The Morgan Lineage in U.S. Financial History

By John Steele Gordon

With assets of $2.687 trillion, JPMorgan Chase is the largest bank in the United States. I covered the history of two of its three major components, the Bank of the Manhattan Company and Chase National Bank, in previous columns. Now it’s time for the most storied of all the major components: J. P. Morgan & Co.

Unlike most plutocrats of the Gilded Age, John Pierpont Morgan was born rich. His grandfather had been one of the founders of the Aetna Fire Insurance Company and his father, Junius Spencer Morgan, an international banker of the first rank. So Morgan received a first-class education, earning a degree in art history from the University of Göttingen. He was fluent in both French and German, invaluable assets in the burgeoning world of international banking.

His father became a partner of the London banking firm of George Peabody and Company in 1854 and after Peabody’s retirement in 1864, changed the name to J. S. Morgan and Company. The son opened his own Wall Street firm, J. Pierpont Morgan and Co. in the same year and began handling his father’s American business. His father, however, thought his son needed some guidance and the younger Morgan took on Charles Dabney as a senior partner. In 1871, he joined with the Philadelphia banker Anthony Drexel to form Drexel, Morgan and Co. After his father’s death in 1890, J. P. Morgan reorganized the Morgan banking interests as J. P. Morgan and Co.

J. P. Morgan’s formidable personality and large physical presence gave him an air of authority that he exploited to the fullest. The photographer Edward Steichen likened his hazel eye to the headlights of an oncoming express train. As the historian Frederick Lewis Allen put it, “if one could step off the track, they were merely awe inspiring; if one could not, they were terrifying.”

But it was his talents as a banker that made him by the last two decades of the 19th century the country’s most powerful banker. In the late 1870s, William H. Vanderbilt wanted to diversify his holdings and Morgan managed to sell 150,000 shares of New York Central in London at $120 a share. And he did it so quietly that the price was unaffected by the huge sale.

In the depression of the mid-1890s, the United States was nearly forced off the gold standard. Morgan arranged a sale of bonds in Europe to restock the Treasury’s gold supply. As I’ve discussed in a previous column, during the Panic of 1907 he, in effect, acted as the country’s central bank. He summoned a meeting of bankers in his library on 36th Street and got them to agree on a plan to provide liquidity to banks under stress. (This led directly to the establishment of the Federal Reserve in 1913, the year that Morgan died.)

J. P. Morgan and Co. remained a formidable presence in Wall Street even after Morgan’s death and was instrumental in helping Britain and France finance the First World War. But with the onset of the Great Depression, it was forced to spin off its investment banking business (as Morgan Stanley) and by the mid-1950s it was only a midsize bank with a great name.

But it began to grow again with its merger with Guaranty Trust in 1959. In the 1990s J. P. Morgan and Co. returned to investment banking and was soon one of the big five banks in that area. A century after its international financial preeminence, Morgan’s 2000 merger with Chase Manhattan put the Morgan name once more at the pinnacle of American banking.


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