Thursday, May 22, 2014

J.P. Morgan: The Giant of Financial World


J.P. Morgan
Most of the greatest tycoons of the Gilded Age were rags to riches stories. From a poor humble background, to a self-made man, to a great industrialist criticized for his practices, this is the usual story line of great businessmen like Rockefeller and Carnegie. However, it cannot be said the same for John Pierpont Morgan. His story was that of someone born to a rich and affluent family. 

John Pierpont Morgan or J.P. Morgan (April 17, 1837 - March 31, 1913) was an American capitalist during the rapid growth of industrial America in the last half of the 19th century. Unlike his contemporary tycoons, he was born rich and fortunate. From the works of his father, he built a great business empire that would later diversify into several industries. But his practices to build this empire earned him to being belong to the list of Robber Barons. Another reason that separates him from other Robber Barons is that he invested not just in one industry at a time. His rise brought by his generous investments into several innovations. He also owned a lot from his reversal of fortune of many companies from a state of faltering to a state of profit with his efficient reorganization. By the time of his demise, he left a huge, if not, an enormous amount of assets.

John Pierpont Morgan was born to a very rich family on April 17, 1837 at Hartford, Connecticut. He was the only son of the wealthy international banker Junius Morgan and his wife, Julliet Pierpont. His father began as a vendor and, with hard work, he became one of the most formidable financier known in New York. His ancestors were also daunting as his father; they had great contributions in different fields. James Pierpont, his relative to his mother’s side founded the prestigious Yale University. His grandfather in Junius’ side was the founder of the thriving insurance company, Aetna. By birth, J.P. Morgan was meant to follow his ancestors.

He was different from his fellow titans. He was not born poor. He did not have difficulty in his education. He received the best education that his wealthy parents could buy. He studied in a public school in Hartford but when they moved to Boston, he studied in the English High School. He graduated at the age of 17 and showed his capabilities in mathematics.

When Junius Morgan became a partner of a gigantic and respected banking firm, George Peabody & Co., they had to move to Europe. J.P. Morgan joined his father on the way to Europe. However, he had suddenly needed to make an abrupt stop in the Azore Islands due to a rheumatic fever that hit him. After his recovery, he continued his way to Europe, to Vevey, Switzerland. There, he continued his education. Later, he then moved to Germany and studied at the University of Goettingen. While in Europe, the young J.P. Morgan learned to speak French and German fluently. While in Europe, he also began to take interest at the artworks of Europe, which he would be fond off later in his life.

In August of 1857, Morgan returned to New York and rented a room, with the son of George Peabody and took a job. He began his long arduous career in finance by working as a copyist at the Duncan, Sherman, & Co. With the strong influence of his father, he was promoted quickly within the company. He was sent by the firm as part of a research mission to some place within country, especially to the south, where he studied the conditions of the agricultural sector. In 1864, his father asked him to manage his bank, J.S. Morgan & Co., in a joint business venture that would be the Dabney, Morgan, & Co.

During the Civil War, J.P. Morgan’s wealth, prestige, and even his notoriety grew. He evaded service in the army by hiring substitutes to enter the army for him. During the war, he made money out of it. However, some of his business venture became a scandal. One such activity was the infamous Hall Carbine Affair. The affair included Morgan who lends money for the purchase of dangerous low-quality carbines for a cheap price. After the purchase of such weapons, they were then resold to the Union government in a price above the level that it was bought. A hearing was then held for the profiteering scandal. Luckily, for Morgan, the court deemed him innocent from the affair because he only served as a creditor and not the perpetrator; but the damage was already done to the reputation of Morgan.

After the Civil War, Morgan began to build his own enormous business empire. While the Civil War was ravaging the country, railroads showed their strategic value both militarily and economically. Railroad tracts crisscrossed the country at very rapid rates. In 1869, he bought ferociously the Albany and Susquehanna line from the infamous business magnate partners Jay Gould and James Frisk. He proved to be very skilled in reorganizing companies towards efficiency. Services became better after his take over and customer satisfactory improved. This continued to the following railroad lines he would buy throughout the late 1800’s.

As he began to build his railroad business, he never ceased to have his attention on his financial business. In 1871, he entered into a long business partnership with a Philadelphia banker, Anthony Drexel. The two shrewd bankers then formed the Drexel, Morgan, & Co., the predecessor of what would become known as the J.P. Morgan & Co. Drexel did not just became Morgan’s business partner, but also became his mentor and thought many things to him. Things he learned helped him to get through one of the most devastating economic panics in US History - the Panic of 1873. Many companies became susceptible to the panic and became bankrupt. Almost all were terribly hit, but somehow, J.P. Morgan evaded the catastrophe and cemented his role as a prominent banker. The Panic also helped Morgan to expand his industrial empire and consolidated them to make them profitable once again. The partnership of Drexel and Morgan would last until 1893 and end with the death of Drexel.

In 1877, he again took an opportunity after the death of the well-respected railroad tycoon “Commodore” Cornelius Vanderbilt. The enormous amount of wealth that he left behind was placed under the care of his son, William Vanderbilt. Morgan was then asked to sell some of Vanderbilt’s holdings that worth to about $25 million.  Morgan succeeded in selling the vast holdings and even took some it that included railroads for his railroad business.

During the late 1870’s, Morgan overwhelmingly supported and invested on one of the greatest scientific discovery - electricity. Even though with the scrutiny of his conservative father, he financed the research of Thomas Edison and helped him to sell the product to the market. Morgan’s house was electrified as well as his company offices to promote further the product. Soon, most of the wealthy New Yorkers wanted the technology to be applied to their home. In 1892, he helped to finance and form one of the most popular and largest electrical company in the planet, General Electric.

In the late 1880’s, Morgan presided over a big collusion of large railroad companies called the Interstate Commerce Railway Association to enforce the 1887  Interstate Commerce Act. The association’s mission was to stop rate war, suicidal rebates, and disastrous railroad wars. Nevertheless, it did not meet its good purpose. For some time, the railroad wars did have a ceasefire and everything looked in order. However, suddenly, they returned to their dubious business practices to get the best from the others and the association was somewhat a failure.

During the late 1890’s and with the death of his father in 1890, his wealth grew towards new heights and signaled the period in his life where he would create US’ giant companies. In 1885, five years before his father’s death, he already helped in the formation of the American Telegraph and Telephone Company (AT&T). In 1892, General Electric was formed. In 1895, with the death of his partner Anthony Drexel, the company was reorganized and renamed as J.P. Morgan & Co. In 1900, he formed the American Bridge Corporation. In 1902, he formed the International Harvester. He also organized a large trans-Atlantic shipping and cruising company, International Mercantile Marine, the company that owns the White Star and the infamous ship, Titanic. In 1903, he also financed the greatest modern wonder ever built, the Panama Canal. But the most remarkable and successful consolidation he made was  In 1901, with the help of Charles Schwab, he bought Carnegie Steel for estimated $500 million, consolidated it with other steel companies, and formed the first billion dollar company, US Steel.

With a vast wealth at his pocket, Morgan had also his hobbies. He bought and owned collections of European Paintings. He also collected, since at a young age, huge amounts of old manuscripts. His one of the most luxurious hobby was collecting yachts, all of which were named Corsair.

Morgan also helped to bail out the government twice during economic recessions. In 1895, he coordinated the rescue of the government from certain collapse by lending $60 million worth of gold in order to balance the dollar. It helped to fight deflation, as well as the gold standard. In 1907, he again helped the government to stabilize the fragile financial market by leading a coalition of other banks to bailout collapsing banks and keep the integrity of American financial standing. Although he helped the government twice, he was never safe from government anti-trust campaign.

Morgan faced some of the government’s efforts to destroy trust. In 1904, President Theodore Roosevelt led a battle against a huge railroad trust partly owned by Morgan, the Northern Securities. A court battle ensued. The court judged that the conglomerate was under violation of the anti-trust laws and were broken up. In 1912, he faced a congressional committee headed by Arsene Pujo. The Pujo Committee was in charge of investigating Morgan for establishing a money trust and profiteering from previous government transaction. Morgan escaped the committee and moved to Italy. The Pujo Committee would eventually decide in 1914 to establish the Federal Reserve to regulate the financial market of the US.

J.P. Morgan died on March 31, 1913, at the age of 75 in Rome, Italy. During his funeral, he was given honor by the New York Stock Exchange by remaining close until noon.

Bibliography:
Geisst, Charles. Encyclopedia of American Business History. New York: Facts On File, 2006. 

Northrup, C. The American Economy: A Historical Encyclopedia. California: ABC-CLIO, 2003. 

Witzel, M. The Encyclopedia of the History of American Management. Bristol: Thoemmes Continuum, 2005.

"The New Tycoons: J. Pierpont Morgan" U.S. History: Pre-Columbia to the New Millenium. Accessed May 16, 2013. http://www.ushistory.org/us/36d.asp

"J.P. Morgan" History. Accessed May 16, 2013. http://www.history.com/topics/john-pierpont-morgan.

"Morgan, J.P. - Overview, Personal Life, Career Details, Chronology: J.P. Morgan, Social and Economic Impact." encyclopedia.jrank.org. Accessed May 16, 2013. http://encyclopedia.jrank.org/articles/pages/6313/Morgan-J-P.html


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