Morgan

by Jean Strouse

  President Taft may have thought it bad policy to see Morgan often, but did not hesitate to enlist the “old fellow” when he could be useful. The administration wanted to enlarge America’s economic and political presence in China, partly to compete with European spheres of influence there, and partly to offset the imperialist designs of Russia and Japan. Morgan never liked operating in unpredictable foreign markets where he had no representative. He had given up on one venture in China—the Canton–Hankow Railroad—in spite of Roosevelt’s pleas about America’s “national interests.”

  The Chinese government had approached Morgan and Kuhn, Loeb about a loan late in 1908, and the discussion expanded early the following year to include other financiers and the White House. In the spring of 1909, Taft’s Secretary of State, Philander Knox (who had brought suit against Northern Securities as Roosevelt’s Attorney General), asked the four leading New York banks—the Trio plus Kuhn, Loeb—to form an American Group that would share a new Chinese railroad loan with a consortium of German, French, and British banks. The liberal journalist Herbert Croly later wrote that the Americans went into the Group “not because they were seeking Chinese investments but in order to oblige the administration.”

  The bankers probably decided that obliging the government would give them leverage on other issues, and hoped the venture would be profitable over the long term. Schiff told his partner Otto Kahn that the initial Chinese transaction had “very little attraction for American capitalists.… But sooner or later China and her finances must be thoroughly reorganized, and it is as well to pave the way now for participation at that time.”

  Jack cabled news of these developments to his father at Dover House in June. Kuhn, Loeb was sending a man to represent them all in China, a former U.S. consul general at Mukden named Willard Straight: “On the whole,” Jack reported, “idea strikes us favorably and Robert Bacon highly recommends Strait [sic].” The senior Morgan, sounding like his father in the 1870s, replied: “Strikes me favorably, but strictly confidential and for your own use only, important JPM&Co. take lead and name mentioned first. Suppose fact already recognized but must not be overlooked.”

  The house of Morgan took the lead but it did them no good. In the four years the Group served as America’s financial representative in China, the Morgan partners spent more time mediating between the U.S. government and their European colleagues than they did on the actual loans—and they hated taking orders from the State Department. Davison asked Grenfell early on to let the Europeans know that a certain sticking point was “a proposition of the Government and not of the bankers,” and on another occasion told Jack, “you can hardly appreciate embarrassing position we in due delay on part U.S. Govt approving our proposed Pekin cable. It seems perfectly ridiculous we should be held up in this matter.”

  A Chinese official deftly helped Davison out of another “embarrassing position” at a dinner in Berlin in 1911. Seated next to this man and knowing no Chinese, Davison spent the evening talking to the diplomat on his other side—until the Peking minister interrupted to ask him in perfect English who was pitching for the White Sox.

  The twenty-nine-year-old Willard Straight was a key figure in the bankers’ undertaking. Tall, handsome, outgoing, and ambitious, he had traveled to the Far East after graduating from Cornell, studied Mandarin, worked as a journalist in Korea and Japan, and assisted Roosevelt in China. He hoped the American presence would save China from exploitation by other foreign powers, but the State Department’s confused policies and the inherent difficulties of the political situation—opposition from Russia and Japan, Chinese nationalist hostility to the reign of foreign finance, and China’s own internal struggles—doomed the U.S. venture. The administration’s effort to promote American interests in the Far East failed, and the bankers did not even cover their costs.

  Straight was new to the bankers’ hauteur. After Morgan told Davison in the summer of 1910 to “make it clear that when we want to discuss things with the United States Government we want [the Secretary of State] and not [the Assistant Secretary],” Straight observed, “It was not difficult to see where the real power lies in this country.” The following spring, Morgan informed Davison that Straight would like a diplomatic post as first secretary in Peking—“will you take up matter with State Department?” Davison said he would, though he was surprised Straight wanted a government job, “as regard it step down rather than up.”e

  By this time, Straight had something other than work on his mind. Shortly before he left for Peking in 1909, he had fallen in love with William C. Whitney’s youngest daughter, Dorothy. Among the obstacles he faced were two rival suitors, the junior Bob Bacon and the Harvard economist who was working with Davison on the Aldrich Monetary Commission, A. Piatt Andrew. Moreover, Dorothy’s family considered him a fortune hunter. (They had grounds for suspicion: Straight had courted Harriman’s daughter, Mary, and the daughter of a wealthy senator from West Virginia, before he met Dorothy.) A nod from Morgan would be invaluable.

  Dorothy called on the financier just before he left for Europe early in 1911, and reported to Straight: “Mr. J.P.M. was lovely to me.… He laughed and said he wished I would go there every single week—so I warned him I might.… Dear Mr. J.P. he’s such a sweetie underneath the sternness!” Whether or not Morgan put in a word for her suitor, Dorothy accepted Straight’s proposal that spring and married him in September.

  The couple returned to a China torn apart by revolution. The Euro-American consortium had been financing the corrupt Manchu dynasty, and a republican revolt in 1911 forced the six-year-old emperor, Pu-yi, to abdicate. One night the Straights got caught in a riot and had to be rescued by U.S. Marines.

  The American bankers shared loans to the new Chinese Republic with England, France, Germany, Russia, and Japan, but Woodrow Wilson’s 1912 election put an end to dollar diplomacy in China. Opposed to U.S. intervention in foreign affairs, Wilson revoked the American Group’s mandate in March 1913, and the United States withdrew from the consortium.

  The China experience increased both the bankers’ aversion to politicians and the country’s aversion to bankers. Once again, the Trio was on center stage—only this time at the government’s request, for virtually no reward. Opponents of big business, imperialism, and “the money power” nonetheless concluded that Wall Street had used the State Department to exploit a weak foreign nation for selfish gain. “Patriotism,” cheered La Follette when Wilson terminated the connection in 1913, “is to be given precedence over profits.” Taft’s China venture yielded neither political nor material profit.f

  An equally unsuccessful and unpopular venture for the Morgan bank during this period was a consolidation of New England transportation properties headed by Charles Mellen, the president of the New York, New Haven, & Hartford Railroad. Mellen had left the Northern Pacific in 1903 largely because he couldn’t stand James J. Hill, and set out to build a system for the Northeast that would include intercity trolley and coastal steamship lines as well as railroads. Morgan financed Mellen’s ambitious plans for New England, hoping to halt the region’s industrial decline. Over the next ten years, however, Mellen proceeded to quadruple the New Haven’s capitalization, increase its bonded debt from $14 million to $242 million (strictly against the usual Morgan rules), overpay for new properties, and antagonize shippers, politicians, journalists, and reformers. In 1906 he paid $21 million for a combination of street-rail and gas companies controlled by the Philadelphia traction barons, W. L. Elkins and P.A.B. Widener. Senator Aldrich, who had sold his Rhode Island trolley interests to the combination, helped negotiate the deal.

  When Mellen bought 36 percent of the Boston & Maine Railroad in 1907, corporate lawyer Louis Brandeis launched a campaign to dismantle the Morganized monopoly of New England transport. Known as “the people’s attorney,” the southern-born, Harvard-educated Brandeis was a champion of labor and an outspoken adversary of big business. In 1910, after Mellen testified about the merger of the New Haven
and the Boston & Maine, Senator La Follette announced that everyone was mistaken about Mellen and the other parties to the deal: “these men … are but hired megaphones through which a beefy, red-faced, thick-necked financial bully, drunk with wealth and power, bawls his orders to stock markets, Directors, courts, Governments, and Nations. We have been listening to Mr. Morgan.”

  Mellen did tremendous damage to the New Haven and to the reputation of the Morgan bank: his overpayments and escalating debt kept the road from improving its facilities, which affected its credit in the markets; and earnings steadily declined. Morgan attended meetings of the New Haven board, but his preoccupation with other matters left the “moral responsibility” for the property in Mellen’s hands. It was more than curious, in this case, that “the Old Man should not be better posted.” (See Chapter 31.)

  Roosevelt, kept apprised by mail about American politics as he traveled abroad, was furious with Taft for betraying his legacies on conservation, progressive reform, and the trusts—and he hated his self-imposed retirement. When TR returned to the United States in June of 1910, Woodrow Wilson, still president of Princeton, warned that “We have a very erratic comet sweeping across our horizon.” The fifty-two-year-old Roosevelt organized an insurgent Republican movement in 1910 that split the party between radical dissidents and the conservative Old Guard. Democrats capitalized on the country’s disgust with political and financial corruption, gained strength among farmers and workers, and swept the gubernatorial and congressional elections, winning a majority of seats in the House for the first time since 1892.

  Morgan was out of town that November, but Belle Greene said he would have voted Democratic had he been there. “We are all very pleased” with the sweep, she told Berenson: “I think we need fear nothing from [TR] at the next Presidential election. It seems to me to be a clear field for Woodrow Wilson.”

  It might have surprised Brandeis and La Follette to learn that the “beefy, red-faced, thick-necked financial bully” was supporting the Democratic Wilson. This former law and history professor had transformed the alma mater of Junius Morgan, Henry Fairfield Osborn, and Jonathan Sturges into one of the country’s major centers of higher learning. Pierpont Morgan had attended Wilson’s Princeton inauguration in 1902, along with Grover Cleveland, Booker T. Washington, William Dean Howells, and Mark Twain. In November 1907, shortly after the panic, Wilson described Morgan to The New York Times as “a man of brains” who might lead a “common council, a sort of people’s forum” that would be above national politics. Two years later, Morgan pledged $25,000 to Princeton University, to be paid over five years; he sent Wilson the first installment ($5,000) on November 1, 1909, and the second a year later, just days before the scholar was elected governor of New Jersey.g Though Wilson had criticized Roosevelt’s antitrust prosecutions, denounced William Jennings Bryan, and condemned excessive government regulation, he ran for governor as a reformer in 1910, proposing to protect workers from hazardous conditions and to regulate big business.

  Death continued to take its toll among Morgan’s contemporaries. Charles McKim died in September 1909—Morgan served as pallbearer at his funeral, and helped persuade the American heiress Clara Jessup Heyland to leave a handsome seventeenth-century estate on the Janiculum, the Villa Aurelia, to the American Academy in Rome. Edward VII died in May of 1910.

  Morgan himself seemed to be in good health, and took no more notice of the exhausting effect he had on others than he did of political opposition to his power. When Belle warned him that he had a reputation for wearing people out, he was (she told Berenson) “as astonished and angry as if it had been untrue.”

  He was in London attending the funeral of Edward VII in June 1910 when he learned that his son had become the latest partner to give way under the nerve-racking pressure of the bank’s business. Jack reported to his father from New York that the doctors had found “nothing organic wrong,” just “fatigue” and nervous strain. Davison added a few days later that the physicians had simply prescribed “a good rest.”

  Jack, now forty-three, had been trying all his life to overcome self-doubt and win paternal approval. The timing of his trouble—eighteen months after Davison’s arrival and six months after Morgan handed the London office over to Grenfell and Vivian Smith—suggests that it may have had to do with his status at the bank. Jack liked all three of these men, and after Pierpont’s death they worked well together, with Jack serving as formal head of the house of Morgan while Davison largely ran it. In 1910, however, Jack’s “nervous strain” may have resulted from conclusive proof, in the agreeable presences of Davison, Grenfell, and Smith, that he had been judged not worthy of the kingdom.h

  The elder Morgan returned to the United States in time to receive an honorary LLD from Harvard at the end of June: Jack proudly presented his father with the award before going off to Scotland for a rest cure.

  Morgan added several exceptional works to his art and rare-book collections in 1910–11. From Durlacher Brothers in May of 1910, on the advice of Hercules Read, he purchased the Stavelot Triptych, a twelfth-century Byzantine reliquary said to contain a piece of the True Cross, for £40,000. Taking its name from the Benedictine Abbey of Stavelot in what is now Belgium, this luxuriantly beautiful triptych made of gold, copper gilt, silver, enamel, vernis brun, and precious stones depicts scenes from the Legend of the True Cross. Its illustrative stories, Byzantine hagiography, European narrative, and use of cloisonné and champlevé enamels bring together Eastern and Western traditions in art. As the earliest cross reliquary with scenes from the Legend of the True Cross, it is an uncontested masterpiece and the most important art object now at the Morgan Library.

  Morgan acquired his third Gutenberg Bible in London in 1911—a paper copy, more simply decorated than the two he already had, but complete and unusually large and fresh; as a pure representative of Gutenberg’s achievement, it is the finest of the three.

  And in the spring of 1911, as he traveled abroad, he authorized Belle Greene to bid for several items from the library of the American bibliophile Robert Hoe, who had died in 1909 leaving one of the greatest book collections of the modern era. Belle wanted above all to secure a unique Caxton on vellum, Malory’s Morte d’Arthur—one of two copies known to exist (the other was in England) and the only perfect one. When Belle wrote to Morgan in March that the price might go as high as $20,000, he wired her to “buy Caxton price at your discretion,” and to spend $75,000 more on other items she considered essential.

  Leading foreign book dealers came to New York for the sale, as did a representative of the British Museum, and news of Morgan’s interest drove the market up. Belle cabled her Chief at Aix on April 28: “Prices absurd and evidently made with you in mind.… Fear cannot buy Caxton under forty thousand.… Shall I buy at any price? Please answer immediately.”

  He replied: “Use your discretion would give seventy five or even a hundred rather than lose.”

  In the early days of the sale a dealer named George D. Smith dominated the bidding, making most of his purchases for the California collector Henry Huntington, Collis Huntington’s nephew. When the Caxton came up on May 1, other buyers entered the competition but dropped out one by one as a small, dauntless woman steadily raised Smith’s bids. The volume went to Belle Greene for $42,700, and her “victory evoked a hearty round of applause,” reported The New York Times.

  Belle cabled Morgan the news: she had bought about forty items altogether, spending slightly over $100,000. Furious at Smith for paying “ridiculous” prices, she doubted that he would “find any market save Huntington and Hearst hereafter … he has made of the Hoe sale a very disgusting and undignified performance.”

  The prospect of Morgan’s deep pockets had moved prices up as well, but confirmation of Belle’s view came from Albert Clay, the new Laffan Professor at Yale: he told Morgan that Miss Greene had made “a profound impression” at the sale “by her dignified demeanor, and for refusing to pay unreasonable prices for what she desired
to purchase for the library,” even though everyone knew she had “unlimited means back of her. It seems her course met with the hearty approval of all because of the ridiculously high prices paid by Mr. Huntington. I understand people were generally disgusted with his doings.”

  In terms of both quality and price, the Hoe sale was a major event in the evolution of American book collecting. It lasted nineteen months, and brought nearly $2 million.

  Exactly two years after Davison arrived at 23 Wall Street, George Perkins left. Although he had done useful work for the firm, he had also caused considerable trouble. He never really fit the bankers’ mold, beginning with his refusal to leave New York Life when Morgan asked him to. Since then, he had engineered his own deals and nurtured his own political influence. The corruption disclosed by the Armstrong Committee in 1905 had justifiably exacerbated public antipathy to the insurance business and tainted the Morgan bank. And though Morgan himself no longer wanted to monitor the daily operations of his firm, he did want partners who shared his style and aims, played by his rules, and deferred to his expertise. When Perkins negotiated financing for the Studebaker Company and B. F. Goodrich Rubber without sufficient clearance from his senior partner late in 1910, the old man decided the prima donna had to go.

  As always, however, Morgan hated to deliver bad news. “He tried to make his partners do it,” recalled Satterlee. “Then he tried to get Mr. Baker to do it. Finally he told George to be at the Library [one day] at 5 p.m. Ledyard went up there at 5:15 and passed George going out. When [Ledyard] went into the West Room Pierpont got up and cried out—‘He’s going to leave January 1st’—and executed a hornpipe.”

  According to Belle, at 1:00 A.M. that New Year’s Eve, Morgan breathed a sigh of relief, “Thank God—no more Perkins!”