J.P. Morgan

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“Go as far as you can see; when you get there, you’ll be able to see farther.”

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John Pierpont “J.P.” Morgan (April 17, 1837 – March 31, 1913) was an American financier, banker, and art collector who dominated corporate finance and industrial consolidation during his time. In 1892, Morgan arranged the merger of Edison General Electric and Thomson-Houston Electric Company to form General Electric. He was instrumental in the creation of the United States Steel Corporation.

At the height of Morgan’s career during the early 1900s, he and his partners had financial investments in many large corporations and had significant influence over the nation’s high finance and United States Congressmembers. He directed the banking coalition that stopped the Panic of 1907. He was the leading financier of the Progressive Era, and his dedication to efficiency and modernization helped transform American business.

Morgan died in Rome, Italy, in his sleep in 1913 at the age of 75, leaving his fortune and business to his son, John Pierpont Morgan, Jr.

Childhood and education

Morgan was born into the influential Morgan family to Junius Spencer Morgan (1813–1890) and Juliet Pierpont (1816–1884) in Hartford, Connecticut, and was raised there.[1][2] Pierpont, as he preferred to be known, had a varied education due in part to the plans of his father. In the fall of 1848, Pierpont transferred to the Hartford Public School and then to the Episcopal Academy in Cheshire, Connecticut (now called Cheshire Academy), boarding with the principal. In September 1851, Morgan passed the entrance exam for theEnglish High School of Boston, a school specializing in mathematics to prepare young men for careers in commerce. In the spring of 1852, an illness which was to become more common as his life progressed struck; rheumatic fever left him in so much pain that he could not walk. Junius sent Pierpont to the Azores to recover.[3]

After convalescing for almost a year, Pierpont returned to the English High School in Boston to resume his studies. After he graduated, his father sent him to Bellerive, a school near the Swiss village of Vevey. When Morgan had attained fluency in French, his father sent him to the University of Göttingen in order to improve his German. Attaining a passable level of German within six months and also a degree in art history, Morgan traveled back to London via Wiesbaden, with his education complete.[4]

Career

Early years and life

Morgan went into banking in 1857 at the London branch of merchant banking firm, Peabody, Morgan & Co., a partnership between his father and George Peabody founded three years earlier. In 1858, he moved to New York City to join the banking house of Duncan, Sherman & Company, the American representatives of George Peabody and Company. During the American Civil War, Morgan purchased five thousand defective rifles from an army arsenal at $3.50 each[5] and then resold them to a field general for $22 each.[5]Morgan had avoided serving during the war by paying a substitute $300 to take his place.[5] From 1860 to 1864, as J. Pierpont Morgan & Company, he acted as agent in New York for his father’s firm, renamed “J.S. Morgan & Co.” upon Peabody’s retirement in 1864. From 1864–72, he was a member of the firm of Dabney, Morgan, and Company. In 1871, he partnered with the Drexels of Philadelphia to form the New York firm of Drexel, Morgan & Company. At that time, Anthony J. Drexel became Pierpont’s mentor at the request of Junius Morgan.[6]

J.P. Morgan & Company

Main article: J.P. Morgan & Co.

After the death of Anthony Drexel, the firm was rechristened “J. P. Morgan & Company” in 1895, retaining close ties with Drexel & Company of Philadelphia; Morgan, Harjes & Company of Paris; and J.S. Morgan & Company (after 1910 Morgan, Grenfell & Company), of London. By 1900, it was one of the most powerful banking houses of the world, focused especially on reorganizations and consolidations.[citation needed]

Morgan had many partners over the years, such as George W. Perkins, but always remained firmly in charge.[7] His process of taking over troubled businesses to reorganize them became known as “Morganization.”[8] Morgan reorganized business structures and management in order to return them to profitability. His reputation as a banker and financier also helped bring interest from investors to the businesses he took over.[9]

Treasury gold

In 1895, at the depths of the Panic of 1893, the Federal Treasury was nearly out of gold. President Grover Cleveland accepted Morgan’s offer to join with the Rothschilds and supply the U.S. Treasury with 3.5 million ounces of gold[10] to restore the treasury surplus in exchange for a 30-year bond issue. The episode saved the Treasury but hurt Cleveland’s standing with the agrarian wing of the Democratic Party, and became an issue in the election of 1896, when banks came under a withering attack from William Jennings Bryan. Morgan and Wall Street bankers donated heavily to Republican William McKinley, who was elected in 1896 and re-elected in 1900.[11]

Newspapers

In 1896, Adolph Simon Ochs, who owned the Chattanooga Times, secured financing from Morgan to purchase the financially struggling New York Times. The New York Times became the standard for American journalism by investing in news gathering and insisting on the highest quality of writing and reporting.[12]

Steel

J. P. Morgan in his earlier years

After the death of his father in 1890, Morgan took control of J. S. Morgan & Co. (which was renamed Morgan, Grenfell & Company in 1910). Morgan began talks with Charles M. Schwab, president of Carnegie Co., and businessman Andrew Carnegie in 1900. The goal was to buy out Carnegie’s steel business and merge it with several other steel, coal, mining and shipping firms. After financing the creation of the Federal Steel Company, he finally merged it in 1901 with the Carnegie Steel Company and several other steel and iron businesses (including Consolidated Steel and Wire Company, owned by William Edenborn), to form the United States Steel Corporation. In 1901 U.S. Steel was the first billion-dollar company in the world, having an authorized capitalization of $1.4 billion, which was much larger than any other industrial firm and comparable in size to the largest railroads.

U.S. Steel aimed to achieve greater economies of scale, reduce transportation and resource costs, expand product lines, and improve distribution.[13] It was also planned to allow the United States to compete globally with theUnited Kingdom and Germany. Schwab and others claimed that U.S. Steel’s size would allow the company to be more aggressive and effective in pursuing distant international markets (“globalization“).[13] U.S. Steel was regarded as a monopoly by critics, as the business was attempting to dominate not only steel but also the construction of bridges, ships, railroad cars and rails, wire, nails, and a host of other products. With U.S. Steel, Morgan had captured two-thirds of the steel market, and Schwab was confident that the company would soon hold a 75 percent market share.[13] However, after 1901 the business’ market share dropped. Schwab resigned from U.S. Steel in 1903 to form Bethlehem Steel, which became the second largest U.S. steel producer.

Labor policy was a contentious issue. U.S. Steel was non-union and experienced steel producers, led by Schwab, wanted to keep it that way with the use of aggressive tactics to identify and root out pro-union “troublemakers.” The lawyers and bankers who had organized the merger—notably Morgan and CEO Elbert Gary—were more concerned with long-range profits, stability, good public relations, and avoiding trouble. The bankers’ views generally prevailed, and the result was a “paternalistic” labor policy. (U.S. Steel was eventually unionized in the late 1930s.)[14]

Morgan corporations

From 1890–1913, 42 major corporations were organized or their securities were underwritten, in whole or part, by J.P. Morgan and Company.[28]

Industrials

John Pierpont Morgan

Railroads



 

This profile is partly adapted from a Wikipedia entry on J.P. Morgan, available under the Creative Commons Attribution-ShareAlike License.

 

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