Here in the 21st century, Capitalism is an
increasingly controversial word. There’s a growing conversation about how much we should
trust obscenely wealthy people, and whether or not there should be upper limits placed
on human wealth. Regardless of where you stand on modern-day
captains of industry, the landscape looks nothing like it did 150 years ago. Compared
to now, the days of the Robber Barons were the Wild West – both figuratively and literally. Across Europe and North America, the late
19th century was a time of industrialization and ingenuity, and it led to the world’s
inaugural class of independently uber-wealthy businessmen. Up until the 1800s, it had been
exceedingly rare for any one individual to amass huge piles of riches without ever sitting
on a throne – that is, until industrialized economies began to reward men not for wholesomeness
or morality, but for shrewd calculations and doing whatever was necessary. Very few men distinguished themselves in these
pursuits like today’s protagonist. He took a successful family business and built it
into a three-headed empire that still helps underwrite the world, even 100 years after
his death. He spent decades financing the major projects and players of the Industrial
Revolution, on both sides of the Atlantic Ocean. When governments ran out of money, he didn’t. His name is JP Morgan, and he paid for the
world you’re living in today. International Boy of Mystery John Pierpont Morgan was born into about as
good a situation as anyone could ever hope for. His paternal grandfather, Joseph Morgan,
was one of the founders of Connecticut’s Aetna Insurance Company – a successful venture
that grew and evolved over the decades, and was most recently bought by CVS Health Corporation
in 2017 for $69 billion dollars. Morgan’s father Junius was a successful
businessman in his own right. Before the birth of his children, he worked as a partner at
J. M. Beebe & Company, a significant New England dry goods importer that doubled as one of
the largest retailers in Boston. He would eventually leave his job to take an even more
glamorous position as the business partner of famous financier and London philanthropist
George Peabody. Morgan’s mother was Juliet Pierpont, the
daughter of noted Connecticut poet John Pierpont. He was best known for his poem The Airs of
Palestine, but also worked as a teacher and Unitarian Minister, too. All that is quite the preamble to the birth
of the eldest Morgan child. John Pierpont Morgan was born April 17, 1837, and he very
much enjoyed the fruits of a privileged New England childhood. He was a sickly boy, who
suffered from coughs and seizures. However, when he felt healthy enough, he would attend
concerts and art shows in the northeast. He enjoyed outings with his parents, where he
told everyone he liked to be called by his middle name, Pierpont. At age 11, he enrolled at the forerunner to
Connecticut’s prestigious Cheshire Academy, where he was allowed to board with the school’s
principal. Three years later, he smashed the entrance exam for Boston’s English High
School – a school that specifically catered toward mathematically inclined students who
were looking for a career in business and finance. He matriculated there in the fall
of 1851, at age 14. His father was grooming him for the family business. Unfortunately, before he could finish his
first year at The English High School, young Pierpont was struck with another medical malady.
Pierpont was incapacitated by a devastating bout with Rheumatic Fever. Just as an untreated
cold or flu might evolve into a more serious case of pneumonia, Rheumatic Fever is the
occasional escalation of an untreated throat infection. According to the Encyclopedia of
Infectious Diseases, Rheumatic Fever only afflicts about three percent of streptococcal
infections, but it is more common in young children between the ages of 5 to 14. Ironically,
the disease most often afflicts impoverished people, because of a lack of proper nutrition
and hygiene. Pierpont, who was already less healthy than
the average boy his age, was completely sidelined by the illness. Thus, his father Junius did
what any father would do for a sick child – he sent him to live by himself in the
Azore Islands, in the North Atlantic Ocean. Mr. Morgan believed the salty air of the Portuguese
isles would help Pierpont recover from his condition; ultimately, he stayed on the islands
for nearly a year. When Pierpont was finally well enough to return
to the US and finish his secondary education, he felt invigorated by his relatively clean
bill of health. He graduated from The English High School quickly, earning a reward of…
more school. With his Boston education completed, Junius next sent Pierpont to Bellerive, a
school in the cozy Swiss town of La Tour-de-Peilz, just across Lake Geneva from the French border.
Here, he picked up a valuable fluency in French, which his father believed would be hugely
beneficial to a future business magnate like Pierpont. Once he’d mastered French conjunctive, Pierpont
moved on to Germany’s University of Gottingen, where he mastered his third language in less
than a year. While there, he also formalized his love of art. Many of us might have loathed
much of the artistic exposure that was forced upon us as young children, but evidently,
Pierpont couldn’t get enough. He left Germany with an additional degree in Art History. With his formal education finally rounded
out, Pierpont went to meet his father in London. By the mid-1850s, Junius had taken that partnership
with George Peabody; thus, when his son was ready to enter the work force in 1857, the
London branch of Peabody, Morgan & Company was the most logical place for a first job. Love & War Morgan worked in London for about a year before
returning to New England. Junius trusted his son as a reliable business auxiliary, which
is how Pierpont landed a position as a clerk at New York’s Duncan, Sherman & Company
– the American representatives of Peabody, Morgan & Company. Even in his 20s, Pierpont showed a keen nose
for profits. One story from his early years recalls how he bought coffee at a short price
off a New Orleans boat captain who couldn’t find any buyers for his product. Morgan used
his company’s considerable funds to buy the coffee, then leveraged his connections
in the area to find buyers that the ship captain never could. He sold the coffee at a significant
rate of return. Pierpont had only been in New York for about
a year when he fell in love. In 1859, while navigating the New York art scene, he met
Amelia, the daughter of a wealthy arts patron named Jonathan Sturges. Amelia had her own
little nickname, and liked to be called Memie. Memie and her family were scheduled to do
some travelling in 1859, and a veteran European traveler like Pierpont was just the expert
they needed. He drew them up an itinerary that ended in London, then met them over in
The Big Smoke once they were finished. Pierpont spent two weeks with Memie before escorting
her across the Atlantic, back to New York. In the modern dating scene, a young single
woman would probably feel that Pierpont was trying way too hard, but Memie didn’t seem
to mind. She agreed to marry Pierpont in the following year, during the Spring of 1860.
At age 23, it was the happiest he had ever been in his young life. Unfortunately, there were twin disasters right
around the corner. The following winter, in 1861, Memie came down with a pesky cough that
just wouldn’t go away. At the same time, the American Civil War was just weeks away
from exploding. Now, you might think a mystery ailment would
be easier to deal with than your entire country breaking out into armed conflict around you,
but Pierpont evaded service in the Union Army by paying $300 to a substitute. For that matter,
so did eventual peers John D. Rockefeller, Andrew Carnegie, Jay Gould, and James Mellon.
For Mellon’s part, he felt some guilt after the fact about avoiding the War, prompting
his father to write to him that "a man may be a patriot without risking his own life
or sacrificing his health. There are plenty of lives less valuable." We don’t know where young Pierpont stood
on the value of his own life during the first year of the Civil War; what we do know is
that he desperately wanted to find a cure for his coughing bride-to-be. After the pair
was married in October of 1861, he recalled his own successful recovery in the Azores,
a decade earlier, so he made plans to honeymoon with Memie in the rejuvenating climate of
the Mediterranean. They set up a quaint residence in Algeria; soon after, while visiting France,
a lung specialist finally diagnosed Memie’s illness. She had tuberculosis. Pierpont waited on her constantly, hoping
to improve her condition. Memie actually wrote a letter to her mother back in the States,
saying “I wish you could see his loving, devoted care of me. He spares nothing for
my comfort & improvement.” Sadly, tuberculosis spared very few people
in the 19th century, and Memie was no exception. She died in February of 1862, four months
after her marriage to Morgan. At 24 years old, our protagonist was a widower. Show Me the Money Pierpont dealt with the loss of his love by
throwing himself back into his work. He returned to New York, where he had already made quite
the name for himself as a financier. In 1860, Pierpont had broken away from Duncan, Sherman
& Company, where he had clerked for two years, and begun representing his father’s firm
in America via his own, eponymous firm: J. Pierpont Morgan & Company. The biggest splash he was attached to was
something of a scandal. After his engagement to Memie, but before their marriage and Mediterranean
retreat, Pierpont had helped finance a nasty bit of war profiteering, which became known
as the Hall Carbine Affair. The affair sees a lot of money and a lot of
guns change hands, and can be a bit confusing, but the simplified version goes something
like this. Morgan was part of a small consortium called the Union Defense League, alongside
two gentlemen named Simon Stevens and Arthur Eastman. Eastman bought 5,000 surplus Hall
Carbine rifles from the US Government, which were considered antiquated and too old for
use because of their age and the caliber of their rifling. Eastman bought the rifles for
$3 dollars and fifty cents a pop, financed by Morgan’s money, in August of 1861. The
rifles were almost immediately sold back to Major General John Fremont and the US government
at more than 600 percent of their original cost -- $22 a rifle. The sale was made under
the assumption that the rifling had been adjusted to government standard .58 caliber. The parties exchanged guns and money, but
the Morgan consortium hadn’t held up their end of the bargain. The rear breeching chambers,
where infantry would load .58 caliber ammunition into the back of the weapon, had been adequately
adjusted; however, the actual rifling of the weapons remained incompatibly sized. Over
the course of the civil war, many infantrymen blamed these old, defective Hall Carbines
for terrible misfires and accidents, many of which led to self-inflicted injuries and
potentially preventable amputations. Almost immediately, there was a US Congressional
investigation. Major General Fremont, who purchased the guns, had a boss, and that guy
complained to his boss, who complained to the Secretary of War, and the next thing you
know, the Hall Carbine Affair was born. The criticism was blistering; newspapers ran dramatic,
muckraking headlines. At one point, the Congressional Committee on Government Contracts issued a
statement, proclaiming, “Worse than traitors in arms are the men
who are pretend loyalty to the flag, feast and fatten on the misfortunes of the nation,
while patriot blood is crimsoning the plains of the South, and bodies of their countrymen
are moldering in the dust." Much of this criticism was refuted, years
later, by E. Gordon Wasson’s 1940s investigation, The Hall Carbine Affair: A Study in Contemporary
Folklore. What isn’t refutable is that Morgan had made a small fortune off the deal. This
new injection of capital financed several of the projects he busied himself with, following
the death of Memie. Pierpont went full-throttle for his father’s company until 1864; it
was then that George Peabody, his father’s old partner, decided to retire. George Peabody
& Co. was rebranded as J. S. Morgan & Co. Perhaps to avoid confusion between two similarly
sounding firms, Pierpont took an opportunity to partner with the more senior Charles H.
Dabney, whom he knew from his European jaunts, to reform his own house as Dabney, Morgan
& Co. Now, with all these banking firms, forming
and reforming, you might be wondering just what it is that Pierpont actually did. It’s
a fair question. Much of what he did was act as an American agent for his London-based
father, but he did a fair amount of investment on his own, too. Early on, he traded mostly
in government bonds and foreign exchange, but as the 1860s went on, he began leveraging
his international contacts to connect old European money with new American industrialists. So, as the Civil War concluded, and American
Reconstruction gave way to industrialization and the Gilded Age, no one on Earth became
more adept at linking railroad barons and aspiring inventors with deep reservoirs of
investment capital. Early in his career, Pierpont was often a mere facilitator, connecting financiers
and visionaries for a small cut of the profits. But as the century wore on, Morgan amassed
a larger and larger fortune, and became wealthy enough – and powerful enough – to finance
many of these projects on his own. Becoming the Bank In the aftermath of the Civil War, Pierpont
had two major life developments. First, he remarried. His new wife was Frances Louisa
Tracy, another woman he had met in his high-class social circle in New York. She, too, had a
nickname, and preferred to be called Fanny. Fanny was not Pierpont’s one true love.
Like many of the American power brokers who came after him, Pierpont preferred long, intense
hours of grinding out work, brokering meetings, and travelling abroad. Fanny was completely
his opposite – she was a homebody, who preferred to spend her time with children and close
friends. Despite their incompatibility, the two remained married until Morgan’s death,
nearly 50 years later. They had four children: Louisa, John Pierpont Jr., Juliet, and Anne. By the birth of his youngest daughter Anne
in 1873, Pierpont’s professional life was ready to evolve as well. His new partner Dabney
retired in 1871, so Morgan formed a new partnership with the powerful Drexel family of Philadelphia.
You should probably have this formula down by now, so it likely won’t surprise you
to learn that their new joint banking venture was called Drexel, Morgan & Company. Years
later, when Anthony Drexel died, the firm was rechristened as something that might sound
more familiar to modern audiences: J.P. Morgan & Co. For the next 20 years, Morgan’s career seemed
powered by rocket fuel. No longer a mere wealthy financier living in his powerful father’s
shadow, J.P. Morgan began shaping the numerous railroad conglomerates that were exploding
across the American landscape. A few simple loans were enough to keep the coffers full,
but Morgan did much more than that – he positioned himself at the center of any number
of mergers and reorganizations, growing both his power and his portfolio. One of Morgan’s earliest moves in the Railroad
sector was seizing a relatively small line called Albany & Susquehanna from robber barons
Jay Gould and Jim Fisk. In 1869, Gould and Fisk had hatched a plan to take a controlling
interest in the railroad by buying a majority stake. Joseph Ramsey, the President of the
Railroad, blocked their attempt by issuing thousands of new shares to his supporters;
incensed by the move, Gould and Fisk turned to more nefarious methods, pressuring a crooked
judge they owned to issue arrest warrants for President Ramsey. At one point, Fisk literally
got on a train and rode through several Albany & Susquehanna line stations, beating up rail
workers in an attempt to intimidate the company into submission. The only thing that stopped
him was a railroad Employee, who pretended to be a police officer, arrested Fisk, and
took him to jail. When he was eventually released, Fisk did the same thing all over again, culminating
in a massive railway brawl that had to be broken up by the state militia. All of this madness ended with J.P. Morgan,
sensing an opportunity and swooping in with a $500,000 mortgage payment. Morgan talked
his way into stewardship of the railroad -- he was elected Vice President of the company
and controller of the road; six months later, he leased it to the Delaware & Hudson Railroad
company for $490,000 per year. The lease ran for 99 years. Morgan was already well off from his family
wealth and his early career moves, but his involvement with the railroads made him obscenely
rich. For decades, he scoured the exploding railroad industry for opportunities to, and
it rarely disappointed him. In 1879, for example, railroad magnate William Vanderbilt approached
him, asking for help in the sale of $250,000 in stock shares for the New York Central Railroad.
He sold all of it, without dropping the share price by one dollar, which scored him a seat
on the railroad’s board of directors. In 1880, he was the central figure in a syndicate
that made a $40 million bond sale to finance the highly anticipated Northern Pacific Railway.
Up to that point, it was the largest transaction of Railroad bonds in US History. In 1885, he restructured the New York, West
Shore & Buffalo Railroad Company, then leased it to Vanderbilt’s New York Central. He
made similar moves in Pennsylvania, Virginia, and Ohio. As Morgan’s personal fortune grew, so did
his clout as a Captain of Industry. In 1882, he moved his family to a prominent brownstone
mansion at 219 Madison Avenue, three blocks from where the Empire State Building would
eventually be built. He was a recognizable face around New York City – not just because
of his metaphorical stature in the Finance World, but also because of his literal countenance.
Morgan was tall and broad-shouldered, with a great, bushy mustache, and as he grew into
middle age, his face was actually becoming deformed. Among the maladies that Morgan suffered
from was Rosacea – a chronic skin condition that swells and reddens much of the tissue
around the nose and cheeks. Morgan’s rosacea was coupled with rhinophyma – the development
of a huge, overgrown, bulbous nose, which often brings inflammation, pimples, and papules. The combination of Morgan’s size, aggression,
and facial features made him a truly intimidating man to be around. Other titans of the gilded
age carried a reputation for cutthroat tendencies, but Morgan actually looked the part. To make
matters worse, he was often photographed because of his fame, but he hated to be photographed
because he was self-conscious about his appearance. His anger at being photographed only served
to heighten his naturally intimidating profile. It was a vicious cycle – one that only served
to make him more intimidating and distrusted by the public as his wealth kept growing. If You Have to Ask… By the time that Junius Morgan passed away
in 1890, his son had become one of the wealthiest and most powerful men in the world. Morgan
had amassed such a combination of money and power that he was almost single-handedly responsible
for navigating the United States economy out of the Panic of 1893. Back when the US Dollar
was backed by gold, a financial downturn could wipe out the national gold reserves. That’s
precisely what happened in the final years of the 19th century. As the US recoiled under a mountain of financial
pressure, Morgan called a meeting with US President Grove Cleveland, offering to replenish
the US coffers from his banks. The US Government resisted at first, exploring the idea of selling
bonds to the public, but ultimately obtained 3.5 million ounces of gold from a trust headed
by Morgan. In return, the US government issued 30-year bonds. Morgan saved the treasury, but in doing so,
armed the Democratic Party with one of its chief complaints in the upcoming Election
of 1896. William Jennings Bryan skewered the cozy relationship between Republicans and
wildly powerful banks, like J.P. Morgan & Company. Bryan’s point was proven both right and
moot when Morgan and several of his banker friends donated heavily to the campaign of
Republican nominee William McKinley, who won in 1896, and again in 1900. Life was good for J.P. Morgan. He smoked Cuban
Cigars all day, every day, and purchased fine art wherever he could find it. He was grooming
his only son, John Pierpont Jr., to join the Morgan banking empire, just as his father
once did for him. His eldest daughter, Louisa, married a lawyer named Herbert Satterlee who
was on track to become Assistant Secretary of the Navy. Another daughter, Juliet, married
a man named William Pierson Hamilton, a descendent of Alexander Hamilton. As the 20th century
approached, life in the House of Morgan was very, very good. Morgan became president of the Metropolitan
Museum of Art and was also a prominent leader in the Episcopal Church. He spent a great
deal of time collecting rare gemstones; part of his collection was displayed at the World’s
Fair in Paris in 1889. And somehow, in between all that, and all the banking work, he was
a frequent, passionate yachter. Morgan loved to sail; after decades of grinding
out work, he likely saw a good retreat on one of his yachts as a well-earned respite.
One infamous story from the House of Morgan recounts how a socialite friend of his once
asked how much the maintenance on his yacht cost; Morgan allegedly replied that, “If
you have to ask, you can’t afford it.” Thus, a truly American syllogism was born. In his later years, Morgan certainly had interests
to enjoy, but it didn’t mean he wasn’t still working. He helped fund Thomas Edison’s
initial experiments with electricity, and, later, helped him form General Electric. Separately,
in 1898, J.P. Morgan and Co. financed the creation of Federal Steel. Two years later,
he began negotiating with Andrew Carnegie and Charles Schwab to buy Carnegie’s steel
business, in the hopes of merging it with other, smaller companies. Together, those
acquisitions, as well as his own creation, could form one massive conglomerate that succeeded
via superior logistics and infrastructure. The result was the United States Steel Corporation,
and in 1901, it was awarded a market capitalization of $1.4 billion dollars, making it the world’s
first billion-dollar company. Around the same time, Morgan teamed up with
Canadian-American railroad executive James Hill to create another new corporation, the
Northern Securities Company. This was a holding company, designed to hold the majority shares
in Northern Pacific, Great Northern, and CB&Q railroads. The stroke gave Morgan control
of one-third of all US Railways. Now, in the aftermath of the Sherman Anti-Trust
Law of 1890, Morgan was careful to avoid moves that could be seen as subverting fair market
competition. He would even go so far as to directly check with the US President on the
legality and fairness of potential acquisitions before buying or restructuring anything. But
the Northern Securities Company is where Morgan finally pushed his luck one step too far.
His friend and ally, President William McKinley, had been assassinated by an anarchist in September
of 1901. He was replaced by Vice President Teddy Roosevelt, a headstrong populist and
avid Trust-Buster who had a much less chummy relationship with America’s biggest banker. Roosevelt wasted no time in using the Sherman
Anti-Trust Law to break up the Northern Securities Company in 1902. Morgan was infuriated – he
wasn’t going to lose any money, but he had carefully cultivated his reputation as an
untouchable financier, and he didn’t want the black mark of an anti-trust suit on his
resume. Thus, Morgan waged a drawn-out legal battle with Roosevelt and his government,
even though he suspected the law wasn’t on his side as soon as the Justice Department
had sued him. The US Supreme Court upheld Roosevelt’s decision two years later, in
1904. Morgan remained angry with Roosevelt for the
remainder of his life, but it didn’t stop him from helping the federal government when
it needed it… again. During the Panic of 1907, the US economy was once again in dire
straits. Several key banks were on the brink of collapse, so Morgan did what he did best
– he leveraged his considerable political power to get as many wealthy friends into
one room as he could, then commanded them when, where, and how to spend their money
to stop the Panic. He used his influence to secure otherwise unavailable lines of credit,
then bought up tons of devalued stock to inject much-needed capital back into the economy.
He even scored a revenge win over Roosevelt – the story is convoluted, but Morgan was
put in a position where he could save the US economy by spending $30 million to purchase
stock in a company called Tennessee Coal & Iron, which was a chief competitor of his company,
US Steel. By the letter of the law, the move violated the Sherman Anti-Trust Act, but Roosevelt
had no recourse but to allow the purchase. The Panic ended days later. The Three Bank Legacy Despite his stabilizing efforts during the
Panic of 1907, JP Morgan was all but retired. Fifty years of stocks and steel in imperfect
health had left him tired and out of energy. Understandably, he wanted to enjoy his yachts
and his art, so he spent the final years of his life at sea and in leisure, supporting
many of the New York artists that he enjoyed, and sailing to new parts of the world. In 1911, the avid ship lover was excited to
take his place on the maiden voyage of the Titanic. The Titanic was operated by the White
Star Line, which was owned by a Morgan corporation, the International Mercantile Marine Company.
The chain of ownership meant Morgan had his own private suite and promenade deck on the
ship. At the very last minute, though, he decided to cancel his attendance on the maiden
voyage due to health reasons, choosing to remain at a resort in the French Alps. After the ship sank, he remarked, “Monetary
losses amount to nothing in life. It is the loss of life that counts.” It’s certainly
a credible opinion, from a man who appeared to have all the money in the world. Morgan outlived the Titanic, but not by much.
His health began deteriorating in 1913; he died while visiting Rome, on March 31, 1913.
He was two weeks shy of his 76th birthday. Morgan’s legacy as both a banker and a philanthropist
is a powerful one. His personal estate was worth $68.3 million dollars at the time of
his death; in today’s money, that would make him a billionaire. Much of his art was
either donated to the Met or preserved in what is now New York’s Morgan Library & Museum.
We could probably do an entire video just on Morgan’s Art Collection, which was worth
tens of millions of dollars, even back then. As for JP Morgan and Co, his son took over
the family business after his death. The company included Morgan’s original business enterprise,
as well as his father’s London enterprise that Morgan eventually took over after the
old man’s death. The London company was restructured shortly before Morgan’s death
as Morgan, Grenfell, & Co. It remained tied to its sister companies in the US until the
1980s; it became Deutsche Bank in 1990. As for the US side of things, JP Morgan & Co
was forced to split itself by the Glass-Steagall Act of 1933, which forced banks to separate
their commercial and investment elements. J.P. Morgan & Company stayed on the commercial
side, eventually becoming J.P. Morgan Chase at the turn of the 21st century. The speculative
side of J.P. Morgan morphed into Morgan Stanley in 1935. That means that J.P. Morgan, over the course
of 75 years, engineered the creation of three of the 21st century’s most prominent banks.
And even that, arguably, wasn’t his greatest accomplishment. His repeated support of troubled
banks, failing businesses, and a panicked US government prompted the creation of the
US Federal Reserve. In the aftermath of the Panic of 1907, it was clear that the US government
could no longer operate without a federal banking system that could better control the
flow of money throughout the economy. It was too risky to rely on the timely support of
a few ultra-wealthy power brokers to resolve recessions; six years later, during the same
year that Morgan died, the US created the Federal Reserve. Despite momentous public backlash, The Federal
Reserve was a necessary action. The United States could never again allow itself to rely
on an ultra-wealthy power broker that could single handedly put the economy back together
again; after all, it was unlikely that there would ever be another man like J.P. Morgan.
