Two individuals named John Pierpoint Morgan, father and son, were leaders in the world of finance and industry in the late 19th and early 20th centuries. Under their guidance, the firm of J.P. Morgan and Company built a reputation that made it synonymous in many minds with Wall Street itself.
John Pierpoint (J.P.) Morgan was born on April 17, 1837, in Hartford, Connecticut. The Morgan family had arrived in New England in 1636 and had become prosperous farmers. J.P. Morgan's grandfather Joseph acquired some profitable business ventures, and his son Junius Spencer Morgan was already a thriving dry-goods wholesaler at the time of Pierpoint's birth. As the boy was growing up, J.S. Morgan entered the world of finance and joined the banking firm of George Peabody & Co. in London, the British arm of the American George Peabody's banking interests.
J.P. Morgan's early education included a variety of schools, where he was particularly adept at mathematics. He attended a school in Vevey, Switzerland for two years where he mastered French. After Vevey, he went to Gottingen to continue his studies and learn German. Having acquired a degree from the University of Gottingen after two more years and learning adequate German, his formal education was complete.
J.P. Morgan's first office job was in his father's London office as as clerk. Before long, he returned to New York City, where he joined the firm of Duncan, Sherman & Co., the American correspondent for the Peabody banking interests. Upon Peabody's retirement in 1864, J.S. Morgan reorganized the London operation as J.S. Morgan & Co., and teamed up with his son and Charles H. Dabney as Dabney, Morgan & Co. in New York to handle the American end. Dabney retired in 1871, at which point the Morgans and Anthony Drexel of the Philadelphia banking family formed Drexel, Morgan & Co. The elder Morgan died in 1890 and Drexel in 1893. From January 1, 1895, the firm became known as J.P. Morgan & Co.
J.P. Morgan had been making money the firm in many ways for many years. His first coup at the outset of the Civil War was one of the most controversial, when he provided the financial banking for a transaction that bought carbines from and resold them immediately back to the federal government at a large profit. It was charged that the guns were available cheaply because they were defective, which may not be true, but it's hard to avoid the conclusion that Morgan profiteered. As was customary for men of wealth, Morgan paid for a substitute to serve for him in the Union Army.
In 1879, Morgan established his reputation for financial dealings when he unloaded stock in the New York Central Railroad for $25 million on behalf of William H. Vanderbilt. The sales took place in London and did not depress the share values in New York. Morgan made $3 million for the firm.
Morgan was active in creating some of the largest American corporations. He merged Thomas A. Edison's electrical works with others to form General Electric. He joined the steel business of ^Andrew Carnegie with others to form the world's first billion-dollar corporation, United States Steel. It became the general practice to have Morgan representatives on the boards of the company's thus created, giving Morgan an influence over corporations with value out of all proportion to his equity interest.
Between the demise of the Second Bank of the United States and the creation of the Federal Reserve System in 1913, there was no formal central bank in America. After the Civil War, the House of Morgan performed this role in emergency situations. In 1871, J.P. Morgan covered the payroll for the entire U.S. Army when a deadlocked Congress was unable to pass the necessary legislation. In 1895, he obtained $65 million in gold so that the United States government could continue to redeem currency for the precious metal.
Morgan gained his greatest fame in the Panic of 1907, when in concert with other Wall Street financiers, he stopped the run on the banks by determining which were sound and allowing those who were to reopen with his backing. While this was a great service to the nation, it revealed the enormous influence that one man had in the U.S. economy. The repercussions of this included an investigation by Congress and in turn the establishment of the Federal Reserve.
The first J.P. Morgan died in Rome on one of his annual trips to Europe on March 13 in 1913, the year that the Federal Reserve was established. He was succeeded in the business by his son, also J.P. Morgan. Born at Irvington, New York, on September 7, 1867, the next J.P. Morgan was Harvard educated, where he graduated in 1889. Like his father, he did a brief stint in London before joining the New York office, becoming a partner in 1892. After assuming full control of J.P. Morgan & Co., his greatest success was the financing of $1.5 billion of allied military purchases in the United States during World War I.
The younger Morgan was a power in American finance, but the tide was running against him. During the period of his father's dominance, British capital was essential for the expansion of American commerce and industry, and the excellent connections that the House of Morgan enjoyed in London worked strongly to its advantage. After World War I, the world's financial center of gravity shifted to New York, and the Morgan advantage became less important.
In addition, the tenor of the times had changed. When the House of Morgan stopped the Panic of 1907, it was criticized for being dominant and interested in itself over the public wellbeing, but although not evenly distributed, the country was enjoying general growth and prosperity. When the Crash of 1929 occurred, the second J.P. Morgan organized an effort to stem the decline and failed. By the mid-1930's the reputation of Morgan, along with all of Wall Street, was dismal. J.P. Morgan & Co. was obliged in 1935 to split off its investment banking into Morgan Stanley to separate it from the commercial banking arm.
Assessed by current practices, the House of Morgan gained its position through activities that are now viewed as unethical. J.P. Morgan manipulated the price of gold, traded on insider knowledge, and supported cartels to minimize competition. However, all these actions should be judged by the standards of the times, and the practices of the House of Morgan stand head and shoulders above those of the true "robber barons" such as Jay Gould and Daniel Drew^.