The Story of J.P. Morgan: The Man Who Saved the Government Twice

This is Lee Habib, and this is Our American Stories, the show where America is the star and the American people, coming to you from the city where the West begins, Fort Worth, Texas. Out of all of the so-called robber barons, J.P. Morgan ranks as one of the most maligned. He is widely credited with having saved the U.S. national economy in general and the federal government in particular, on two separate occasions. Let’s take a listen to the story.

It was the 1800s, and in just 35 short years, America had grown into one of the most powerful countries on the planet, fueled by a group of visionaries who were building a better future. Cornelius Vanderbilt stopped at nothing to connect the nation by railroads. John D. Rockefeller lit homes from coast to coast cheaply and safely with his Standard Oil. Under the strength of Andrew Carnegie, steel cities expanded to the sky and bridges tightened a nation. And because of J.P. Morgan’s business sense and vision, electricity began powering America. But what exactly did J.P. Morgan do, and why is it that we all know this man’s name?

You look at J.P. Morgan the way he controlled the banking system. Basically, there’s one man who just literally dominated the banking industry and essentially dominated financing in the country.

J.P. was a banker, a very powerful one who pulled the financial strings of wealthy men and was called on by presidents for what we now know as a bailout. He was a man who brought order to chaos, a man who made a fortune consolidating broken industries, buying out failing companies, and returning them to profitability. Twice he was called on by American presidents to save the nation’s economy. Both times he was criticized for wielding the power and the ability to do so. He was physically large, with massive shoulders, piercing black eyes that seemed to look through people. He had an enormously disfigured purple nose because of a chronic skin condition called rosacea. As a result, all of his professional portraits were retouched. Photographer Edward Steichen said meeting his blazing dark eyes was like confronting the headlights of a freight train bearing down on you. In 1837, the new steam engine was beginning to transform America, creating new and exciting opportunities. It was into this world of possibility that John Pierpont Morgan was born on April 17th in Hartford, Connecticut, the eldest son of Junius Spencer Morgan, the legendary founder of the world’s first modern investment bank, and Juliet Pierpont Morgan, the daughter of a fiery preacher. Young Pierpont was greatly influenced by both his grandfathers. Every Sunday he accompanied his grandfather, Joseph Morgan, to the local Episcopal church. Pierpont loved the services, especially when it came to singing the hymns. His other grandfather, the Reverend John Pierpont, was known for his passionate sermons on man’s depravity and the love of Christ. Here’s historian Ron Chernow.

From his Pierpont grandfather, Morgan got a streak of romanticism, a streak of morality, and even a certain crusading streak that would be very important in his life.

From the time he could count, Pierpont was taught that there was only one way to do business, the Morgan way. Simply put: invest wisely, avoid risk. Pierpont was a relatively solitary child who preferred reviewing his father’s account books to outdoor sports. Pierpont’s father noticed his son’s abilities, and over the years groomed him for a career in business.

He raised his son, Pierpont, with a great deal of love, but also a great deal of discipline. Junius Spencer Morgan expected that his son would follow in his footsteps and succeed in the business world.

But illness plagued Pierpont and often kept him out of school.

From the time that he was a boy, he really had two personalities. One was this very jolly, animated, high-spirited, outgoing boy with tremendous energy and health. But then he would suddenly get these fainting spells, and that was accompanied by a personality that was more that of a brooding loner.

Forced by illness to spend time alone, Pierpont perfected the game of solitaire, a game he played to relax when he felt tense or nervous. After his first year at college, Pierpont’s father decided it was time for his 20-year-old son to begin his career and arranged for him to be given a job as a clerk in a Wall Street banking firm. He worked hard, was orderly, and absolutely methodical, and he could add numbers with lightning speed. Here’s historian H.W.

Brands. J.P. Morgan understood the game, and at some point he realized that as successful as his father had been, he could become even more successful.

At this time, Pierpont was introduced to a young lady named Amelia Sturges, or Mimi, and they began dating. Soon, Pierpont was sent to New Orleans, where he stumbled upon a business opportunity that he couldn’t resist. A local sea captain was stuck with a shipload of coffee and no buyer. Immediate action was required, or the coffee would spoil. Using the firm’s money, Pierpont purchased the coffee and managed to turn a tidy little profit in the process. In New York, the partners at the bank weren’t impressed. They were angry and thought the venture was risky. But Morgan believed that fortune smiles on those who act fast, and he believed his instincts about people would always make him a winner.

Said the real risk was that he had misjudged the character of the captain, and that the captain would have lied to him. And this is sort of the quintessential issue of Morgan, that he was able to look at people and immediately make a judgment of their character and of their integrity, and one of his greatest strengths.

And you’ve been listening to the story of J.P. Morgan, and you may have ideas about who Morgan was, and you may indeed have ideas about the Robber Barons in general. I mean, the tagline alone is enough to make people hate these men, but there’s also much to know and much to appreciate, and we’re learning more about what J.P. Morgan did—his contribution to the building of modern America—when we return. More of the story of J.P. Morgan on Our American Stories. Lee Habib here. As we approach our nation’s 250th anniversary, I’d like to remind you that all the history stories you hear on this show brought to you by the great folks at Hillsdale College, and Hillsdale isn’t just a great school for your kids or grandkids to attend, but for you as well. Go to Hillsdale.edu to find out about their terrific free online courses. Their series on communism is one of the finest I’ve ever seen. Again, go to Hillsdale.edu and sign up for their free and terrific online courses. And we continue with Our American Stories and the story of J.P.

Morgan.

Let’s pick up where we last left off.

During the summer of 1861, three years after they had met, Mimi was diagnosed with tuberculosis, almost always fatal in the 19th century. Pierpont was devastated. Immediately, he took control of the situation. He proposed to Mimi, promising her that he’d help find a cure.

He married her in the family house in New York. In fact, he had to carry her downstairs for the ceremony.

Pierpont immediately took Mimi to Algiers for their honeymoon. He thought the tropical climate might save her. When Mimi’s condition worsened, he brought in the best specialists to attend to her, but his efforts were in vain. Four months after their marriage, on February 17th, 1862, Mimi died in Pierpont’s arms.

He was an extraordinary outpouring of somebody trying to control life.

In some way.

It was a terrible loss for him, and he failed, but he knew what he was getting into. Oddly enough, he was daring, and almost he was daring death in some sort of dramatic way and attempting to control it.

The ordered, controlled life that Pierpont had made for himself was turned upside down. He returned to New York a changed man.

The loss was so powerful that, in a way, it forced him to keep his genuinely emotional nature under tight control.

Pierpont immersed himself in his business. He also remembered the comfort he received while attending church as a young boy. He joined Saint George’s Church in Manhattan and became an active member. As he continued to grieve for Mimi, the church provided a type of redemption that Pierpont didn’t expect. It was there where he met the young, beautiful Fanny Tracy.

She was at first put off by Pierpont’s gruff demeanor, but soon she warmed to his affections. After a year-long courtship, Pierpont and Fanny were married at Saint George’s Church on May 31st, 1865. They had three daughters and one son. Pierpont’s prospects were bright. At 33, he had a beautiful family, a yacht, two homes, and was earning more than $75,000 a year, a huge amount in a time when $2,000 was a comfortable living. Then, like the discovery of fire and the invention of the wheel, Morgan envisioned electric light, revolutionizing the world.

Morgan hired Thomas Edison, a telegraph boy turned inventor, to install electricity at his Manhattan mansion on 219 Madison Avenue, the first electrically lit home in the world.

Ladies and gentlemen, behold a miracle of modern science. The gas lamp is dead! Long live the electric light.

Morgan’s home became a lab for Edison’s experiments, and when the time came to showcase electric light to a group of potential investors, Pierpont’s father was not impressed. Though his father, Junius, saw electric light as a risky fad, Morgan invested everything in it. In the end, the fruits of Morgan’s insight and investment gave birth to a company called General Electric. At this point, Morgan was running the biggest investment bank in America and consolidated both the electricity and railroad industries. He controlled 100,000 miles of railroad, half the country’s mileage. But the American economy was fragile, and in 1893, the stock market crashed; the nation was thrown into a devastating depression. More than 100 railroads declared bankruptcy, causing a domino effect that threatened other businesses and promised complete collapse of the economy. As had happened in the past, powerful men called upon Pierpont Morgan to bail them out.

He excelled at taking warring parties who were destroying an industry and bringing peace on terms that were suitable to them, profitable to him, and which gave him leverage in the business itself. Anyone who knew anything about him realized that, like him or not, he got things done.

Morgan reorganized the railroads by streamlining operations, and he was quickly able to reverse the downward spiral. But Pierpont wasn’t finished. As a result of the depression of 1893, the federal government’s gold reserves had dropped to such an alarmingly low level that it looked as though the United States government would go broke. Fortunately, writes Philandshoots, Morgan considered the United States too big to fail, so Morgan devised a plan in which American and European bankers would invest gold directly in the government, saving it from collapse. But President Cleveland rejected Morgan’s plan, and instead he backed the plan to raise the money by selling bonds directly to the public. But Morgan knew that the government didn’t have time to sell bonds. Morgan quickly took a train to Washington, but was told that the President would not see him. Morgan’s reply was swift: ‘I have come down to Washington, D.C., to see the President, and I’m going to stay here until I see him.’

I think Pierpont Morgan certainly felt that he was the equal of the President of the United States.

The next morning, word came from the White House that Morgan would be received. The President implemented Morgan’s plan, and within days the economy recovered. Here’s Alan Greenspan.

Morgan obviously was looking at the national interest in the context of his own—that is, saving the U.S. Treasury was an act of basic self-interest, but it was an act of nationalism.

Morgan was hailed as a hero. He was praised for his patriotism and selflessness. But like all good deeds, Morgan’s didn’t go unpunished. Some accused him of manipulating the government and collecting a profit.

People began to decide that Pierpont had too much power to be able to save the government of the United States—an extraordinary thing—and therefore the only way that he could have done it is by having some sort of evil capability.

With the chaos, uncertainty, and personal demonization that often plagued Morgan’s life, there was one source of stability: Saint George’s Church. The Reverend Rainsford said, ‘Sometimes I found him kneeling in prayer, or reading or singing a hymn without organ and alone. No one but myself knew that the great Master of men and things was worshiping.’ But this great Master of men and things had another side. Morgan was known for enormous appetites.

He consumed enormous quantities of port, sherry, and wine with dinner. He had breakfasts so large that could have killed a horse.

His appetites extended to other areas as well. He was often seen in the company of women other than his wife.

Pierpont once made a very telling comment that there are always two reasons why a man does something: a good reason and the real reason. And he was always very respectful of Fanny. He was very discreet about the various escapades that he went through.

And you’ve been listening to the story of J.P. Morgan, and in the beginning of this segment we learned about him losing the love of his life to tuberculosis, which at the time was a death sentence. He joined Saint George’s Church where he found solace, redemption, and also his future wife. But it was his vision of electric light illuminating not just America but the world, and his huge investment empowering America with light that led to his great fortune. And he backed Edison and actually… well, he had the first electrically lit home in the world. That’s how much he believed. And that investment parlayed into and turned into General Electric, a company we all know. When we come back, more of the story of J.P. Morgan—the good and the bad, the visionary and the investment banker—here on Our American Stories. And we continue with Our American Stories and the story of J.P. Morgan. Let’s pick up where we last left off.

Morgan’s passionate nature extended to his business enterprises. In 1901, he undertook the largest business transaction in modern history: the purchase of Carnegie Steel. Carnegie Steel was the crown jewel in the Morgan Empire. When asked, ‘His name is Price?’ Andrew Carnegie jotted down a figure on the back of an envelope.

Carnegie wasn’t going to do any price haggling with Morgan. Carnegie wrote down $480 million on a piece of paper. It’s the equivalent of $400 billion today, more than Gates and Buffett together.

Carnegie dared J.P. Morgan to buy him out for an outrageous price, a sum that is higher than the entire budget of the U.S. federal government. Telling the answer, ‘Yes,’ the deal was closed without lawyers and without a written contract. The agreement gave Carnegie a personal net worth of over $310 billion in today’s money, the largest private fortune the modern world has ever seen. With Carnegie Steel under his belt, Morgan formed the United States Steel Corporation. In March of 1901, stock was valued at $1 billion, 400 million dollars. Morgan had created the world’s first billion-dollar corporation, but his enormous power now brought public scrutiny.

After his creation of U.S. Steel, he controlled somewhere between 60 and 70 percent of the American steel industry. He controlled a third of American railways at a time when railway stocks comprised 60 percent of all the stocks on the New York Stock Exchange.

Morgan had reached the pinnacle of his power, and it looked as if nothing could stop him. At the turn of the century, Morgan, along with John D. Rockefeller and Andrew Carnegie, joined forces in launching the business-friendly William McKinley into the position of President of the United States. But on September 6th, 1901, McKinley was cut down by an assassin’s bullet and died. Eight days later, Vice President Theodore Roosevelt was sworn in as the next president. Now, let’s get started. Morgan soon confronted a man whose power equaled his own.

He was an unknown end today, but to the extended people in New York knew his record. They also knew that he was something of a loose cannon who had gone on record as criticizing businessmen.

Roosevelt was determined to break up the big, powerful businesses called trusts, and he used Morgan’s railroad company to set the example.

Morgan demanded to see the President, so he stormed down from New York to Washington, went into the White House, and he said, ‘I don’t understand.’ He said, ‘If we’ve got a problem, send yo–‘