History is proving kinder to J. Pierpont Morgan than many of his contemporaries were. Reviled in his time as the prototypical plutocrat, Morgan has been rediscovered as the architect of the 19th-century American industrial expansion and a patriot attentive to the call of duty.
Last week, the integrity and prestige of the namesake J. P. Morgan & Co. bank was the focus of much of the commentary that attended the announcement that the bank would be taken over by Chase Manhattan Corp. to create an institution valued at more than $96 billion. One headline suggested: "Some say Morgan lost independence by trying to be true to founder's goals," meaning that in a free-wheeling world it had been unable to retain its role as financial pillar to the richest and most powerful.
Morgan himself emerged as a more complex and nuanced figure in a biography published last year, "Morgan: American Financier," by Jean Strouse. She began her research with the conviction that Morgan was "an icon of capitalist greed," Strouse writes in her introduction. But after "listening to the evidence," she found a complicated man with a paternalistic sense of public responsibility, who lacked the political sensitivity to understand that capitalism brought problems as well as opportunities.
Of course, the interests of his country, as he conceived them, often coincided with his own interests, and he made a great deal of money. But not as much as people thought. When Morgan's estate was settled after his death in 1913, it came to about $80 million. (Strouse estimates that as roughly $1.2 billion in today's dollars.) It didn't impress John D. Rockefeller, who had 10 times more. "And to think," the oil tycoon sniffed, "he wasn't even a rich man."
He was a powerful man, though. For a half-century, from the Civil War to the eve of World War I, Morgan mobilized the capital that financed the formation of many of America's railroads and major corporations, including the corporate ancestors of U.S. Steel, General Electric and AT&T.; More than anyone else, he transformed America's banking system from local loan-makers serving farmers and storekeepers into the financial hub of the world. And when there was a panic on Wall Street or a gold run on the U.S. Treasury, he organized the bail-outs.
While Morgan was alive, the United States needed no formal central bank. Within months of his death, the government set up the Federal Reserve to regulate the supply of money and credit, serve as the lender of last resort and intervene in times of panic.
The roots of the J. P. Morgan bank trace to 1838, when an American merchant, George Peabody - the man who endowed Baltimore's Peabody Institute - founded a bank in London to bring European investment capital to the United States. Peabody later took Junius S. Morgan as a partner, and in 1861, Morgan's 24-year- old son, Pierpont, was set up in New York to handle the American end of the business.
Pierpont Morgan made his first killing, however, as a war profiteer, not a banker. When the Civil War began, he paid a substitute $300 to take his place in the Union army. Then he set about buying guns from the government, upgrading them and selling them back at a handsome markup.
In the expansion years that followed the Civil War, Morgan helped build railroads and industries. These were times of frenzied competition, ruinous price wars, boom-and-bust cycles, spectacular bankruptcies and spectacular fortunes. Morgan used his leverage as supplier of capital to force weak or warring companies into combinations.
The process came to be called "Morganization." By disciplining the companies, he stabilized the economy and raised the cash to fuel the growth of industries. But then, as now, business mergers often meant lost jobs. When workers tried to form labor unions to protect jobs and wage levels, bloodshed frequently followed.
As the symbol of exploitative capitalism, Morgan became one of the most hated men in the country. He was easy to caricature, with his austere stare, penchant for cigars (made especially for him in Havana) and bulbous nose.
His gaze was described by the photographer Edward Steichen as like "looking into the lights of an oncoming express train." British writer E. M. Forster thought him a soulless incarnation of greed: "If you could pierce through him, you'd find panic and emptiness in the middle." Historian Henry Adams accused him of "trying to swallow the sun."
The nose, said a woman friend quoted in Strouse's book, was "a Cyrano nose of vast blue oozing glands, ... a hideous deformity." It was caused by a condition known as rhinophyma, or excess sebaceous tissue. Morgan never sought medical treatment for his nose. He was something of a hypochondriac, Strouse notes, having suffered from seizures in his childhood and bouts of depression, or "nervous exhaustion," in adulthood; he may, she suggests, have left the nose untreated on the assumption that some other infirmity would take its place.
The depressions caused Morgan to take frequent months-long vacations. He could do a year's work in nine months, he would say, but not in 12. He used these trips to bring Old World art to an America that then had little art of its own.
Strouse reckons that Morgan spent nearly half his fortune buying Old Master paintings, sculptures, tapestries, rare books including Gutenberg Bibles, Chinese porcelains, Roman frescoes, medieval reliquaries, Regency furniture and other treasures. The art connoisseur Bernard Berenson gibed that Morgan's London house looked like "a pawnbroker's shop for Croesuses."
Morgan donated much of his art to the Metropolitan Museum of Art and served as the museum's president. He built a lavish - "almost papal," in Strouse's description - mansion and library to house the rest.
In 1907, Morgan became briefly a national hero after he locked 50 bankers in his Madison Avenue mansion and refused to let them out until they had subscribed to a $25 million rescue plan to stop a Wall Street panic. But this was the Progressive era, distrustful of concentrated power in private hands. In 1912, Congress launched an investigation into whether a "money trust" controlled the American economy. Morgan, by now known as "the Napoleon of Wall Street," was summoned to testify.
Strouse's retelling of the hearings shows two men talking past each other. The committee counsel, Samuel Untermeyer, showed that officers of five New York banks held 341 directorships in 112 U.S. companies - in banks, utilities, insurance, transportation, manufacturing and trade. Was that not a "trust" to control the nation's money and credit?
Morgan insisted otherwise - that money cannot be controlled. "The first thing," he said, "is character." He would lend to a pauper if he believed in the man; but "a man I do not trust could not get money from me on all the bonds in Christendom."
The testimony was well received, but Morgan, already an old man, lived only a few months more. Upon his death at 75, Untermeyer acknowledged: "Mr. Morgan was animated by high purpose and ... he never knowingly abused his almost incredible power."
Still, that power was daunting. The New York World expressed its "bewilderment that a self-ruling people should ever have allowed one man to wield so much power for good or evil over their prosperity and general welfare, however much ability and strength and genius that man possessed."