J.P. Morgan

J.P. Morgan

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. 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. 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. 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. 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 & Co., and teamed up with his son and Charles H. Dabney as Dabney, Morgan & Co. Dabney retired in 1871, at which point the Morgans and Anthony Drexel of the Philadelphia banking family formed Drexel, Morgan & Co. Morgan & Co.J.P. 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. Morgan made $3 million for the firm.Morgan was active in creating some of the largest American corporations. 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. 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. The repercussions of this included an investigation by Congress and in turn the establishment of the Federal Reserve.The first 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. By the mid-1930's the reputation of Morgan, along with all of Wall Street, was dismal. 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. 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.For additional material, consult Morgan, J.P. Morgan, Social and Economic Impact