The Magnitude of J. P. Morgan

PrintPrintEmailEmail

On the night of Thursday, October 24, 1907, nearly every important banker in New York was meeting in J. P. Morgan’s exquisite private library, located next to his house at the northeast corner of Madison Avenue and Thirty-sixth Street. In the magnificent East Room, with its three tiers of inlaid wood and glass cabinets containing the printed masterpieces of the world, the bankers sought a way to end the financial panic that held Wall Street, and thus the country, in its grip.

 

Liquidity—the easy flow of money between creditor and borrower—had vanished from the marketplace. Depositors by the thousands were withdrawing their assets from sound and unsound banks alike, forcing the banks to call in loans as fast as they could and to husband their dwindling reserves. That afternoon the call money rate paid by speculators (the cost of borrowing money overnight) had reached 125 percent. The Stock Exchange had managed to stay open until the usual closing hour only because Morgan had flatly forbidden it to close early and had raised twenty-five million dollars in a quarter of an hour to see it through. The American financial system appeared on the brink of collapse.

Everyone knew that something had to be done that very night to restore confidence. “If people will keep their money in the banks,” Morgan had told reporters that week, “everything will be all right.” He was correct, of course; getting people to cooperate was the trick.

As the other bankers met in the East Room, Morgan sat alone in the equally magnificent West Room, which was his office. Its deep red flocked wallpaper bore the arms of the Chigi family of Renaissance Rome. Masterpieces of the Italian Renaissance hung on the walls in profusion. Sitting in an easy chair before the fire, Morgan played game after game of solitaire, a pastime that he found peculiarly soothing. Now and then one of the other bankers would come in and suggest a plan.

“No, that will not work,” he would say, and the banker would return to the East Room to help devise another.

After this had happened several times, Belle da Costa Greene, Morgan’s librarian, asked him, “Why don’t you tell them what to do, Mr. Morgan?”

“I don’t know what to do myself,” Morgan replied with characteristic forthrightness, “but sometime someone will come in with a plan that I know will work, and then I will tell them what to do.” He went back to his solitaire, putting the ten on the jack, the nine on the ten. Constrained by the rules of the game, he sought to bring order to the cards out of the chaos created by the shuffle.

 

Bringing order out of chaos, within the rules of the game, had been the abiding passion of Morgan’s life. A genius for doing exactly that, combined with a formidable personality, total self-assurance, and a powerful physical presence, had brought him to this moment. Now both Wall Street and Washington looked to him to rescue the situation. He had never held public or military office of any sort, but at this moment John Pierpont Morgan was, perhaps, the most powerful man in the country, and the future prosperity of America lay in his hands. He sat, he played his cards, he waited.

 

In retrospect, it might appear that Morgan’s whole life had been leading up to this moment. He had been born in Hartford, Connecticut, on April 17, 1837. Unlike so many who rose to great wealth in nineteenth-century America, Morgan was born affluent. His paternal grandfather had moved to Hartford in 1817 and prospered. As the city grew—it was then on the fastest route between New York and Boston—he invested in real estate, steamboat lines, and railroads. Later he was one of the founders of the Aetna Fire Insurance Company.

Morgan’s father, Junius Spencer Morgan, was a partner in a dry-goods firm in Hartford for several years, before moving to Boston and becoming a partner of James M. Beebe & Company, which was heavily involved in conducting and financing the burgeoning Atlantic cotton trade. By 1854 his financial reputation had grown to the point where he was invited to join George Peabody’s banking house in London, one of the City’s leading private banks. Peabody was an American who had lived in London for many years and was widely known on both sides of the ocean for his business integrity and his philanthropies. When Peabody retired in the early 1860s, Morgan’s father took over the firm, which he renamed J. S. Morgan and Company.

From his earliest days J. P. Morgan was exposed to two elements that were to dominate and characterize his life: international banking at its highest levels and the idea held by Peabody and his own father that personal integrity was indispensable to success in that field. At the end of his life Morgan was questioned by a congressional committee about the workings of Wall Street. “Is not commercial credit based primarily upon money or property?” the committee’s counsel asked.

“No, sir,” Morgan replied. “The first thing is character.”

“Before money or property?”

“Before money or anything else. Money cannot buy it. … Because a man I do not trust could not get money from me on all the bonds in Christendom.”