by Ron Chernow
The beleaguered president, Grover Cleveland, was a friend of the House of Morgan and a staunch advocate of the gold standard. During the four years he spent on Wall Street between his two presidential terms, Cleveland worked in the law offices of Bangs, Stetson, Tracy, and MacVeagh. This was the law firm of Pierpont’s father-in-law, Charles Tracy, located next door to the Morgan bank, at 15 Broad Street. Cleveland had been good friends with the shrewd Francis Lynde Stetson, Pierpont’s lawyer for the railroad reorganizations and known on Wall Street as Morgan’s attorney general. He also befriended many Wall Street people and was one of the twelve pallbearers at the funeral of August Belmont, Sr., in 1890. Although Pierpont was a Republican, he wasn’t antagonistic toward the Democratic Cleveland. In 1884, he cast his lone Democratic vote for Cleveland precisely because the candidate endorsed sound money.
As the gold reserve dipped, Cleveland faced a hostile Republican Congress, which favored free coinage instead of gold; many prairie Democrats concurred. Amid this gloomy deathwatch, Congress refused to grant President Cleveland the authority to replenish the gold reserve through a public bond offering. At the same time, Populist fury made resorting to private bankers like Morgan unthinkable. Cleveland sat paralyzed. By January 24, 1895, gold reserves had declined to $68 million, and gold coin was especially scarce at the nine Subtreasuries around the country, including that in New York, across Wall Street from the Morgan bank. As a crisis approached, Cleveland turned to the Rothschilds in London, perhaps to deflect charges of being in Wall Street’s pocket. When approached by Rothschilds about a bond issue, J. S. Morgan and Company agreed to participate only if Pierpont handled the American end with the Rothschild representative, August Belmont, Jr. On January 31, Pierpont and Belmont met at the New York Subtreas-ury with William E. Curtis, the assistant secretary of the Treasury. Although no action was taken, the report of the meeting relieved skittish investors, and $9 million in gold on ships in the harbor was returned to land overnight. For Populists, news of the Morgan-Belmont-Curtis meeting confirmed suspicions of a Wall Street-Washington conspiracy.
In the cables he sent to the London partners during this period, Pierpont affords a glimpse into his deepest ideological impulses—his contempt for politics, his regard for European opinion, his allegiance to neoclassic economics, and his disdain for certain Jewish firms. Referring to one leading Jewish house, he said, “we should dislike see business largely in the hands of Speyer & Co. & similar houses.” His identification with the London creditors was patent: “We all have large interests dependent upon maintenance sound currency U.S. Important use every exertion . . . success negotiations . . . greater factor is European absorption even temporarily of bonds.”5 His dispatches were often fervent and even melodramatic in tone.
By early February, the New York Subtreasury was losing gold rapidly. Default seemed imminent. Yet the Treasury Secretary John G. Carlisle informed Morgan and Belmont that the Cabinet had flatly rejected their proposed private bond issue. So on Monday, February 4, Belmont set off for Washington, followed by Morgan. Aware of Francis Stetson’s friendship with Cleveland, Morgan told him, “There may be papers to be drawn and I want you,” and brought him along with a new Morgan partner, the handsome young Robert Bacon.6 Pierpont told his London partners that the United States was on “the brink of the abyss of financial chaos” and that he wanted to help the U.S. government avert calamity.7
Morgan, Bacon, and Stetson took a private railroad car down to Washington, hitched up to the Congressional Limited. When they arrived, they were greeted by Secretary of War Daniel Lamont, who said that the president had decided against a private syndicate and refused to see the party. Pierpont said magisterially, “I have come down to see the president, and I am going to stay here until I see him.”8 While Stetson tried to lobby Cleveland, Bacon applied his charms to Attorney General Richard Olney. That night, in a technique he used to steady his nerves, Pierpont played solitaire—a game called Miss Milliken—until the early hours. After breakfast at the Arlington Hotel, he crossed a snowy Lafayette Square to the White House. One pictures the famous stride, described by a biographer as “elemental, jungle-like.”9
Pierpont was often taciturn in meetings. At the White House, obedient as a schoolboy, he sat wordless while Cleveland, Attorney General Olney, and Treasury Secretary Carlisle debated the issue. Edgy, he crushed an unlighted cigar, leaving a pile of tobacco on his pants. Cleveland still clung to the hope of a public bond issue, which would spare him congressional obloquy. Not until a clerk informed Carlisle that only $9 million in gold coin remained in government vaults on Wall Street did Pierpont pipe up, saying he knew of a $ 10-million draft about to be presented. “If that $ 10-million draft is presented, you can’t meet it,” Pierpont said. “It will be all over before 3 o’clock.” “What suggestions have you to make, Mr. Morgan?” replied the president.10
Pierpont laid out an audacious scheme. The Morgan and Rothschild houses in New York and London would gather 3.5 million ounces of gold, at least half from Europe, in exchange for about $65 million worth of thirty-year gold bonds. He also promised that gold obtained by the government wouldn’t flow out again. This was the showstopper that mystified the financial world—a promise to rig, temporarily, the gold market. There was some question as to the legality of the proposed issue, and either Morgan or Carlisle dusted off an 1862 statute that granted the Lincoln administration emergency powers to buy gold during the Civil War. When the deal was concluded, Cleveland gave Pierpont a fresh cigar to replace the one he had nervously ground up. Pierpont’s blood was now at full boil. He wired London, “We consider situation critical, politicians appear to have absolute control. If fail & European negotiations abandoned, it is impossible overestimate what will be result U.S.”11
Populist pressure still demanded a public bond issue. As a practical matter, Cleveland awaited congressional action on the Springer Bill, which would have allowed the Treasury to sell long-term bonds; if Congress defeated it, Cleveland thought, he could then resort to Wall Street bankers with far less popular abuse. At the Tuesday-morning meeting, it was agreed that Morgan and Belmont should return when the Springer Bill was killed. By the time it was defeated on Thursday evening, Pierpont was already en route to Washington, arriving in a blizzard.
News of the Morgan-Rothschild operation was a sedative for the financial markets. When the syndicate bonds were offered, on February 20, 1895, they sold out in two hours in London, in only twenty-two minutes in New York. Pierpont was jubilant and exhausted: “You cannot appreciate the relief to everybody’s mind for the dangers were so great scarcely anyone dared whisper them.”12 Yet the syndicate was a victim of its success. It took up the bonds at 104½, then sold them at an opening price of 112¼; they quickly soared to 119. For the cynical, this sudden appreciation proved the syndicate had cheated the government and underpriced the issue. The interest rate of 3¾ was thought extremely harsh. In just twenty-two minutes, the bankers had booked $6 or $7 million in profits. Morgan would later claim these figures were vastly exaggerated and that the syndicate had earned less than a 5 percent return. Even commentators such as Allan Nevins and Alexander Dana Noyes, otherwise sympathetic to the operation, condemned the stiff terms. Nonetheless, the bankers believed that they themselves had induced the confidence that had led to the higher prices.
The Populist uproar was furious and laced with anti-Semitism because of the Rothschild participation. Populist rabble-rouser Mary Lease called President Cleveland a tool “of Jewish bankers and British gold.”13 The New York World described the syndicate as a pack of “bloodsucking Jews and aliens.” In his vehement denunciation in Congress, William Jennings Bryan asked the clerk to read Shylock’s bond from The Merchant of Venice. Bryan always denied that his attacks pandered to anti-Semitism. Campaigning in 1896, he told Jewish Democrats in Chicago, “Our opponents have sometimes tried to make it appear that we are attacking a race when we denounced the financial policy of the Rothschilds. But we are not, we are as muc
h opposed to the financial policy of J. Pierpont Morgan as we are to the financial policy of the Rothschilds.”14
The gold syndicate, alas, was just a temporary victory: even Pierpont could dam up the gold supply for only so long. By the summer, gold again left the Treasury in large amounts. When a new loan was raised in early 1896, Pierpont had a fresh scheme for a global syndicate which would include the National City Bank of New York, Deutsche Bank of Berlin, and Morgan, Harjes of Paris. (Perhaps to appease the anti-Semites, it was a syndicate of Christian bankers.) But Cleveland didn’t want to incite Populist wrath a second time and decided on a public loan, with Morgan taking only about half of a $67-million bond issue.
Despite his venality, the gold operation had been a tour de force for Pierpont. He had functioned as America’s central bank, stepping into the historic breach between Andrew Jackson’s 1832 veto of the second Bank of the United States and passage of the Federal Reserve Act in 1913. So long as governments were financially weak, with primitive monetary methods and small budgets, they had to rely on private bankers. For his part, Grover Cleveland never regretted his decision, praising the “lightning-like rapidity” with which Pierpont Morgan reached his decision and extolling him as a man “of clear-sighted, far-seeing patriotism.”15 By stubbornly adhering to principle, Cleveland alienated smalltown farm elements in his own party. In 1896, the Democrats rejected him in favor of William Jennings Bryan. For Bryan, Morgan was a Pontius Pilate who nailed starving farmers to a cross of gold. The sheer savagery of these attacks contributed to the secretive, cautious style of the Morgan bank, which, in turn, further fed popular fantasy about its power.
During the 1896 presidential campaign, Pierpont lobbied for a gold-standard plank in the Republican party platform. He entertained Mark Hanna, Ohio banker and chairman of the Republican National Committee, aboard the Corsair II. Generous contributions by Morgan and other bankers to the campaign of William McKinley—23 Wall Street was hung with banners in his support—were thought instrumental in persuading him to champion the gold standard, and in 1900 he signed a law bestowing upon it new legal status. The farmer-banker conflict subsided somewhat when a European wheat famine pushed up farm prices. Also, the Yukon gold rush and gold strikes in South Africa and Australia helped expand the U.S. money supply and led to higher prices. The bitter deflationary politics of the late nineteenth century subsided.
In the 1890s, Pierpont Morgan represented a fact unpalatable to Americans—that America was still financially dependent on Europe. As a debtor nation, the United States had to placate its creditors abroad. England exerted much the same influence over American economic policy as Japan would nearly a century later, when it financed much of the U.S. budget deficit in the 1980s. Like Japan, England was criticized for curbing homegrown American excesses. As Keynes noted, “A debtor nation does not love its creditor, and it is fruitless to expect feelings of goodwill.”16 The ill will descended upon the House of Morgan.
Tutored in London finance, Pierpont knew that British bankers considered the pound’s stability the basis of British wealth. In the nineteenth century, it was the currency every investor wanted to hold. Pierpont adopted the same attitude toward the dollar. Sound monetary policy in the United States would be a precondition of America’s rise as the chief creditor nation. In the 1920s, by one of those ironies so abundant in Morgan annals, the bank would put England itself back on the gold standard, forcing a later British prime minister to suffer the same repudiation by his own party as Grover Cleveland experienced in 1895.
IN Pierpont Morgan’s career, success often bred more controversy than acclaim, so the twentieth century was his time of bittersweet triumph. Sleek and portly in top hat and black overcoat, gray slacks reaching the tops of shiny shoes, and a watch chain stretched across his paunch, he personified the new tycoon and the industrial gigantism threatening pastoral America. His exploits were rendered in mythic terminology. Life magazine produced a lasting catechism: “Q. Who made the world, Charles? A. God made the world in 4004 B.C., but it was reorganized in 1901 by James J. Hill, J. Pierpont Morgan and John D. Rockefeller.”17 Finley Peter Dunne’s character Mr. Dooley pictured Morgan this way: “Pierpont Morgan calls in wan iv his office boys, th’ prisidint iv a national bank, an’ says he, ’James,’ he says, ’take some change out iv th’ damper an’ r-run out an’ buy Europe f’r me,’ he says. ’I intind to reorganize it an’ put it on a paying basis.’ ”18 When Pierpont was quoted as saying “America is good enough for me,” William Jennings Bryan’s Commoner snapped back, “Whenever he doesn’t like it, he can give it back.”19 Editorial writers competed to mint Morgan titles—king of trusts, morganizer of the world, financial titan, Napoleon of finance, or, more simply, Zeus or Jupiter.
For a republican country lacking a feudal tradition, Morgan and other robber barons were ersatz aristocrats, their feats avidly chronicled by the press. The public reacted with fear and resentment but also with some vicarious pleasure. When Pierpont brusquely ordered his chauffeur to bypass traffic and drive up on a curb, the public was shocked by his arrogance but admiring of his implacable will. When Wall Street broker Henry Clews said of Morgan, “He has the driving power of a locomotive,” he suggested something brutish and uncontrollable, but also something of superhuman strength.20
Now the world’s most powerful private banker, Pierpont regarded himself as a peer of royalty. With regal munificence, he dispensed benefactions to the masses. Regretting the dark interior of Saint Paul’s Cathedral in London, he underwrote the expense of electric lighting. He visited the kaiser aboard his yacht and advised King Leopold of Belgium on his finances. In 1901, Jack reported to his mother how his father and London partner Sir Clinton Dawkins went down to Gravesend “and dined with the King of the Belgians who wanted to see them about some business and brought his yacht over because Father would not go to Brussels.”21 Pierpont did business on his own territory, even if it sometimes meant treating a king as a commoner.
In 1906, Pierpont vouchsafed a private tour of his art collection at 13 Princes Gate, the townhouse he inherited from his father, to King Edward VII. He had given the king financial advice, and the two often met at European watering holes. Gazing at Sir Thomas Lawrence’s famous portrait of the countess of Derby, the king said the ceiling was too low for the picture. “Why do you hang it there?” he asked. “Because I like it there, sir,” said Pierpont tersely, feeling no need to elaborate. His son-in-law Herbert Satterlee noted a perfect equality between king and banker: “They were just two friends together and seemed quite content to sit in silence sometimes and not try to entertain each other.”22 As a coronation gift, Pierpont had given the king a $500,000 tapestry, which set off a long-lasting relationship between the House of Morgan and British royalty.
Pierpont also pleased Italian royalty. In 1904, he was honored by Italy for returning a treasured cope that turned out to have been stolen from the Cathedral of Ascoli. King Victor Emmanuel conferred upon him the Great Cordon of Saints Mauritius and Lazarus, making him a cousin of His Majesty whenever he set foot on Italian soil.
Even as Pierpont aspired to heaven, he made religious men think in earthly terms. After a 1905 audience, Pope Pius X breathed with regret: “What a pity I did not think of asking Mr. Morgan to give us some advice about our finances!”23 The House of Morgan would later advise the papacy on its purchases of American stocks.
As a rule, Pierpont didn’t assemble palatial homes. In business as well, he showed surprisingly scant interest in real estate, which produced so many fortunes among his contemporaries. He would say laughingly that he only needed “a place to live in and a lot in the cemetery,” and his son, Jack, proudly confessed himself an ignoramus about land.24 Instead of grand estates, Pierpont had his solid but unpretentious Madison Avenue townhouse and his Hudson River retreat, Cragston, with its kennels, dairies, and gardens.
The splendid exception was Camp Uncas, in the Adirondack Mountains of upstate New York, and that came to him only by acciden
t. In 1898, a friend, architect William West Durant, defaulted on a loan and signed over the rustic camp as payment. Deep in the woods, Camp Uncas crouched beneath wooded cliffs that were thick with evergreens. It covered more than a thousand acres and required a year-round staff of thirty to care for the main lodge and dozens of outlying buildings. Durant had popularized such millionaire retreats in wilderness areas, producing the most lavish log cabins ever made. They had thick wooden posts, walk-in fireplaces, and heavy exposed beams. To lend a rustic, woodland atmosphere, the furniture was nicked with ax scars, and bark was left on the pine logs. Wool Indian blankets, moose heads, and prize fish decorated the walls. When Pierpont threw parties there, he would bring up a private railroad car full of friends, and a baggage car loaded with racks of vintage champagne would rattle along behind them.
With his vagabond nature, Pierpont was too restless to be a member of the landed gentry. His splendor shone most fully at sea. As commodore of the New York Yacht Club, he offered Morgan Cups for races and helped finance the Columbia, which defended the America’s Cup. He even provided land for the yacht club’s new headquarters, on West Forty-fourth Street.
Pierpont’s boats, more impressive than his homes, were the real monuments to his wealth. In 1898, over his heated protest, the navy conscripted Corsair II for use in the Spanish-American War. The Morgans had opposed the war, and Jack (later labeled a warmonger for his role in World War I) lamented the “needless waste of life & property.”25 The navy paid Pierpont $225,000 for the ship and transformed it into the gunboat Gloucester. It saw action in the Battle of Santiago and was damaged by a Spanish shell. Pierpont kept a piece of the ship’s splintered mast as a memento.
Corsair III was an even more megalomaniacal affair, a modern phar-oah’s tomb. Like a lover mourning his dead mistress, Pierpont had reproduced, at fantastic expense, the carpeting and other details of Corsair II. Measuring over three hundred feet at the waterline and requiring a crew of seventy, this black-hulled oceangoing ship was built on an altogether new and more garish scale. Among its many details was a special humidor to freshen Pierpont’s black eight-inch Meridiana Kohinoor cigars. He reveled in nautical spectacle. When he returned by liner from Europe, the Corsair would steam out to greet him as he waved his handkerchief from the larger ship’s deck. By transferring to the Corsair, he could slip through quarantine without having to mingle with the liner’s steerage passengers.