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Morgan, J.P. - Overview, Personal Life, Career Details, Chronology: J.P. Morgan, Social and Economic Impact

american morgan’s business company

J.P. Morgan & Company


J.P. Morgan was a potent force in American business during its era of greatest growth, and a tycoon who almost single-handedly established the practice of investment banking. The son of a banker with international connections, Morgan, through his successful investments and cunning acquisitions, amassed a fortune that was almost unimaginable at the time. “Essentially an organizer and an integrating force, he continually fought the financial buccaneers of his day with their own weapons, and triumphed over them, becoming a powerful force for stabilization in the economic system,” declared John N. Ingham in the Biographical Dictionary of American Business Leaders.

Personal Life

The Morgan family’s roots in the United States stretched back to 1636 with the arrival of one Miles Morgan from Wales. They were affluent farmers by the time Joseph Morgan, J.P.’s grandfather, entered adulthood, but Joseph became quite prosperous by acquiring a number of holdings, including stagecoach manufacturing concerns and fire insurance providers. His son, Junius Morgan, was involved in the dry-goods wholesale business, first in Hartford, Connecticut and later in Boston. In 1836 Junius wed Juliet Pierpont of Boston. Their first son, John Pierpont, was born in April of 1837 when the family was still in Hartford.

J.P. was tagged with the unwieldy “Pierpont” name as a youth, and earned good grades in school. He was especially gifted in math. Four other siblings followed him—all girls, a fact that historians would later note made it easy for him to gain such mastery over the family’s businesses and assets; he would have been expected to share some power with a brother. When he was 14, the Morgans moved to Boston and J.P. unofficially began his collection of rare documents: he sent a card to U.S. president Millard Fillmore that he asked him to sign, which the Chief Executive did and returned to the youngster. Morgan graduated from English High school at the age of 17. His family moved once more at that point when Junius Morgan entered into a partnership with an American who possessed a thriving London brokerage. The senior Morgan became a partner in George Peabody & Company, a firm that handled financial transactions for transatlantic trade and would play a vital role in the growth of J.P. Morgan’s career.

Before he joined his family in London, J.P. Morgan adjourned to the Azore Islands for health reasons; it was thought that the tropical sea air would cure a host of his health problems, including skin and stomach ailments. Later that year, he enrolled in a boarding school in Vevey, Switzerland, where he stayed two years. From there, he traveled and studied in Europe, spending two years at the University of Goettingen in Germany. He worked for his father for a time, in a lowly clerk’s position at the London office, and then returned to New York City in August of 1857. He rented rooms at West 17th Street, and took on George Peabody’s son as a roommate.

In early 1860 Morgan married Amelia Sturges against his father’s advice; Junius thought the couple should wait a bit longer. For their honeymoon the pair sailed to North Africa to cure what was thought to be a lingering cold in Amelia. Instead she died in Algiers of tuberculosis a few months later. In 1865 Morgan wed Frances Tracy, whom he had come to know though his affiliation with St. George’s Episcopal Church in New York City. Together they had four children—one son, J.P. Morgan Jr., and daughters Louisa, Juliet, and Anne. When Junius Morgan died in 1890, J.P. inherited a great deal of money, which he used to buy European art and rare manuscripts. Known as a tireless executive, Morgan’s few activities outside of the business world involved St. George’s. He owned a series of ocean-going yachts he named Corsair, and traveled to Europe at least once a year.

Career Details

When Morgan returned to New York City after some training at his father’s firm in England (which was involved in financing the import of British-made iron rails for the American railroad system), he was hired at Duncan, Sherman & Company. Here too, he spent much of his first months as a copyist: there were no typewriters, and every business document had to be written in longhand and then copied in the same manner. Soon Morgan advanced to a position of more responsibility; the fact that his father was a prominent London banker certainly helped. He was sent on research missions for the firm. He traveled throughout the South, and gleaned information on the cotton trade, then a major part of southern economy. On the side, Morgan engineered deals, once buying a shipload of coffee in New Orleans and selling it to local merchants at a profit.

In 1861 the 24-year-old founded his own firm, J.P. Morgan & Company, to act as the American agent for his father’s London firm, now called J.S. Morgan. That same year the American Civil War broke out, and Morgan, like 70,000 other men who could afford to do so, hired someone to take his place in the Union Army. He came under worse criticism, however, for his role in financing what came to be known as the Hall Carbine Affair, in which Morgan loaned money to a profiteer who used it to buy armaments from the U.S. government, and then sold them back to the government at a profit.

Morgan’s first office was at 53 Exchange Place near Wall Street, and at first he did not even have a permanent clerk to copy papers at the office. But soon he was making a name for himself in increasingly brazen deals: he bought gold in small transactions, then sold half of it overseas, which drove up the price; he then sold the other half at a profit. His father, Junius Morgan, disapproved of such dealings, and forced J.P. to hire the older, more cautious Charles Dabney as senior partner. Thus the firm became Dabney & Morgan from 1864 to 1871, then Drexel, Morgan in 1871 when his father arranged a merger with the New York branch of a successful Philadelphia family-run bank.

During this era the younger Morgan made a fortune in financing the growing railroad industry as it spread across the continent. By 1869, he had gained control of the Albany and Susquehanna Railroad, and in 1879 Morgan was part of a secret syndicate that sold $25 million worth of William Vanderbilt’s holdings in the New York Railroad. He had colluded with his father in London to do this, and the deal both enriched him and made him famous for the return on the investment. For the success of his plan he was granted a seat on New York Central Railroad’s board of directors. Between 1885 and 1890 Morgan held private meetings at his home with other railroad tycoons, a group that called itself the Interstate Commerce Railway Association, to squash potential competition on lucrative routes. During this era, competing railroad lines would build parallel tracks, and one carrier inevitably went under. The magnates also set rates amongst themselves. This practice was declared illegal with the Interstate Commerce Act of 1887.

Morgan’s ties with the federal government began in the early 1870s when he became involved in treasury bonds and government loans. With the financial crisis that was known as the Panic of 1893, Morgan was tapped to act as a central banker by President Grover Cleveland. The United States had no Federal Reserve system at the time, and Morgan and the other bankers knew the nation’s monetary system was in danger of collapse. Morgan led the effort that created a syndicate with European lenders to provide $65 million in gold. He profited enormously from the deal, and came under great fire in the press. Cleveland too was criticized, and Congress launched an inquiry. Morgan refused to reveal how much profit he had actually made in the transaction, which did not endear him to the press or the public, and was tagged as a “Robber Baron.” Still, latter-day historians credit Morgan with saving the United States’ commercial banking system from collapse on this and a few other occasions.

In the late 1870s Morgan became involved in funding the Edison Electric Company. Drexel and Company in Philadelphia became one of the first offices in the world to operate by electric light. In the early 1890s Morgan arranged a merger of Edison with its competitor to form General Electric. Morgan’s firm also worked with the Boston brokerage of Kidder, Peabody to underwrite bonds for the capitalization of American Telephone & Telegraph’s telephone infrastructure. By 1895 Morgan was head of his own firm, J.P. Morgan & Company, and was considered a powerful force in American finance. He became involved in merging a number of small steel producers until Andrew Carnegie’s giant Carnegie Steel was threatened. Morgan then arranged a merger that created United States Steel in 1901, the first billion-dollar manufacturing corporation in the world. He engineered another profitable merger with the creation of International Harvester around the turn of the century.

Chronology: J.P. Morgan

1837: Born.

1854: Studied in Germany at University of Goettingen for two years.

1861: Opened offices at 53 Exchange Place.

1869: Gained control of his first railroad, the Albany and Susquehanna.

1873: Opened famous headquarters at 23 Wall Street.

1887: Presided over the Interstate Commerce Railway Association.

1890: Inherited $12 million upon death of his father.

1895: Engineered major international gold transaction on behalf of U.S. Treasury.

1901: Founded U.S. Steel.

1907: Reorganized American banks during confidence crisis.

In 1907, Morgan was again tapped by the government to help out in a potentially disastrous American financial crisis when many banks were about to fail. Morgan and a group of other prominent financiers evaluated which institutions were solvent. In the midst of the crisis, Morgan’s U.S. Steel traded some stock for one bank’s share in the Tennessee Coal, Iron, & Railroad Company, and Morgan was later indicted by President William H. Taft for this. Morgan’s son, J.P. Morgan, Jr., took over the company upon his death in 1913, and quickly achieved success when he became the American purchasing agent for France and England during the early years of World War I.

Social and Economic Impact

Before Morgan’s era, large costly enterprises such as transportation systems and massive manufacturing enterprises, were usually created by a monarch and funded from the royal coffers. Morgan and a few others realized early on an opportunity to fill such a role in the United States with the creation, underwriting, and sale of bonds. New railroads and public utilities are examples of the infrastructure created with Morgan’s influence.

Despite the fact that Morgan was willing to step in and help the federal government if he foresaw a benefit for himself—he even financed the entire army payroll in 1871 when a deadlocked Congress would not appropriate the funds for it—much of America’s legislative involvement in business dates from this era and Morgan’s infamy. During this time, private banks became involved in financing the development of industrial nations, and politicians saw great wealth being created. At the time, there were neither personal nor corporate taxes. Furthermore, the nation was becoming more cohesive after the resolution of the Civil War, with less regional differences that had caused political friction between the states’ powers and federal powers. In other words, any federal regulation regarding business was viewed as anti-business and heavy-handed. This changed in the Morgan era with the introduction of several important legislative acts, such as the aforementioned Interstate Commerce Act of 1887 and the Sherman Anti-Trust Act of 1890. Naturally, Morgan decried the increasing hand played by government in the affairs of business. “The time is coming when all business will have to be done in glass pockets,” he said, after the Supreme Court found his Northern Securities concern an illegal enterprise in 1909, according to Encyclopedia of American Business History and Biography.

Morgan’s role in creating U.S. Steel made a significant difference in helping that particular economy thrive in the following decades. Demand for steel greatly increased; steel wire was needed to enclose grazing lands out West, and other variations of the strong metal were needed for a growing urban America, such as nails, skyscraper skeletons, and tubes for steam boilers. Still, the popular image of Morgan at the time, fanned by tabloid-style newspapers, was as an enormous, greedy tycoon. Such images had political repercussions. Because of the Panic of 1907 and Morgan’s role in it, he again came under Congressional suspicion and faced the Pujo Committee in 1912. The Pujo Committee was part of the House Banking and Currency Committee and investigated insurance practices. It found that among the country’s public utilities and banking, insurance, and transportation giants, transactions and profits seemed to be controlled by a very small number of men, Morgan among them. To avoid the periodic economic panics and the reliance upon Morgan and others to help out, Congress finally voted to create a Federal Reserve System in 1913 within the department of the Treasury. Such an institution had been attempted on other previous occasions in American history, but had until then been viewed with suspicion as perhaps too powerful an economic force. It was only the influence wielded and profits reaped by men like Morgan that helped sway public and legislative opinion.

Morgan died during the Pujo Committee aftermath while staying at the Grand Hotel in Rome. He left a fortune estimated at $68 million, which was separate from his extensive collection of fine art. He had built up a superb rare book and manuscript collection that included several historically significant pieces, such as the first Bible ever printed in North America. He served as president of Metropolitan Museum of Art, to which he bequeathed his extensive art collection. His rare books and manuscripts, at first housed at his mansion at Madison Avenue and 36th Street in New York, were moved to the Pierpont Morgan Library.

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