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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