J. P. Morgan - Business in United States of America
Identification: American financier and banker
Born: April 17, 1837; Hartford, Connecticut
Died: March 31, 1913; Rome, Italy
Significance: Morgan exercised tremendous economic power through J. P. Morgan and Company, the nation’s most prosperous private banking house; a railroad empire built by reorganizing bankrupt lines and gaining a controlling interest in many of the nation’s major lines; and the United States Steel Corporation, then the world’s largest business. His consolidation and domination of industries aroused vehement criticism.
J. P. (John Pierpont) Morgan played a crucial role in the financial development of the United States. The son of prominent international banker Junius Spencer Morgan, he studied at English High School in Boston and the University of Gottingen in Germany and joined Duncan, Sherman and Company as an accountant in 1857. Three years later, Morgan joined his father’s London-based financial firm, George Peabody and Company, as American agent and attorney. In 1871, he established a private banking company with Anthony Drexel and emerged as the leading dealer in federal securities. On Drexler’s death in 1895, the firm became J. P. Morgan and Company, the nation’s most prosperous private banking firm and one of the world’s most powerful banking institutions.
Morgan acquired, consolidated, and restructured many of the nation’s major railroad lines, applying his own regulations and standards in an unregulated industry. Inefficient management, inflated security structures, and unrestrained competition financially jeopardized many railroad corporations. Morgan demonstrated exceptional organizational skills, eliminating inefficiency, costly competition, and instability. Morgan controlled the Albany and Susquehanna, New York Central, New Haven and Hartford, Lehigh Valley, Pennsylvania, Reading, Southern, Erie, Chesapeake and Ohio, and Northern Pacific Railroads. On 1901, Morgan, James Jerome Hill, and Edward H. Harriman created the Northern Securities Company, a holding company that controlled major railroads in the Midwest and Northwest.
Morgan created business monopolies by reorganizing and consolidating numerous industrial corporations. Because his railroads required large quantities of steel, he founded and acquired large steelmaking operations. In 1901, Morgan formed the United States Steel Corporation (U.S. Steel) by merging Carnegie Steel Works with his other steel companies. U.S. Steel became the world’s largest and first billion-dollar corporation. Morgan controlled virtually all the basic American industries, including shipping, communication, insurance, and coal, and he sat on many boards. Between 1892 and 1904, he helped form General Electric, American Telephone and Telegraph, Western Union Telegraph Company, and International Harvester.
Morgan also provided financial backing for the U.S. government. In 1877, he, August Belmont, and the Rothschilds floated $260 million in U.S. government bonds. When the government experienced a gold shortage in 1895, Morgan’s firm replenished the Federal Reserve with $62 million. Detractors criticized him for the harsh terms of the loan. Morgan’s company helped the U.S. Treasury thwart a stock market panic in 1907. New York financiers were forced to obey his directives for stabilizing the stock market.
Morgan, acting as the main force behind his trusts, came to symbolize concentrated economic power. His wealth, power, and influence attracted much federal government scrutiny. In 1911, the government filed suit against the U.S. Steel Company. The Pujo Committee of the U.S. House of Representatives investigated his monopoly finances. Morgan adamantly denied charges of undue influence in his control of the nation’s industries and financial institutions, but the Pujo Committee found that eleven House of Morgan partners held seventy two directorships in forty-seven major corporations. Although reformers criticized his corporate domination, Morgan remained largely unscathed and America’s foremost financier. He amassed $80 million, but his power rested in the billions he controlled.
Morgan donated extensively to schools, hospitals, libraries, churches, and museums. The Metropolitan Museum of Art in New York City houses his vast art collection, and the Morgan Library in New York City contains his massive accumulation of rare books.
Carosso, Vincent P. The Morgans: Private International Bankers, 1854-1913. Cambridge, Mass.: Harvard University Press, 1987.
Chernow, Ron. The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance. New York: Grove/Atlantic, 2001.
Strouse, Jean. Morgan: American Financier. New York: Random House, 1999.
See also: Andrew Carnegie; Gilded Age; Panic of 1893; Panic of 1907; robber barons; steel industry.