Jp Morgan Essay, Research Paper
No, sir, the first thing is character. Before money or anything
else. Money cannot buy it Because a man I do not trust could not get money
from me on all the bonds in Christendom (Sinclair XIII). With that line,
John Pierpont Morgan ended his career in a show-stealing manner. Indeed,
J.P. Morgan was a man of character; moreover, he was perhaps the greatest
Wall Street banker of the decade. Unlike others who gained fame at a young
age, Morgan lived in obscurity until 1895, where at the age of 58, he
signed a contract to supply gold to the United States Treasury propelling
him into the headlines (Wheeler 3). The mid to late 19th century was a
period of expansion in the American industry and in big business
corporations. Through his leadership, Morgan salvaged America’s financial
systems several times during his lifetime. In the railroad industry, he was
known as the great arbiter, saving several railroads with his successful
reorganizations. In the steel industry, Morgan combined many holdings into
one of the successful ventures of the time. In his lifetime, J.P. Morgan
was certainly a captain of industry who saved the American financial system
and numerous companies while overseeing one of the biggest ventures of the
time.
During his career, Morgan bailed out America’s financial system
several times. When Congress adjourned in 1877 without appropriating money
to pay soldiers. Morgan came up with the $550,000-a-month payroll and set
up a disbursement system (Gross 64). In 1895 when the U.S. gold reserves
fell dangerously low, he signed a contract with President Grover Cleveland
to procure $50 million in gold from Europe in a private-bond sale, saving
the Treasury from distress (Gross 65). In the fall of 1907, the future of
America’s financial system again looked bleak. Dun’s Review noted that
8,090 companies with total liabilities of over $116 million failed in the
first nine months of 1907, with the September figures showing the highest
level of bankruptcy since the 1903 (Gross 62). Because the trusts loaned
out money against the value of securities on deposit, the falling stock
prices meant they had less collateral to back loans. Realizing that
continuing failures in the trust companies would not only wipe out
depositors but would provoke runs on banks, Morgan called a meeting with
James Stillman of National City Bank, George Baker of First National Bank,
and many other important figures in the financial industry (Gross 66). As a
result, a group of banks agreed to establish a $10 million fund to bolster
the ailing Trust Company of America ending the epidemic. Soon after,
Treasury Secretary George Cortelyou agreed to deposit $25 million of
government cash into selected New York City banks, to be used to bolster
the troubled trust companies and banks (Gross 67). Despite these measures,
many poorly capitalized institutions were still on the edge of disaster.
Because of this, Morgan convinced the trust company presidents into
subscribing to a $25 million loan for the trusts (Gross 70). His actions
convinced the financial world of the critical need for a central government
agency, the Federal Reserve System, that would provide stability for the
modern banking system and financial markets.
Since the services of bankers were used most by the railroads,
Morgan quickly got involved with them. In 1879 William H. Vanderbilt
wanted to get rid of 150,000 shares of New York Central stock. Morgan
carried out the transaction so successfully and secretively that when news
of it broke, the financial community was greatly impressed, transforming
Morgan into a leading financier (Boardman 121). Just as he had done
bailing out the banking industry, Morgan again received critical acclaim
acting as a mediator in a skirmish between the Pennsylvania Railroad and
New York Central Railroad. Calling a meeting between the parties, he got
them to agree to his proposal, resulting in restored peace between the
companies, undamaged railroad profits, and no one suffering except perhaps
the small shippers who might have benefited from the lower rates resulting
from the competition (Boardman 121). Following the Panic of 1823, Morgan
again came to the rescue of the railroad industry. Called on by a number
of railroads, he reorganized their finances through several measures. Bond
issues were consolidated at a lower interest rate; stockholders had to pay
off accumulated debts and stocks replaced some bonds. In one case, he
combined more than thirty roads, holding companies and subsidiaries in the
Southeast into the successful Southern Railway Company. Within four years,
he reorganized and saved the Richmond Terminal, the Erie, the Reading, the
Norfolk and Western, the Northern Pacific and Baltimore and Ohio (Allen 85).
By 1900, he controlled most eastern railroads in addition to a few in the
west (Boardman 123).
In the Steel Industry, Morgan in his initial venture started out by
putting together an $80 million combination of steel and wire companies in
1897. The following year, he organized a combination of the Illinois Steel
Company, an ore company and several other firms to found the Federal Steel
Company. Other combinations comparable to these followed which led to the
scheme for merging the combinations including the Carnegie Interests into
the $1 billion United States Steel Corporation (Boardman 124). After this
was done, one component still troubled Morgan. Despite the size of the
United States Steel Corporation, a guaranteed supply of iron ore was still
lacking. To correct this predicament, he went out to acquire the ore
deposits at Mesabi, which were owned by the Rockefellers, people whom
Morgan considered unprincipled upstarts. Although Morgan had to pay $5
million dollars more than he had offered, he did not mind stating, In a
business proposition as great as this would you let a mater of $5 million
stand in the way of success? (Boardman 125). When the stock went up for
sale, half a million shares was sold in the first two day’s of the stock’s
appearance, and one million in a week (Sinclair 129).
In addition to his business dealings, J.P. Morgan was also a great
philanthropist. In his lifetime, he gave St. George’s Church in New York a
new rectory, parish house, and over $5 million toward the construction of
the Cathedral of St. John the Divine (Boardman 130). As one of the
founders of the Metropolitan Museum in New York and president in 1904, he
bought a fellow collector’s collection of Chinese porcelains to donate to
the museum. Eventually, the Metropolitan received most of his art
collection. In other affairs, Morgan also gave much money to the Harvard
Medical School and hospitals (Boardman 131). J.P. Morgan was truly a
captain of industry because he followed Carnegie’s proposition that it was
an obligation of the rich to share their wealth, but more importantly, he
realized that if he didn’t help the various institutions the way he did the
markets and nation would have suffered greatly, causing panic among the
public.
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