The Great Pierpont Morgan

by Allen, Frederick Lewis;

  The day of the meeting offered a spectacle probably unmatched in the history of that ordinarily sedate institution, the stockholders’ meeting. The bearded Gould was not in Albany; but his right-hand man, the dandified Jim Fisk, with his waxed mustache, was on hand to further Gould’s designs, wearing a speckled straw hat with a blue ribbon; and in profitable roguery Fisk was as adept as any rascal in the land. He was accompanied by an exceedingly untidy gang of forty or more ruffians whom he had brought up by train from New York and had fed that morning at the Union depot restaurant in Albany; subsequently these men were referred to delicately by the Supreme Court of New York as “such as in common parlance would doubtless be classed among the roughs and fighting men of the city.” Each carrying a proxy—for they were now to play the part of Albany & Susquehanna stockholders—these ragged but muscular characters were lined up by Fisk in a meeting room already crowded with railroad officials, lawyers, and stockholders.

  Word came that two of Ramsey’s tellers had been stopped on their way to the meeting by an officer of the law armed with one of those injunctions which certain Manhattan judges, who enjoyed good living more than good reputations, would issue on behalf of Gould and Fisk at the drop of a hat. And just before the scheduled time for the meeting, President Ramsey himself was likewise arrested on a charge engineered by Gould. Apparently the Gould-Fisk tactics were to disorganize the Ramsey forces by such arrests, and then to hold an election which their strong-armed gang of “stockholders” would control. But Ramsey managed to get bail in the nick of time to participate in the proceedings. What then happened was that two stockholders’ meetings took place, with the tellers at one table counting votes for the Ramsey candidates and the tellers at the other table counting votes for the Gould-Fisk candidates, and each party claiming victory for its side. Surveying the tangled results of these rival elections, and of assorted injunctions, counterinjunctions, arrests, counterarrests, lawsuits, and counterlawsuits, the Governor of New York in disgust then called upon the Supreme Court to settle the whole issue; and weeks later it delivered judgment—in favor of the Ramsey board and all its works.

  As one of Ramsey’s chief aides, Pierpont Morgan took part in this incredible episode, but just how much part is not clear. His devoted son-in-law and biographer, Herbert L. Satterlee, represents him as standing guard at the head of the steps leading to the meeting room and, with the aid of Ramsey, physically throwing Fisk and the leading toughs downstairs. But it is quite clear from detailed contemporary accounts that Fisk entered the meeting unopposed; it was not on September 7 that he was thrown downstairs, but a month earlier, when he made another foray on the Albany & Susquehanna offices with the idea of capturing the company’s stock transfer books; and since Satterlee himself places Morgan in California at that previous date, it seems doubtful whether the young banker had to make any physical show of prowess. Some other recent writers, including Matthew Josephson in The Robber Barons, perhaps succumbing to the tendency of narrators long-after-the-fact to place undue emphasis on the participation in any event of a man subsequently famous, have referred to the Ramsey party in the dispute as the “Morgan-Ramsey party.” No contemporary account that I have seen pays Morgan any such compliment. But it is certainly true that Morgan was called upon, as a reliable and active young financier with a quick head for strategy, to help Ramsey, and that his name headed the list of directors chosen by the Ramsey faction and subsequently confirmed by the upstate court.

  It is doubtless true, too, that the victory of his side added to the solidity of Morgan’s reputation in downtown New York; for the Mephistophelean Gould and the hard-shelled playboy Fisk were formidable adversaries. And one may perhaps hazard a further conclusion. Earlier that summer Pierpont Morgan, accompanied by his wife and two friends, had taken a trip to the Pacific Coast over the newly completed transcontinental railroad line. It had been his first Far Western visit. On the way out they had spent twelve days in Chicago; then they had boarded one of the earliest Pullman cars for a journey on which, as they crossed the Plains, they could see from the car windows a Pawnee war party, squads of scouting United States Cavalry, herds of antelopes, and immigrant trains winding slowly westward. They had visited Salt Lake City (where they talked with Brigham Young), and San Francisco, and the Yosemite, and then had returned East, again by Pullman. Is it not unreasonable to guess that this expedition gave Morgan a fresh and lively sense of what new frontiers there were for the railroad industry to conquer, and that it must have been a shock to him, immediately on his return home, to see a part of that industry demoralized by a lawless battle for control? And is it not also likely that to him, who had a deep instinct for order, the Battle of Susquehanna may have seemed an object lesson in the disorderliness of competition gone hog-wild?

  By instinct, if not by reason, most business men hate competition, at least when they are selling rather than buying. A man’s competitor is the fellow who holds down his prices, cuts away his profits, tries to seize his markets, threatens him with bankruptcy, and jeopardizes the future of his family. It is only when the business man mentally sets competition alongside some order of things even less attractive to him that he becomes its devotee. To a young man in 1869, monopoly, as an alternative, had no such connotations as it carries today; government control was something that only a few wild theorists talked about; and even government regulation of competition seemed a pretty remote possibility—and might very well appear to involve, furthermore, an unpalatable complication of the anarchy of competition such as had been brought about by Gould’s cheerful prostitution of the New York judiciary. It is hardly an accident that most of the Americans who at the beginning of the twentieth century were charged with being monopolists had got a good look in their youth at competition at its savage and unbridled worst, and had decided to try to do something about it. At the age of thirty-two Pierpont Morgan saw at close range what the Battle of the Susquehanna did to a small fragment of the railroad industry. It brought corruption, confusion, waste, and loss; and his systematic soul detested it. Surely, he may well have thought, it would be better if instead of fighting thus like cats and dogs, people could be brought together to combine forces for the peaceful and orderly and profitable development of railroad properties.

  4

  During the next year or two Morgan became deeply depressed about his health. He felt perpetually tired, slept badly, had severe headaches, had recurrences of his old fainting-spell trouble; and he began to think that, having already made a good deal of money—enough to live on thereafter—he might as well retire. The term for which the partnership of Dabney, Morgan & Co. had been organized was coming to an end; the elderly Mr. Dabney wanted to retire; the faithful Jim Goodwin talked of returning to Hartford. Why not just wind the whole thing up, get out of business, and take as many years as might be necessary to recover his physical well-being? So he reasoned in a letter to his father in London.

  What, one wonders, would have been his future, and how would the course of American business have been affected, if he had succumbed to this despondent idea? But it happened that at about this time his father was engaged in putting through one of the boldest operations ever known in international finance. The French had just been soundly defeated in the Franco-Prussian War of 1870; Paris was surrounded by German forces. To the city of Tours went Junius Spencer Morgan, head of the London firm that had once been George Peabody & Co., and agreed with the French ministers there to support them in their hour of trial by floating a loan to the French Government of 250,000,000 francs—fifty million dollars—in the form of six per cent bonds which he would take at the price of 80. It was a stiff price, but it was also a dangerous gamble. To sell the bonds he organized a group of bankers to which was applied the French term “syndicate”—a term which was then new. At first the sale of bonds went badly, and Morgan had to buy back a considerable number of them at a discount. But after the war the French credit rallied; the value of the bonds quickly rose to par; and Morgan’s ju
dgment was justified. His firm not only made a resounding profit on the French bonds—probably five million dollars or more—but won for itself in the world of international finance a place second only to that of the Rothschilds.

  With a deal like this in hand, Junius Morgan would appreciate more than ever the future value to him of having his son in a strongly entrenched position to sell European securities for him in the United States and to negotiate for American securities which J. S. Morgan & Co. might distribute in Europe. And here was that son flirting with the idea of retirement—and at the age of thirty-three!

  Somewhere about this time he wrote to the young man in New York, “I have had a visit from Mr. A. J. Drexel, of Drexel & Co., Philadelphia. It is possible he may want to see you about a certain matter, and if he does I hope you will go to see him.”

  Drexel & Co.—established by old Joseph Drexel, an immigrant portrait painter turned financier—had become an important private banking house, second only in Philadelphia to the great house of Jay Cooke. It had set up a London branch, Drexel, McCulloch & Co., and it also had a Paris house, Drexel, Harjes & Co. But its New York connections were unsatisfactory. What could be more promising for it than an alliance with young Pierpont Morgan, who not only was building up a sturdy reputation of his own, but also—what was presumably more impressive—was the son and American representative of the great J. S. Morgan of London? One day in May 1871, Anthony J. Drexel (old Joseph’s son, and now the leading spirit of the Drexel firm) wired young Morgan asking him to come on to Philadelphia for dinner.

  Somewhat mystified, Morgan took a train to Philadelphia, went to Drexel’s house, and dined with the Drexel family. After dinner Drexel and he adjourned to the library.

  “Morgan, I want you to come into my firm as a partner,” said Drexel; and then proposed, more specifically, that they join forces to set up in New York the firm of Drexel, Morgan & Co., the Drexels and Morgan each contributing capital to it and sharing the profits half-and-half.

  Morgan protested that he was in wretched health and that he had been thinking seriously of leaving business altogether. He said that anyhow he could not enter such an alliance, inviting though it might be, unless he took a year off at the outset. Drexel saw no objection to such a prolonged holiday; and so that evening they reached an agreement, written down by hand on a small sheet of paper. And on the first of July, 1871, the new firm of Drexel, Morgan & Co. began business—whereupon Pierpont Morgan promptly sailed with his wife and young children to spend over a year abroad.

  5

  The new association proved highly profitable. By 1873 Drexel, Morgan & Co. began to break into the field of distributing United States Government bond issues, a field which for some time had been monopolized by Jay Cooke’s banking house in Philadelphia. Teaming up with Levi Morton’s firm in New York, which was allied with the Rothschilds abroad, Morgan was given a chance to sell an issue of bonds along with Cooke. The sales went badly, the times being inauspicious, but it was something to be placed by the Treasury on a par with the notable financier of the Civil War; and when, a few months later, Cooke plunged into bankruptcy in the panic of 1873, Morgan found himself without an equal rival. For in those days there were far more wealthy investors in England and on the Continent than in the United States, and there was nothing more important to a distributor of government bonds than to have the means of selling them abroad. So a man who not only was already the dominant figure in the Drexel-Morgan firm, with the Drexel capital to aid him, but also had at his disposal the machinery of J. S. Morgan & Co. in London and Drexel, Harjes & Co. in Paris, and in alliance with Levi Morton could put into action also the international salesmanship of the great Rothschild firm, found himself one of the key figures of American finance in the eyes of the United States Treasury, despite the fact that not yet did one American citizen in a thousand know his name.

  On a little sheet of paper which he carried about with him in his wallet, Pierpont Morgan wrote down the “reserves” contributed by each partner to the business of Drexel, Morgan & Co. in the years 1871, 1873, 1874, and 1875—that is to say, the part of each member’s share of the annual profits which he did not take out as personal income but put back into the business to add to its financial backlog. Usually each member took out half of his share and put back half; perhaps in 1871, since the firm was newly formed, he put back a larger proportion than half. At any rate, here are Pierpont Morgan’s contributions to reserves in those years: for 1871—$727,649.21; for 1873—$202,253.03; for 1874—$324,-572.60; for 1875—$200,820.58. If Pierpont in those three latter years kept as personal income (not subject to any income tax) an amount equal to what he was contributing to reserves, clearly he was making out very handsomely indeed—especially as they were dismal years for business in general.

  6

  He had his offices, now, in a sumptuous and strategically located building just erected by the Drexels at the corner of Broad and Wall streets—a six-story white marble building with a corner entrance and, high above it on the roof, a sort of hexagonal cupola. The splendor of these new quarters offered majestic evidence of his rise in the world; and they were to serve him throughout the rest of his active business life, for it was not until within two or three years of his death that the Drexel Building was removed to make way for the present much lower and solider building at 23 Wall Street.

  Uptown, he and Fanny and the children occupied a brownstone house at 6 East Fortieth Street, just a few steps from Fifth Avenue, across which rose the embankment of the Croton Reservoir (on the site of the present Public Library). It was a unit in one of those rows of high-stooped brownstone houses which gave the residential districts of New York their prevailing air of somber monotony; but it was a very proper house by the standards of the Rutherford B. Hayes period, with a plethora of Victorian furniture. In its elongated, high-ceilinged, heavily curtained drawing room there were amply upholstered chairs, a sofa with a fringe hanging down in front, and sundry small tables of maximum inutility and instability; there were fine rugs superimposed upon a flowered carpet; every horizontal surface—mantels, tables, shelves—carried its freight of ornaments and knick-knacks; and if Pierpont had not yet become a notable collector of art, at least there was hardly a foot of wall space not covered with pictures elaborately framed in gold, hanging one above the other.

  And up in the Highlands of the Hudson—at Highland Falls, just south of West Point—the Morgans now had a country place, Cragston, which Pierpont had purchased by cable when he was abroad in 1871. It was one of the most comfortable estates in what was then a fashionable summer district. Some two miles south of the village of Highland Falls the entrance driveway of Cragston turned in from the main road that ran along the bluff high above the west shore of the Hudson; turned downhill toward the river, swung through woods, skirted a green meadow through which ran a little brook, and then twisted up the slope of a knoll just above the river bank. Here stood the house, a very ample, broad-eaved, gabled structure, a hundred feet long or thereabouts, three stories high, built of white clapboard; its front windows looked southward across a fine lawn toward the hills opposite Bear Mountain. (In 1948 the house had become a terrible blackened wreck; for after Morgan’s death the place had been sold, had gone through various vicissitudes, and finally had been visited by fire. Three great brick chimneys still stood and the walls were partly intact, but the roof had mostly fallen in, charred wainscoting hung at crazy angles, and the stairs and floors were gone. Outside, the long grass of the one-time lawn—half overgrown now—was matted and unkempt. Even so, one’s mind’s eye could reconstruct the Cragston of old: a very commodious though unpretentious country house, surrounded by rolling acres of field and grove, with the river glittering below it; a place that would commend itself to a man who enjoyed exercising a substantial hospitality and appreciated the English county tradition.) Here the growing Morgan family now spent a good part of the year.

  Still Pierpont’s health troubled him. He had frequent cold
s and headaches, and to his humiliation the recurring inflammation of the skin of his face began to settle in his nose; this was the beginning of the unending affliction of acne rosacea which was destined to disfigure him increasingly as time went on. But there were compensations. He was a rich man now, and life was beginning to expand. The Morgans went on frequent trips abroad, and now when they were in England they would find themselves either in Junius Morgan’s fine city house at Prince’s Gate, facing Hyde Park, or at his agreeable country estate, Dover House, at Roehampton in the western outskirts of London. In 1877 they spent almost a year abroad; in Egypt they chartered a steamer to go up the Nile and had their pictures taken in front of the ruins of Karnak in a group of eighteen—family, friends, doctor, maid, dragoman, waiter, and consular agent—Pierpont standing very straight and solid looking, with pith helmet, knickerbocker suit, wing collar, and a long walking stick.