also that fall Morgan took control of the Equitable Life Assurance Society. He bought some of the stock from Harriman’s estate and the rest from Thomas Fortune Ryan. Ever since the fight over the Equitable that had led to Ryan’s purchase, the society had been in the hands of conservative trustees. One of them—Grover Cleveland—had died in 1908, another had retired, and the five-year voting trust was due to expire in 1910. Moreover, Ryan’s reputation had not improved. Many of his street-rail interests had gone bankrupt, and Robert La Follette told the Senate that one of them had “cleaned up” at least $100 million “by methods which should have committed many of the participants to the penitentiary.” According to Belle Greene, Morgan called Ryan to the library and told him: “Your name won’t do [in conjunction with the Equitable]—right or wrong, it spells distrust.” She confided to Berenson that she had always had a “sneaking fondness” for “Tommy” Ryan—“although it is a mystery to me how he has managed to keep out of States Prison all this time … he is so gentle & mild & kind hearted that if I did not positively know of his atrocities I should never believe them.”

  Morgan’s purchase of Ryan’s Equitable stock, for the price Ryan had paid ($2.5 million) plus 4 percent interest since 1905, inevitably came under attack. Questioned about it later, Morgan said he had bought the Equitable not for control in the ordinary financial sense, but “to take it o
ut of the situation.” Like most of his explanations, this one failed to clarify his motives. He probably meant that he wanted to take the company out of Ryan’s hands and “protect” it from ownership struggles, takeover attempts, and the market gyrations that had proved hazardous to share- and policyholders, as well as to the broader financial markets, in the past. As always, he saw himself performing a large public service in preserving national economic order—and as always these days, few people outside his immediate circle believed him. He tried to sell the Equitable stock back to the company at his cost plus interest, in order to mutualize it, but the society did not have enough money to buy the shares; the Equitable finally mutualized with the help of the Morgan bank in 1925.

  With Davison as his heir apparent in New York, the seventy-two-year-old Morgan reorganized his London firm at the end of 1909 in another preparation for the succession. Junius had asked that the English bank retain his own name only during Pierpont’s lifetime, and any wish of his father’s was “a law unto JPM, who is above all a sentimentalist,” Grenfell told a friend. Young Walter Burns had finally resigned, to everyone’s relief, and J. S. Morgan & Co., led by the Englishmen Grenfell and Vivian Smith, was renamed Morgan Grenfell & Co. in 1910.†

  Jack was visiting London in December 1909 when a slightly manic Perkins sent him a cable marked “Denkstein”—code for top secret, to be translated only by the person addressed: “We have concluded purchase of Guaranty Trust Co.… Stock will be put in Voting Trust.… We have sold all the Steel Common of the Paris syndicate and closed the account … profits … average something over 90. Newspapers have commented most favorably on Senior’s purchase of Equitable stock, even to the extent of favorable editorial in New York Evening Post.… Have concluded negotiations with Telephone Co. by which you and HPD to go on [the AT&T] Board.… HPD will be elected a Director in Chemical Bank next week. This is all for today thank you.”