Examine the success of any titan of industry,
whether it be Carnegie and his mountains of
steel, or Rockefeller and his sea of oil,
and you will find a coveted green commodity
fueling their industry ...
Money.
And in the 1800s, one man controlled more
of it than any other;
John Pierpont Morgan.
To understand the vast scope of Pierpont’s
influence, we must first rewind to a time
long before America was an economic powerhouse
with a 21 trillion-dollar GDP.
It’s all too easy to forget that America
was once an emerging market;
one that, not too long ago, was almost entirely
dependent upon British capital.
So, without further ado, let’s explore the
story of how a combination of timing, genius,
and connections made J.P. Morgan the most
powerful man in the history of American finance.
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Typically, we begin someone’s life story
at birth, but the story of JP Morgan cannot
be told without mentioning the influential
family that brought him up.
Pierpont’s grandfather, John Pierpont, was
a radical and fiery preacher,
and would introduce his grandson to the power
of forceful speaking —
a skill that would later pay dividends for
the future captain of industry.
But a far more towering and instrumental figure
in Pierpont’s life, was his father;
Junius Spencer Morgan.
Junius was a highly-respected businessman,
in both the American and
European banking industry.
And he largely took it upon himself to shape
his son into his own ‘cool’ and ‘collected’
image; grooming the young boy to inevitably
join the family banking business.
No other man comes close to having the same
kind of impact on Pierpont’s life,
than his beloved father.
Although, their father-son relationship is
probably best described as
“tough love”.
But, we’re getting ahead of ourselves.
John Pierpont Morgan was born into this privileged
life on April 17th, 1837,
with every advantage that could be given to
prepare him for what was to come.
But it wasn’t all sunshine and rainbows
for the young Morgan.
He was a sickly child.
As an infant, he suffered from seizures, and
as he grew
older, was often plagued with rheumatic fever,
scarlet fever, and painful
migraines.
But certainly his most visible medical complication
was his acne rosacea –
which severely inflamed and ruptured the blood
vessels of his nose.
Lacking treatment in the mid-1800s, his condition
progressively worsened;
transforming his nose from “unsightly”
to a disfigured red and purple monstrosity.
Although you certainly wouldn't know that
by looking at most pictures of
JP Morgan, which is the way he wanted it to
be.
According to his great grandson, any time
Morgan commissioned a portrait or
photo of himself, he demanded that his gargantuan
nose be touched-up,
after-the-fact.
Essentially, the 1800s equivalent of photoshop.
Pierpont’s various medical problems required
isolation, turning him into
somewhat of a loner.
Unable to play outside like most of the other
kids, Pierpont stayed inside,
where he spent his time studying and learning
to read financial statements.
In the rare moment that he wasn’t absorbing
information, Pierpont found comfort
in playing the card game, Solitaire — a
pastime that became one of his
life-long pleasures.
Back in the classroom, Pierpont was a natural
leader.
He would often
challenge his teachers, and, using logic,
talk them down from punishing him.
As he went through school, his leadership
skills caught the eye of his seemingly impossible-to-please
father, Junius, who would focus his energies
on helping Pierpont cultivate his promising
potential for the business world.
Influenced by his father’s success, Pierpont
became fascinated with
successful men, and made a habit of collecting
autographs from presidents
and other famous figures.
His fascination with powerful leaders led
him to write a school essay
on Napoleon Bonaparte.
And although his parents tried to introduce
him to American heroes, Pierpont
was solely impressed with Napoleon, and heavily-inspired
by the general’s
insatiable appetite for global power — an
idea that struck a chord with the future
leader.
On October 1st, 1854, Pierpont’s father,
Junius, was made partner at the London-based
financial firm, George Peabody & Company.
Soon after, the Morgan family relocated to
London.
But Pierpont, then just 17, wouldn’t be
staying very long.
Concerned about his son’s mood swings and
hot temper, Junius sought to instill principles
of discipline and responsibility.
Wanting only the best for Pierpont, Junius
sent him to the Institut Sillig,
a Swiss boarding school on Lake Geneva, 600
miles away.
It wouldn’t be his first time far apart
from his family.
When he was only 15, Junius sent Pierpont
to the remote islands of the Azores
to help him recover from rheumatic fever.
Alone, all by himself, he’d spend an entire
year recovering from his illness.
Perhaps this was part of his father’s unique
parenting plan to help “toughen”
Pierpont; helping the boy to become independent.
After school, Pierpont began his career on
Wall Street, aiming to profit from the
lucrative, emerging American market.
With the help of his father, Pierpont secured
a starting position as an unpaid
clerk with a small banking firm in New York.
One of his chief responsibilities was providing
overseas intelligence to his father in London;
sending the latest American economic and political
updates.
For 33 years, Pierpont reserved Tuesday and
Friday evenings to write to his father, who
not only absorbed his son’s lengthy letters,
but cherished them.
With his new position on Wall Street, Pierpont
gained invaluable first-hand
experience in the business world.
But his tireless ambition soon outgrew that
small firm, and in 1861, started his
own company, J Pierpont Morgan & Company.
One of the dividends of working in the banking
industry was Pierpont’s
introduction to New York’s elites, allowing
him to mingle with those of
high-society.
It was at one of these gatherings when one
young woman caught his interest
and deposited a fierce love in his heart;
Amelia Sturges.
Amelia, or Mimi, as she was more commonly
known, came from a banking
family as well, and when Pierpont first met
her, he was mesmerized.
Over the next 3 years, Pierpont and Mimi were
inseparable.
And as his business grew, he used his new
wealth to buy her a ring from
Tiffany’s, planning to propose.
But their lives would soon take a turn for
the worst.
Preparing for a wedding in a few months, Mimi
approached Pierpont that
summer with a lingering cough.
And although Mimi said she was too sick for
a wedding, Pierpont rushed to
marry the woman of his dreams in October of
1861.
By this time, she had become so frail that
Morgan had to carry her down the
stairs to her own wedding.
Hoping that a warmer climate would cure her
cough, Pierpont took his bride on
an extended honeymoon to the Algiers.
Concerned, Morgan hired the best doctors that
money could buy.
But as her condition deteriorated, physicians
confirmed Morgan’s worst fear:
Tuberculosis, a disease almost always a death
sentence in those days.
Sadly, it became evident that no amount of
money could change her fate.
Although J.P. Morgan was as attentive as could
be, Mimi Morgan died on
February 17th, just 4 months after their wedding.
Pierpont was heartbroken, and returned to
New York a shell of who he once was.
Coping with the pain of loss, Morgan threw
himself wholeheartedly into his work.
With long days and strict discipline, the
next two years were consumed with
growing his reputation as a trustworthy American
banker.
It was during this time, however, that America
would go to war … with itself.
North fighting South, the Civil War would
soon reach Morgan when Congress
passed the Conscription Act in March of 1863,
drafting all able-bodied men
between 20 to 45 to enlist in the Union Army.
But John Pierpont Morgan was too far busy
and important to dirty his hands
with something as trivial as war.
Following in the footsteps of other men of
means like Andrew Carnegie and John D. Rockefeller,
Morgan paid $300 to be removed from enlistment
and
instead have a substitute fight in his place.
He would fondly refer to his stand-in as,
“the other Pierpont Morgan”.
But Pierpont wouldn’t sit idle on the sidelines
of battles — the business of war
was too lucrative for such nonsense.
As the battles raged on, Morgan found a way
to profit from the carnage;
trading Union bonds.
He recognized that bond prices seesawed in
value following the news of each battle’s
outcome between the Union and Confederate
Army – the ability to foresee the winner
of a battle meant big profits.
Along with Union bond speculation, Morgan
also found other ways to monetize the war.
In what would later become known as the Hall
Carbine Affair, the 24-year-old
Pierpont was approached with a unique business
proposal from a New York
lawyer named Simon Stevens.
Stevens proposed that Morgan lend him $20,000
at 7 percent interest
to purchase approximately five-thousand antiquated
rifles, called Hall Carbines.
Widely regarded as outdated, yet still serviceable,
Stevens could purchase the rifles from the
Union army at the bargain price of just three-dollars-and-fifty-cents
apiece.
Using Morgan’s loan, Stevens’ plan was
to modernize the rifles, by upgrading their
cartridges; which would improve their range
and accuracy.
After upgrading the weapons at the cost of
only seventy-five cents more per rifle, Stevens
would then flip the guns – selling them
back to the army, and using the proceeds to
repay Morgan’s loan with interest.
The plan worked to a tee.
Following the defeat of the Union army at
the First Battle of Bull Run, the North suddenly
found itself desperate for rifles.
Reluctantly, the army agreed to repurchase
the newly modified weapons at the steep price
tag of $22 each — despite selling these
same guns for just three-dollars-and-fifty-cents
only about a month prior.
Two years later, a Congressional committee
overseeing government contracts
labelled those involved in the Morgan-backed
deal as being:
“Worse than a traitor”.
These types of deals didn’t make Pierpont
popular, however, especially with his
father – for Junius lived by a conservative
and non-speculative business
philosophy; born from his first-hand experience
during the Panic of 1857.
“Slow and sure should be the motto of every
man.”, he preached.
Despite his hectic deal-making schedule, Pierpont
always made the time for religion, and devoutly
attended Saint George’s church in Manhattan.
On one of these Sunday mornings, Pierpont
met Frances Louisa Tracy.
Fanny, as was her nickname, wasn’t immediately
interested in Pierpont,
but over time, Morgan wore her down.
By the end of 1864, the two were an item.
Although he had waited 3 years to marry Mimi,
he waited just a few months to marry Fanny
on May 31st, 1865.
9 months and 10 days later, Fanny gave birth
to Pierpont’s first daughter, Louisa.
Two years later, his first son was born, J.P
Morgan Junior.
At this time in America, wealth and prosperity
was on everyone’s mind.
The end of the Civil war pushed the country
into a multi-decade boom,
later dubbed as the Gilded Age; the Age of
Enterprise.
From 1870 to 1910, America’s population
and per capita income more than doubled, as
robber barons and business tycoons took the
nation by storm.
Names like Carnegie, Rockefeller, and Vanderbilt
were on everyone’s lips,
as entire industries were birthed seemingly
overnight.
But as the country grew, so did its need for
capital.
Backed by the old-world money that Pierpont’s
father was working with back in
London, JP Morgan was perfectly positioned
on Wall Street.
It was the epitome of being in the right place
at the right time.
The only problem was that JP Morgan was finished.
At age 33, with the world ready to beat down
his door, JP Morgan was tired.
It looked like retirement was the only option
for him to cure his weary body.
But his father would have none of it.
Junius had worked too hard in London to cultivate
ties with America to let his son stop now.
If health was the issue, then he would graciously
allow his son some time off, but Pierpont
would not be permitted to leave the banking
business altogether.
Junius Morgan arranged a new partnership for
Pierpont.
One of his contacts with substantial ties
in London was a Philadelphia banker by the
name of Anthony Drexel, a man who was 11 years
Pierpont’s senior —
a conscious decision by Junius to surround
the young Morgan with older and wiser minds.
Drexel’s American firms were already raking-in
three-hundred-and-fifty-thousand a year, and
had established trade
partnerships overseas.
Armed with five million dollars of seed capital
from Junius, Pierpont and Drexel formed a
new venture, creating Drexel, Morgan & Company
in 1871.
As per his father’s wishes, the younger
Morgan agreed to join the partnership, under
one condition:
a desperately needed vacation.
Pierpont wasn’t thrilled at the prospect
of going back into the office: he was exhausted.
In fact, throughout the financier’s life,
he would regularly take vacations for several
months each year, desperately needing to recharge.
He often joked that he could accomplish 12
months of work in just 9 months time.
After returning from a 15-month vacation in
Europe and Africa, JP Morgan purchased a 368-acre
property in Highland Falls on the Hudson River,
north of New York City.
This sprawling estate, known as Cragston,
would be where he escaped the noise of the
city and raised his growing family; the Morgans
added another two daughters in the next couple
of years.
Unsurprisingly, Pierpont cared about excellence
in every area of his life.
He was as precise with his gardens as his
finances.
It was well-known that he cultivated his own
roses and took special care to only select
the best flowers for his stately home.
And just like pruning his plants on the weekend,
he was careful to avoid weeds that threatened
to sprout in his business.
Back at his office on 23 Wall Street, he demanded
that women only be allowed in the building
once a year, on New Year’s Day, when the
markets were closed.
His partner had a female secretary who had
to be stationed across the street, so as not
to distract the busy businessman.
That level of focus led to unheard of success
in the banking business.
While the country’s median annual income
was just five-hundred-dollars a year, Morgan
was regularly making over five-hundred-thousand
a year.
But it was more than his financial genius
that made him so successful;
it was also his intimidating image, which
was only exacerbated by his bulbous and deformed
nose.
His fierce gaze was described as like staring
into the light of an oncoming train.
He towered over men, standing an impressive
six-foot-two, a full 8 inches over the average
man’s height at the time.
Morgan used his daunting appearance to bend
his opponents to his will, especially those
in the railroad industry.
Unlike most businesses with relatively low
barriers to entry, starting a railroad could
cost anywhere from seventeen to thirty-five
million dollars.
Fortunately for Drexel, Morgan & Company,
there were just a handful of banks that could
finance projects of such magnitude.
But despite the high startup costs, the railroad
industry had overexpanded;
with several companies offering lines that
competed with one another, all trying to service
Americas’ never-ending growth.
During this time, it was common for one person
to control the interests of an entire industry.
Carnegie was forging more steel than all of
Great Britain.
Rockefeller was refining as much as 90% of
America’s oil.
But the rails, on the other hand, were quite
the opposite.
Whereas other industries were largely monopolized,
many railroad owners
dealt with cut-throat competitors.
It wasn’t uncommon to have multiple companies
lay rail lines along the same route to compete
with one another, driving down margins.
But whereas others saw over-expansion, Morgan
saw opportunity.
Instead of passively owning stock in railroad
companies, Morgan would play an active role
in the corporate management of rails he invested
in.
By taking a position in a company, and joining
its board of directors, Morgan could reshuffle
the company’s leadership and then direct
the company the way he saw fit.
The practice grew so popular that it later
became known as “Morganization”, although
today, we know it as activist investing.
It was said that, despite serving as a director
on many boards, the true
chairman was always wherever Pierpont sat.
On one rare occasion, when a railroad president
challenged his leadership,
JP Morgan responded:
“Never forget, your railroads belong to
my clients.”
Over time, Pierpont gained an unparalleled
reputation as an honest and
forthright dealmaker.
And at a time when government regulatory agencies
didn’t exist, he was known as “the sheriff”
in the Wild West of trains.
Having Morgan on your board was a deterrent;
one that would cause
corporate raiders and robber barons to think
twice about attempting a hostile
takeover.
Brokering larger and larger deals, Morgan
perfected the art of consolidation, as his
growing reputation helped to attract even
more business for his firm.
So when two railroad giants threatened to
take down the rail industry and crash the
entire American economy, it’s no surprise
that Morgan’s power was called into action.
But the scale of this deal required Pierpont
to set the stage in a way that had never been
tried before … the stakes could not have
been higher.
If you’ve ever heard the phrase “work
hard, play hard”, it was lived out with
JP Morgan.
Although he spent long hours in the office,
he exercised just as much effort in his leisure
time.
In 1882, JP Morgan joined the New York Yacht
Club, and purchased a 185 foot iron yacht,
which he called the Corsair.
He often used the vessel to commute to and
from work in the city, so that he wouldn’t
be tied down by the rail schedule.
In luxurious fashion, Pierpont also hosted
extravagant parties, as he cruised up and
down the Hudson.
Although the Corsair was mainly used for pleasure,
its staterooms would serve as the eccentric
boardroom for Morgan’s next meeting.
Two of the largest railroads in the country,
The Pennsylvania and The New York Central,
were battling each other at every turn, with
their margins growing thinner by the day.
But what these companies didn’t realize
was how their territorial wars were affecting
the American economy.
British investors, who had sunk $1.5 billion
into the industry, nervously watched as the
railroads edged ever closer to bankruptcy.
Before long, the British were quickly pulling
money out of US rail stocks, at the concerning
rate of $25 million a year.
This was particularly dangerous, considering
railroad companies consisted of over two-thirds
of America’s publicly traded companies at
the time.
If the two railroads collapsed, the domino
effect could have a catastrophic impact on
the infant American economy.
JP Morgan devised a daring plan that required
agreements on both sides of the tracks, but
neither rail president looked ready to concede.
So Morgan invited both of them to come aboard
the Corsair, where they sailed the Hudson
river, debating the details of Morgan’s
ambitious proposal.
In his typical unconventional and controlling
style, Morgan refused to dock until both parties
agreed to his terms – effectively holding
the railroad presidents hostage.
In the end, they wearily agreed to stay out
of each other’s territories.
This landmark victory became known as the
Corsair Pact.
For Morgan’s help in brokering the transaction,
he was generously rewarded with a $100,000
commission, along with a million-dollar profit
on his rail bonds.
A few years later on April 8th, 1890, Morgan’s
father, Junius, tragically passed away in
a carriage accident.
And while his father’s death was awful news,
it wasn’t entirely negative,
as Pierpont inherited the lion’s share of
his fortune, totaling 15 million dollars.
Although painful for Pierpont, it was also,
perhaps, liberating.
With his father gone, Morgan was now free
to invest and spend how he wanted, finally
enabling him to step-out from his father’s
overcasting shadow.
Overnight, JP Morgan’s wealth more than
doubled.
His first order of business was to immediately
purchase an even bigger yacht, which he very
creatively named the Corsair II.
When asked about the cost of building such
a mega-yacht, legend has it that the banker
answered;
“If you have to ask, you can’t afford
it.”
Few prices in life were too high for JP Morgan.
The opulent new Corsair II spared no expense;
boasting real fireplaces,
unique fine china, oak panelling, full-size
tubs, and central heating.
The yacht would cost him $100,000 a year in
maintenance alone.
Despite the steep price, Morgan considered
it well worth the investment, allowing for
a true escape from the office and the bombardment
of telegrams.
And although Morgan had plenty of cash to
keep himself afloat, the market would soon
poke holes in his business.
Enter The Gold Panic of 1893.
At the time, the U.S. dollar was tied to the
gold standard; which allowed for anyone to
convert their paper money into physical gold.
Because notes like the twenty or hundred-dollar
bill were essentially thought of as “vouchers”
for gold, the government always kept a minimum
reserve of one-hundred-million dollars worth
of gold coin and bullion.
It wasn’t a legal mandate, but keeping it
above that line meant the public still trusted
the government.
But in February of 1893, the government’s
reserves plunged well below the hundred-million
mark, as European investors exchanged their
U.S. currency for the precious metal.
The run on gold sparked widespread panic,
as people began to ask themselves;
“If the U.S. government ran out of gold,
would paper money really be worth anything?”
And as the country’s reserves drained-out
in a steady flow, banks and businesses began
to fold around the country, seemingly in unison.
With millions now unemployed, major corporations
turned to the same institutions that helped
them in the first place: the bankers of Wall
Street.
But the bankers had their hands full, especially
JP Morgan.
His darling industry, the rails, were collapsing
— with 192 lines declaring bankruptcy in
one year alone.
Eventually, a third of all train tracks in
America would be shuttered, impacting the
entire economy from coast-to-coast.
The people of the time would call this period
“The Great Depression”,
a name that wouldn’t be redefined until
1929.
Soon, JP Morgan would once again prove why
he was known as “The American Napoleon”,
as he turned his mighty will to the problem
at hand.
His reputation as a great consolidator would
prove him to be the right man for the job.
Intuitively, he knew that merging the railroads
was their only chance at survival, a move
which left many wondering if the banker held
too much power over this great American industry.
But when railroads came to him for help, he
would refuse — unless, he was given full
control.
This wasn’t the time for waiting around
— as all great businessmen know,
this was a time for decisive action.
After taking control of a rail line, Morgan
used his financial wizardry to strengthen
the company’s balance sheet; refinancing
its debt and issuing new shares to raise more
capital, among other strategies in his financial
playbook.
Over time, Morgan slowly pulled the brakes
on the out-of-control railroad industry.
And for his efforts, Drexel, Morgan and Company
was rewarded with a secure hold on all future
business with major rail lines, not to mention
some very handsome commissions.
Out of this 20-month financial feat, JP Morgan
walked out with more than just money, he also
gained new notoriety and fame.
His increasingly impressive reputation took
him farther than he had gone before, eventually
landing him in front of the highest office
in the land.
Although Pierpont was able to halt the railroad
catastrophe, America’s Treasury was still
in crisis mode.
Gold was the foundation of the entire US economy.
And that foundation was quickly crumbling.
In response, JP Morgan came up with a plan
to restore America’s gold reserves, which
he sent directly to President Grover Cleveland.
Confident that his plan would work, Morgan
retreated to his library to play solitaire,
waiting for the eventual “Yes” from the
President.
Within an hour, the reply came back ...
“No.”
President Cleveland instead opted to do what
the government had always done in the past;
sell bonds to the American public.
But Pierpont knew that issuing bonds would
take too long, when the government would default
on its debts within 3 weeks.
Without delay, JP Morgan rushed from New York
to Washington,
determined to meet with the President, a man
he considered his equal.
If the President was the king of the land,
then Morgan was unquestionably the emperor
of finance.
At first, the President denied seeing him,
to which Pierpont replied with an intense,
intimidating tone:
“I have come down to Washington to see the
President – and I’m going to stay here
until I see him.”
By this time, the situation was growing worse
by the hour, as the government was running
the serious risk of going bankrupt – leaking
$2 million a day from its gold reserves and
showing no signs of slowing.
The morning after his arrival, Morgan was
ushered-in to see the President and his several
cabinet members.
But the President and his men were not inclined
to listen to the Wall Street banker.
Luckily for Morgan, the treasurer received
a call in that meeting that their reserves
had dropped to $9 million.
Pierpont saw his opportunity and jumped.
He told the men in the room that he personally
knew of a draft for $12 million that, if presented
that day, would wipe out the US government
by 3 o’clock that afternoon.
Realizing their dire situation, President
Cleveland turned and asked:
“Have you anything to suggest, Mr. Morgan?”
Morgan offered a syndicate of U.S. and European
investors who could work together to invest
gold back into the government’s coffers.
Using an outdated loophole from an earlier
Civil-War law, Morgan demonstrated how the
Treasury could buy gold from Morgan’s private
syndicate, building-up their dwindling reserves
and plugging the leak.
More importantly, the loophole enabled the
President’s administration to bypass Congress,
a convenient way for Cleveland to make an
immediate decision.
In spite of the negative publicity of the
White House working with Wall Street, Cleveland
signed the contract with Morgan’s syndicate.
Within 22 minutes in New York City, and 2
hours in London, the private sale of the government’s
gold-bonds were completely sold.
Disaster now averted, Pierpont had successfully
bailed out the United States government – rescuing
the country from the brink of collapse and
restoring faith in the American economy.
But his motivations were not entirely altruistic,
as he pocketed a hefty commission for his
services in facilitating the transaction – raising
questions as to whether Morgan’s behavior
resembled more a profiteer than a patriot.
With this amount of influence, many were concerned
whether one man like Morgan should hold so
much power.
There’s no clearer example of this than
when JP Morgan was approached by Andrew Carnegie
in 1901.
Carnegie Steel was at its peak, netting $40
million a year, but Andrew Carnegie was ready
to retire from the business world.
So he wrote on a scrap of paper the amount
he’d be willing to sell his business for,
and had it delivered to Morgan’s office.
Taking just one glance at the $480 million-dollar
price tag, JP Morgan agreed on the spot, marking
the largest business transaction in history,
as well as minting Carnegie as the richest
man in the world at the time.
Later, when celebrating the deal, Carnegie
remarked that he should’ve asked for an
extra hundred million dollars.
“If you had, I would’ve paid it.”, replied
Morgan.
Using Carnegie Steel, Morgan formed the United
States Steel Corporation and continued his
consolidation-spree, effectively controlling
60 to 70 percent of the country’s total
production.
In doing so, he also created the world’s
first billion-dollar company, U.S. Steel,
then valued at $1.4 billion dollars; equal
to a staggering 7 percent of America’s GDP.
In addition to his iron-grip on the steel
industry, Morgan’s newest venture, Northern
Securities, had bought-up and controlled two
of the largest railroad companies in the nation.
This meant that Morgan owned one-third of
all rail lines, at a time when 60% of America’s
stock market capitalization consisted of railroad
corporations.
People began to whisper and speculate that
Morgan owned the United States.
One of those who believed the whispers was
the President himself;
Theodore Roosevelt.
Previous presidents, like Cleveland and McKinley,
were very much in favour of the mega-corporations
taking over the country — or, at least,
they didn’t seem to mind.
In stark contrast, Roosevelt was anti-monopoly,
and believed that the size of government should
grow with the size of American industry.
Needless to say, Morgan and the president
weren’t off to a great start.
Using the Sherman Anti-Trust Act of 1890,
Roosevelt worked hard to tear down companies
like Northern Securities and U.S. Steel.
At a time when there were no problems with
politicians receiving bribes from big business,
like free rail passes, President Roosevelt
was resolutely against those old-world practices.
Roosevelt saw JP Morgan as part of the problem
with America’s bumpy economy.
The President did not want giant corporations
to go unchecked.
Morgan and his Northern Securities would be
Roosevelt’s example to the whole world.
Without consulting his presidential cabinet,
Roosevelt publicly declared that Northern
Securities was being investigated for illegal
acts under the antitrust law.
And for the second time in his life, Morgan
rushed over to the White House demanding to
see the President.
He claimed that he should have been given
time to fix the problem and warned before
this hasty move.
“That is precisely what we did not want
you to do”, replied Roosevelt.
Eventually, Northern Securities would be broken-up
in 1904 as the Supreme Court overturned Morgan’s
appeal.
JP Morgan resented the government’s intrusion
into big business.
Upon hearing that President Roosevelt was
travelling to go hunting in Africa one year,
Pierpont remarked:
“Good.
I hope the first lion that meets him does
his duty.”
Although the two did not see eye-to-eye, President
Roosevelt, or Teddy, as he was also known,
had to admit that Morgan possessed a talent
for repairing entire economies.
This talent would be tested again in 1907,
when the stock market panicked after the failure
of the United Copper Company, which pulled
down the entire mining industry with it, along
with two brokerage houses, and a bank —
all within one weekend.
As it happened, the stock market panicked
again and a bank-run ensued.
One of the strategies used for slowing the
drain of capital from the nation's banks was
to have the tellers count money slowly, as
customers rushed to withdraw their money;
purposefully dragging-out each encounter with
depositors.
Perhaps this played a role in making the lines
so long in the historic bank-run photos we
know today.
If the public continued pulling money out
at the same time, the ramifications would
be felt for years.
President Roosevelt would need to set his
differences aside, as he knew there was only
one man who could solve this problem: John
Pierpont Morgan.
His administration called for Morgan to step-in,
extending twenty-five million dollars of government
funds to be used at Pierpont’s disposal.
Amidst the crisis, John D. Rockefeller offered
half of his personal fortune to Morgan if
it would help save the country from a depression.
Just like the business conducted on his yacht,
Morgan had to set the stage.
He arranged for heads of the nation’s largest
banks and trusts to meet in his private library
to work together to solve the national crisis.
Morgan reportedly laid out his plans for the
bigger banks and trusts to invest in their
smaller competitors.
He then locked the door and played Solitaire,
while the bankers negotiated amongst themselves.
Reporters anxiously camped outside, waiting
to hear the news.
By early morning, the leaders of the nation’s
largest banks and trusts had come to a resolution,
just like the Corsair Pact so many years before.
Morgan helped organize the capital needed
to bailout the failing banks.
And by the end of the week, another crisis
was averted.
JP Morgan was hailed a hero.
Walking down Wall Street, bystanders cheered.
But this would be the very last time that
one man, especially a Wall Street banker,
held that much influence over an entire country.
And even though Morgan was semi-retired and
well into his mid-70s,
he continued to face opposition for his unparalleled
influence.
By 1912, Morgan was commanded to appear before
the Pujo Committee,
a Senate-led group that was investigating
the extensive financial power held by a small
handful of all-mighty bankers.
And although the group was investigating numerous
banks, it soon became evident that JP Morgan
was the main target in the government’s
crosshairs.
But Pierpont remained adamant that he had
done nothing wrong.
When asked if he chased power, he claimed
that power was never something that he wanted.
Widely covered by the media, Morgan used the
platform to show off his diplomatic superpowers.
“Is not commercial credit primarily based
upon money or property?”
a lawyer on the sub-committee asked.
“No, sir, the first thing is character.”
Morgan cleverly replied.
“Before money or property?” the lawyer
countered.
“Before money or anything else.”
Morgan responded.
Spectators roared with applause.
Ultimately, the committee’s findings revealed
that Morgan single-handedly controlled more
than twenty-two billion dollars of capital
through his 112 corporations and 341 directorships;
effectively equating to more than two-thirds
of the country's GDP.
And although the senators were unable to find
Morgan guilty of any illegal wrongdoings,
the Pujo committee eventually paved the way
for the establishment of the Federal Reserve
and the permanent fixture of income taxes.
Despite being able to help America avoid multiple
economic depressions, Morgan couldn’t seem
to escape his own mental depression.
Pierpont suffered from nervous breakdowns
throughout his career, and grew increasingly
anxious as he grew wealthier, arguably because
he had more to worry about losing: not just
for himself, but for his clients.
Throughout his life, Morgan would confine
himself to his bed, usually several days each
month to recover from his various health complications.
Despite being the toughest banker who ever
lived, Pierpont was thin-skinned.
Worsening his manic-depressive episodes was
the public’s negative personification of
the financier, portraying him as a greedy
businessman.
He certainly didn’t enjoy seeing newspaper
cartoons portraying him as a devilish and
greedy monster.
Now, in his final years, he endured great
personal struggles; dealing with tremendous
criticism, all while trying to cement his
legacy as America’s most successful and
patriotic financier.
By this point, Pierpont lived to excess; draining
massive amounts of sherry and port, while
smoking dozens of cigars a day.
He was said to eat a breakfast so large that
it would kill a horse.
It was certainly no aid to his health when
he learned about the shipwreck of one of his
investments; the Titanic – a vessel which
he owned through his shipping trust.
Interestingly, it was only a last-minute fluke
that he and his multi-million dollar art collection
weren’t on the fateful ship when it went
down on April 14th, 1912.
Perhaps it was all too much for the 75 year-old
titan.
While traveling in Rome, on March 31st, 1913,
Morgan passed away,
shortly after midnight.
His son J.P Morgan Junior, attributed his
death to the Pujo committee – which caused
his father so much distress.
Out of respect, Wall Street not only flew
its flags at half-mast but closed the New
York Stock Exchange until noon.
At the time of his death, his personal net
worth was calculated to be around 80 million
dollars, approximately half of which was in
his art holdings alone.
Andrew Carnegie commented on Morgan’s passing,
upon hearing about his paltry fortune, which
paled in comparison to other titans such as
himself, remarking;
“And to think that he wasn’t even a rich
man.”
Most captains of industry believed he was
far richer than he actually was.
But Morgan’s legacy extends far beyond the
weight of his wallet.
After his passing, many of his paintings were
donated to the Metropolitan Museum of Art,
where they can still be viewed today.
However, art only comprised around 5% of his
various collections.
He also boasted a portfolio of other invaluable
items; such as Napoleon’s watch, Leonardo
da Vinci’s notebooks, and a 5-page letter
from George Washington, among many more countless
treasures.
His personal library was opened to the public
in 1924, and it remains a testament to the
amount of influence that one man can aggregate
in his lifetime.
The principles that we take away from JP Morgan’s
life are, of course, about influence and power.
No matter who met him, everyone could appreciate
Pierpont Morgan’s unrestrained and fierce
honesty.
Even Morgan’s arch rival, President Roosevelt,
couldn’t help but praise the man:
“Mr. Morgan was politically opposed to me,
but whenever I was brought into contact with
him, I was struck not only by his very great
power, but by his sincerity and truthfulness.”
We hope that you face your own challenges
with the same drive and passion as JP Morgan:
honest and sincere, in whatever you pursue.
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