Instructor: Kyle Johnson Date: November 30th, 2012 Duration

The Panic of 1907 was a financial crisis that almost crippled the American economy. Major New York banks were on the verge of bankruptcy and there was no mechanism to rescue them until Morgan stepped in personally and took charge, resolving the crisis.[10][11] Treasury Secretary George B. Cortelyou earmarked $35 million of federal money to quell the storm but had no easy way to use it. Morgan now took personal charge, meeting with the nation's leading financiers in his New York mansion; he forced them to devise a plan to meet the crisis. James Stillman, president of the National City Bank, also played a central role. Morgan organized a team of bank and trust executives which redirected money between banks, secured further international lines of credit, and bought plummeting stocks of healthy corporations. A delicate political issue arose regarding the brokerage firm of Moore and Schley, which was deeply involved in a speculative pool in the stock of the Tennessee Coal, Iron and Railroad Company. Moore and Schley had pledged over $6 million of the Tennessee Coal and Iron (TCI) stock for loans among the Wall Street banks. The banks had called the loans, and the firm could not pay. If Moore and Schley should fail, a hundred more failures would follow and then all Wall Street might go to pieces. Morgan decided they had to save Moore and Schley. TCI was one of the chief competitors of U.S. Steel and it owned valuable iron and coal deposits. Morgan controlled U.S. Steel and he decided it had to buy the TCI stock from Moore and Schley. Judge Gary, head of U.S. Steel, agreed, but was concerned there would be antitrust implications that could cause grave trouble for U.S. Steel, which was already dominant in the steel industry. Morgan sent Gary to see President Theodore Roosevelt, who promised legal immunity for the deal. U.S. Steel thereupon paid $30 million for the TCI stock and Moore and Schley was saved. The announcement had an immediate effect; by November 7, 1907, the panic was over. Vowing to never let it happen again, and realizing that in a future crisis there was not likely to be another Morgan, banking and political leaders, led by Senator Nelson Aldrich devised a plan that became the Federal Reserve System in 1913.[12] The crisis underscored the need for a powerful mechanism, and Morgan supported the move to create the Federal Reserve System.

While conservatives in the Progressive Era hailed Morgan for his civic responsibility, his strengthening of the national economy, and his devotion to the arts and religion, the left wing viewed him as one of the central figures in the system it rejected.[13] Morgan redefined conservatism in terms of financial prowess coupled with strong commitments to religion and high culture.[14]

Enemies of banking attacked Morgan for the terms of his loan of gold to the federal government in the 1895 crisis and for the financial resolution of the Panic of 1907. They also attempted to attribute to him the financial ills of the New York, New Haven and Hartford Railroad. In December 1912, Morgan testified before the Pujo Committee, a subcommittee of the House Banking and Currency committee. The committee ultimately concluded that small number of financial leaders was exercising considerable control over many industries. The partners of J.P. Morgan & Co. and directors of First National and National City Bank controlled aggregate resources of $22.245 billion, which Louis Brandeis, later a U.S. Supreme Court Justice, compared to the value of all the property in the twenty-two states west of the Mississippi River.[15]

Unsuccessful ventures

Morgan did not always invest well, as failures with energy, subways and shipping demonstrated.

Energy

In 1900, Morgan financed inventor Nikola Tesla and his Wardenclyffe Tower with $150,000 for experiments in transmitting energy. However, in 1903, when the tower structure was near completion, it was still not yet functional due to last-minute design changes that introduced an unintentional defect. Once Tesla revealed to Morgan his vision of wireless electricity, Morgan saw no reason to continue investments in Tesla's vision since Morgan was motivated by profits and had a monopoly on copper of electrical lines. [16] Consequently, by July 1904, Morgan (and the other investors) finally decided they would not provide any additional financing. Morgan also advised other investors to avoid the project.[17]

Morgan suffered a rare business defeat in 1902 when he attempted to enter the London Underground field. Transit magnate Charles Tyson Yerkes thwarted Morgan's effort to obtain parliamentary authority to build an underground road that would have competed with "Tube" lines controlled by Yerkes. Morgan called Yerkes' coup "the greatest rascality and conspiracy I ever heard of".[18]

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Shipping

In 1902, J.P. Morgan & Co. financed the formation of International Mercantile Marine Company, an Atlantic shipping combine which absorbed several major American and British lines. IMM was a holding company that controlled subsidiary corporations that had their own operating subsidiaries. Morgan hoped to dominate transatlantic shipping through interlocking directorates and contractual arrangements with the railroads, but that proved impossible because of the unscheduled nature of sea transport, American antitrust legislation, and an agreement with the British government. One of IMM's subsidiaries was the White Star Line, which owned the RMS Titanic. The ship's famous sinking in 1912, the year before Morgan's death, was a financial disaster for IMM, which was forced to apply for bankruptcy protection in 1915. Analysis of financial records shows that IMM was overleveraged and suffered from inadequate cash flow that caused it to default on bond interest payments. Saved by World War I, IMM eventually reemerged as the United States Lines, which itself went bankrupt in 1986.[19] Morgan lost heavily on the deal.[20] Morgan had a suite with a private promenade deck on the Titanic and is reported to have booked passage on the maiden voyage, but instead decided to stay in France to continue receiving therapeutic sulfur baths.[21]

Morgan corporations

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  American Bridge Company
  
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  American Telephone & Telegraph
  
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  Federal Steel Company
  
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  General Electric
  
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  International Harvester
  
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  International Mercantile Marine
  
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  J. I. Case Threshing Machine
  
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  United Dry Goods
  

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  Atchison, Topeka and Santa Fe Railway
  
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  Atlantic Coast Line
  
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  Central of Georgia Railroad
  
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  Chesapeake & Ohio Railroad
  
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  Chicago & Western Indiana Railroad
  
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  Chicago, Burlington & Quincy
  
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  Chicago Great Western Railway
  
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  Chicago, Indianapolis & Louisville Railroad
  
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  Elgin, Joliet & Eastern Railway
  
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  Erie Railroad
  
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  Florida East Coast Railway
  
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  Hocking Valley Railway
  
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  Lehigh Valley Railroad
  
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  Louisville and Nashville Railroad
  
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  New York Central System
  
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  New York, New Haven & Hartford Railroad
  
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  New York, Ontario and Western Railway
  
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  Northern Pacific Railway
  
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  Pennsylvania Railroad
  
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  Pere Marquette Railroad
  
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  Reading Railroad
  
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  St. Louis & San Francisco Railroad
  
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  Southern Railway
  
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  Terminal Railroad Association of St. Louis
  

After the death of his father in 1890, Morgan gained control of J. S. Morgan & Co (renamed Morgan, Grenfell & Company in 1910). Morgan began conversations with Charles M. Schwab, president of Carnegie Co., and businessman Andrew Carnegie in 1900 with the intention of buying Carnegie's business and several other steel and iron businesses to consolidate them to create the United States Steel Corporation.[8] Carnegie agreed to sell the business to Morgan for $487 million.[8] The deal was closed without lawyers and without a written contract. News of the industrial consolidation arrived to newspapers in mid-January 1901. U.S. Steel was founded later that year and was the first billion-dollar company in the world with an authorized capitalization of $1.4 billion.[23]

Morgan was the founder of the Metropolitan Club of New York and its president from 1891 to 1900. When his friend, Frank King, whom he had proposed, was black-balled by the Union Club because he had done manual labor in his youth, Morgan resigned from the Union Club, and then organized the Metropolitan Club. He donated the land on 5th Avenue and 60th Street at a cost of $125,000, and commanded Stanford White, "Build me a club fit for gentlemen. Forget the expense." Of course he invited King as a charter member.

Personal life

Morgan was a lifelong member of the Episcopal Church, and by 1890 was one of its most influential leaders.[24]

In 1861, he married Amelia Sturges, a.k.a. Mimi (1835–1862). Three years after her death, he married Frances Louisa Tracy, known as Fanny (1842–1924) on May 31, 1865. They had four children:

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  Louisa Pierpont Morgan (1866–1946) who married Herbert L. Satterlee (1863–1947)[25]
  
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  John Pierpont Morgan (1867–1943) who married Jane Norton Grew
  
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  Juliet Pierpont Morgan (1870–1952) who married William Pierson Hamilton (1869–1950)
  
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  Anne Tracy Morgan (1873–1952).
  

Morgan smoked dozens of cigars per day and favored large Havana cigars dubbed Hercules' Clubs by observers.[31]

His house on Madison Avenue was the first electrically lit private residence in New York. His interest in the new technology was a result of his financing Thomas Edison's Edison Electric Illuminating Company in 1878.[32] It was at 219 Madison avenue that a reception of 1000 people was held for the marriage of Juliet Morgan and William Pierson Hamilton on April 12, 1894, where they were gifted a favorite clock of Morgan. Morgan also owned East Island in Glen Cove, New York, where he had a large summer house.

An avid yachtsman, Morgan owned several sizeable yachts. The well-known quote, "If you have to ask the price, you can't afford it" is commonly attributed to Morgan in response to a question about the cost of maintaining a yacht, although the accuracy of the story is unconfirmed.[33]

Morgan was scheduled to travel on the maiden voyage of the RMS Titanic, but canceled at the last minute, choosing to remain at a resort in Aix, France.[34]White Star Line, Titanic's operator, was part of Morgan's International Mercantile Marine Company, and Morgan was to have his own private suite and promenade deck on the ship. In response to the tragedy, Morgan purportedly said, "Monetary losses amount to nothing in life. It is the loss of life that counts. It is that frightful death.”[35]

Morgan died while traveling abroad on March 31, 1913, just shy of his 76th birthday. He died in his sleep at the Grand Hotel in Rome, Italy. Flags on Wall Street flew at half-staff; the stock market closed for two hours when his body passed through.[36]

At the time of his death, he only held 19% of his own net worth, an estate worth $68.3 million ($1.39 billion in today's dollars based on CPI, or $25.2 billion based on 'relative share of GDP'), of which about $30 million represented his share in the New York and Philadelphia banks. The value of his art collection was estimated at $50 million.[37]

His remains were interred in the Cedar Hill Cemetery in his birthplace of Hartford, Connecticut. His son, J. P. Morgan, Jr., inherited the banking business.[38]

The Cragston Dependencies, associated with his estate Cragston at Highlands, New York, was listed on the National Register of Historic Places in 1982.[39]

Collector of art, books, and gemstones

Morgan was a notable collector of books, pictures, paintings, clocks and other art objects, many loaned or given to the Metropolitan Museum of Art (of which he was president and was a major force in its establishment), and many housed in his London house and in his private library on 36th Street, near Madison Avenue in New York City. His son, J. P. Morgan, Jr., made the Pierpont Morgan Library a public institution in 1924 as a memorial to his father and kept Belle da Costa Greene, his father's private librarian, as its first director.[40] Morgan was painted by many artists including the Peruvian Carlos Baca-Flor and the Swiss-born American Adolfo Müller-Ury, who also painted a double portrait of Morgan with his favorite grandchild Mabel Satterlee that for some years stood on an easel in the Satterlee mansion but has now disappeared.

Morgan was a benefactor of the American Museum of Natural History, the Metropolitan Museum of Art, Groton School, Harvard University (especially its medical school), Trinity College, the Lying-in Hospital of the City of New York, and the New York trade schools.

By the turn of the century Morgan had become one of America's most important collectors of gems and had assembled the most important gem collection in the U.S. as well as of American gemstones (over 1000 pieces). Tiffany & Co. assembled his first collection under their Chief Gemologist George Frederick Kunz. The collection was exhibited at the World's Fair in Paris in 1889. The exhibit won two golden awards and drew the attention of important scholars, lapidaries and the general public.[41]

U.S. gemstones from the Morgan collection

Morgan was also a patron to photographer Edward S. Curtis, offering Curtis $75,000 in 1906, to create a series on the Native Americans.[43] Curtis eventually published a 20-volume work titled The North American Indian.[44] Curtis went on to produce a motion picture, In the Land of the Head Hunters (1914), which was restored in 1974 and re-released as In the Land of the War Canoes. Curtis was also famous for a 1911 magic lantern slide show The Indian Picture Opera which used his photos and original musical compositions by composer Henry F. Gilbert.[45]

Legacy

His son, J. P. Morgan, Jr., took over the business at his father's death, but was never as influential. As required by the 1933 Glass–Steagall Act, the "House of Morgan" became three entities: J.P. Morgan & Co., which later became Morgan Guaranty Trust; Morgan Stanley, an investment house; and Morgan Grenfell in London, an overseas securities house.

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