The Great Pierpont Morgan

by Allen, Frederick Lewis;

  SENATOR PLATT. Why did you not want to have an issue of bonds after you had commenced your negotiations? You asked the President not to issue a call. What was your reason for doing that?

  MORGAN. Because I knew that if the call was made the public would understand that the foreign negotiation had been abandoned.

  PLATT. It was a well-known fact that you had commenced a negotiation.

  MORGAN. I did not care about anything except to get the gold for the government. I had but one aim in the whole matter—to secure the gold that the government needed and to save the panic and widespread disaster that was sure to follow if the gold was not got.

  PLATT. Then it was understood that when you were negotiating, shipments ceased?

  MORGAN. Absolutely; and they did not commence again until a month afterwards.

  PLATT. And so your real purpose, as I understand you, in this transaction was not the idea that you could take this bond issue and make money out of it, but that you could prevent a panic and distress in the country?

  MORGAN. I will answer the question, though I do not think it is necessary in view of all that I have done. I will say that I had no object except, as I have stated, to save the disaster that would result in case that foreign gold had not been obtained.

  SENATOR VEST (moving to the attack). If that was your sole object, why did you specify in your telegraphic communication to Mr. Carlisle that your house, or you and Mr. Belmont, were to have exclusive control of the matter?

  MORGAN. Because it was absolutely impossible for more than one party to negotiate—to make the same negotiation for the same lot of gold. It would only have made competition.

  VEST. If the gold was abroad, I take for granted that anybody could get hold of it who had the means to do so. If you were actuated by the desire to prevent a panic, why were you not willing that other people should do it, if they wanted to?

  MORGAN. They could not do it.

  VEST. How did you know?

  MORGAN. That was my opinion.…

  VEST. Do you believe that the government could have made any better terms with anybody else than it made with yourself and Mr. Belmont at that juncture?

  MORGAN. I do not, sir.

  VEST. Do you believe that gold could have been obtained from abroad on any better terms?

  MORGAN. I do not. It was difficult enough to obtain it, as it was.

  VEST. Was your house engaged in shipping gold abroad up to this time, or at about this time?

  MORGAN. We never have shipped one dollar of gold abroad for the last three years.

  12

  When Senator Vest, a little earlier, asked the direct question, “What profit did your house make upon this transaction?” Morgan replied flatly: “That I decline to answer. I wish to state that I am perfectly ready to state to the committee every detail of the negotiation up to the time that the bonds became my property and were paid for. What I did with my own property subsequent to that purchase I decline to state, except this, that no member of the government in any department was interested directly or indirectly in connection therewith.”

  Vest pursued the matter. “You decline to answer my question as to the amount of profits made by your firm?”

  “I do, sir,” said Morgan.

  “Upon what terms did you dispose of these bonds that you received from the government, and to whom?”

  Morgan still stood fast. “That was subsequent to the purchase,” he said, “and I decline to answer for the reason stated.”

  J. P. Morgan, Jr., used to say that his father told him that he himself was quite willing to disclose his profit, but that for some reason August Belmont asked him not to. Be that as it may, Belmont too refused to inform the senators. Nobody seriously questioned the bankers’ right to keep silence if they chose—a fact which seems somewhat remarkable to us today, since, in view of the surrounding circumstances, the transactions of the syndicate were emphatically vested with a public interest—and therefore the amount of the actual profit long remained a matter of conjecture.

  As we have noted, the New York World charged in 1895 that “the bankers” (unspecified) made at least sixteen million dollars. In his book The House of Morgan, published in 1930, Lewis Corey said that “the syndicate profits ranged from seven to twelve million dollars.” Other estimates, taking into account possible losses in maintaining foreign exchange in equilibrium and other expenses of the operation, and also taking into account the probability that the syndicate could not have disposed of all its bonds at the top price and raked in the whole difference as a profit, made much lower estimates, nevertheless arguing, as did the conservative Alexander Dana Noyes in his Forty Years of American Finance, that “the terms were extremely harsh … they measured with little mercy the emergency of the Treasury,” or as did Nevins in his sympathetic life of Cleveland, that “after all allowances are made, the profits must be pronounced exorbitant.” On the other hand, Francis Lynde Stetson said in an address that the American syndicate realized “only five per cent and interest”; and Herbert L. Satterlee went so far as to declare that “from my talks with Mr. Morgan I can confidently state that there was no profit for him at all.”

  Among these wildly divergent statements it was Stetson’s which was the most accurate. Here are the actual figures—which so far as I know have never previously been disclosed—from the original Syndicate Book of the American Syndicate. (It must be recalled that there were two syndicates, one American, one European, with the business divided about evenly between them. These are the American figures only, from the still-existing records at 23 Wall Street.)

  The American Syndicate took bonds totaling $31,157,000, and allotted them among no less than sixty-one syndicate members—banks and private banking and investment houses. The House of Morgan took less than a tenth of the total. The largest holdings of bonds were $2,753,875 by August Belmont & Co.; $2,678,825 by J. P. Morgan & Co.; $2,600,000 by the First National Bank; $2,600,000 by Harvey Fisk & Sons; $1,800,000 by the United States Trust Co.; $1,500,000 by the National City Bank; and $1,000,000 each by the Fourth National Bank and the Chase and Hanover banks. All the other fifty-two holdings were for less than a million dollars apiece.

  When the transaction was over and the books were closed, the total profit of the American Syndicate was $1,534,516.72, which was about a tenth of the figure set down by the World, less than a quarter of the minimum figure set down by Corey, and a shade less than the five per cent figure given by Mr. Stetson. (If interest is included—properly it should not be—the amount is increased from $1,534,516.72 to $2,079,776.47.)

  Of the American Syndicate’s profit, J. P. Morgan & Co.’s share was $131,932.13. In addition the Morgan firm received half of the American Syndicate Managers’ commission of three-quarters of one per cent; that brought in $116,841.37 more. These two sums total $248,773.50—a little less than a quarter of a million dollars. And this, by the way, was gross profit, against which could reasonably be charged some of the general costs of doing business. (If one adds to this sum the interest drawn by the firm on its holding, the total rises by $46,879.43 to $295,652.93.)

  As for Pierpont Morgan himself, presumably at the year’s end he was credited with a goodly share of this profit—and also a share in the London profit, whatever that may have been.

  To people outside the banking world, a profit (for the Morgan firm in New York) of a quarter of a million dollars on a single transaction looks large. But considering that it amounted to less than one per cent of the value of the bonds which were being distributed, it was not large at all—especially when one took into account the duration and complexity of the operation and the risks involved in such an unprecedented undertaking. And to Morgan himself, who was accustomed to thinking in large sums, it undoubtedly seemed a modest recompense indeed for saving the credit of the United States.

  VIII

  TRIANGULATION

  1

  To fix precisely the size and shape and position of a natural object, such
as a mountain peak, the surveyor triangulates, which is to say that he looks at the object from various points of view and compares the different observations which result. Sometimes triangulation is useful in biography as well. A biographer may try to reveal his subject’s terrific personal force, the awe in which he was held by those about him, the weight of the few words he spoke; his curtness toward those upon whom he had not focused his sympathies, and especially toward those whom he regarded as interrupters or interferers; his tenderness toward those who engaged his friendship; the patrician limitations of his view of other men—yet all the time this biographer is conscious that the picture he is drawing is two-dimensional and flat, and that each of the qualities which he has recorded will leap into bolder relief when observed from another direction. So I propose now to show you Pierpont Morgan through the eyes of a few contemporaries, each of whom saw him from, as it were, a different point of the compass.

  Let us begin with Lincoln Steffens, writing in his remarkable Autobiography about the days when he himself had not yet become a redoubtable chronicler of municipal corruption but was simply an energetic and observant young financial reporter for the New York Evening Post. He depicts Morgan at about the time when the banker was reorganizing railroads right and left and saving the gold reserve of the United States—and also, as his prestige grew, was becoming recognizably the man revealed in Steichen’s great portrait photograph.

  “In those days of the eighteen-nineties,” writes Steffens, “I had to do with the private bankers who are the constructive engineering financiers.

  “Of these last, J. P. Morgan, Senior, was the greatest. I did not see much of him, of course; nobody did. He was in sight all the time. He sat alone in a back room with glass sides in his banking house with his door open, and it looked as if anyone could walk in upon him and ask any question. One heard stories of the payment of large sums for an introduction to him. I could not see why all the tippers with business did not come right in off the street and talk to him. They did not. My business was with his partners or associates, principally Samuel Spencer,* but I noticed that these, his partners, did not go near him unless he sent for them; and then they looked alarmed and darted in like officeboys. ‘Nobody can answer that question except Mr. Morgan,’ they would tell me. Well, Mr. Morgan was there; why not go in and ask him? The answer I got was a smile or a shocked look of surprise. And once when I pressed the president of one of the Morgan banks to put to him a question we agreed deserved an answer, the banker said, ‘Not on your life,’ and when I said, ‘But why not?’ he said, ‘You try it yourself and see.’ And I did.

  “I went over to J. P. Morgan & Company, walked into his office, and stood before him at his flat, clean, clear desk. I stood while he examined a sheet of figures; I stood for two or three long minutes, while the whole bank seemed to stop work to watch me, and he did not look up; he was absorbed, he was sunk, in those figures. He was so alone with himself and his mind that when he did glance up he did not see me; his eyes were looking inward.… I thought … that he was doing a sum in mental arithmetic, and when he solved it he dropped his eyes back upon his sheet of figures and I slunk out.…”

  But one afternoon Steffens’ paper received a typewritten statement from J. P. Morgan & Company about some bonds, a statement that did not make sense as written. So, says Steffens, “ready for the explosion, I walked into Morgan’s office and right up to his desk. He saw me this time; he threw himself back in his chair so hard that I thought he would tip over.

  “‘Mr. Morgan,’ I said as brave as I was afraid, ‘what does this statement mean?’ and I threw the paper down before him.

  “‘Mean!’ he exclaimed. His eyes glared, his great red nose seemed to me to flash and darken, flash and darken. Then he roared. ‘Mean! It means what it says. I wrote it myself, and it says what I mean.’

  “‘It doesn’t say anything—straight,’ I blazed.

  “He sat back there, flashing and rumbling; then he clutched the arms of his chair, and I thought he was going to leap at me. I was so scared that I defied him.

  “‘Oh, come now, Mr. Morgan,’ I said, ‘you may know a lot about figures and finance, but I’m a reporter, and I know as much as you do about English. And that statement isn’t English.’

  “That was the way to treat him, I was told afterward. And it was in that case. He glared at me a moment more, the fire went out of his face, and he leaned forward over the bit of paper and said very meekly, ‘What’s the matter with it?’

  “I said I thought it would be clearer in two sentences instead of one and I read it aloud so, with a few other verbal changes.

  “‘Yes,’ he agreed, ‘that is better. You fix it.’

  “I fixed it under his eyes, he nodded and I, whisking it away, hurried back to the office. They told me in the bank afterward that J. P. sat watching me go out of the office, then rapped for Spencer and asked what my name was, where I came from, and said, ‘Knows what he wants, and—gets it.’”

  2

  So much for Steffens, the reporter. Let us now move our theodolite to another angle of observation and look at Pierpont Morgan through the eyes of the Reverend William Stephen Rainsford, rector of St. George’s Church, the bold preacher and pioneer in church social work who, you may recall, had accepted the pulpit of St. George’s in 1882 at a vestry meeting held in Morgan’s house.

  From that time on, Morgan had been Rainsford’s devoted friend and backer. He had become senior warden of the church on his father-in-law’s death; had passed the plate every Sunday when he was in New York; and had had Rainsford to breakfast every Monday morning at No. 219 to discuss the affairs of the church over an after-breakfast cigar. When in 1889 Rainsford suffered a nervous breakdown from overwork, Morgan saw to it that he was well cared for, and during Rainsford’s absence made a point of reaching St. George’s each Sunday morning a half hour before the service began and standing at the church door, “welcoming those he knew and did not know,” and thus helping them to feel “that St. George’s was a going concern.” Let Rainsford say in his own words what Morgan meant to him in the dark hour of that illness:

  “Then it was I proved fortunate in my friends. I had no care. Others planned my life and saved me all expense and all trouble. Of course the strongest arm under me was that of my senior warden. He was ever a man to lean on in time of trouble. You differed with him, and he with you, but when a helper was needed you turned to him, you leaned on him, and you leaned hard. He had a great heart.…”

  After Rainsford returned to the pulpit he found that something had gone out of him; he had lost vitality and was often tired. “Mr. Morgan saw most things he wanted to see,” writes Rainsford, “and he noticed the change in me. Soon after my return, in his quiet way, he drew me aside one day and, slipping a paper into my hand, said, ‘Don’t work too hard; you ought not to have to worry about money. Don’t thank me, and don’t speak of it to anyone but your wife.’ He had created a modest trust fund for me and mine. So he lifted from my shoulders a burden that has crushed the life out of many a good soldier.…”

  Again, when Mrs. Rainsford was gravely ill for a long time at the Roosevelt Hospital, Morgan, “who at that time was carrying a load of responsibility heavier, perhaps, than any other man in the United States carried, except its President, found time again and again to bring roses to her sick room, and would wait outside her door till the nurse permitted him to lay them by her bed.”

  The close association between these two men was a strange one. For Rainsford was by nature a radical reformer, a passionate democrat. He believed in the “social gospel”—the pre-eminent importance, in Christ’s teaching, of the duty of active neighborliness to all men. He wanted to make the church itself a friendly place to which men and women of every sort would come for companionship, enjoyment, solace, and practical help. To Morgan, the conservative and traditionalist, all this was strange. Morgan’s religious faith, unquestioned and unchanged since his Hartford boyhood, was something set sacre
dly apart from daily conduct. As Rainsford interpreted him, “His mental qualities drew him strongly to the ecclesiastical side of the Episcopal Church’s life. Its very archaic element, its atmosphere of withdrawal from the common everyday affairs of men, answered to some need of his soul.” Morgan regularly attended the triennial national Episcopal conventions, and according to Rainsford, “The floor of the convention, the association with men who were, by virtue of their office, guardians and exponents of a religious tradition, beautiful and venerable, had for him an attraction stronger than any other gathering afforded. He would cast all other duties aside and sit for hours, attentively following the details of the driest of debates, on subjects that could interest only an ecclesiastic.” How explain such a man’s loyal partnership with a clergyman to whom the church was first of all an organization to energize and inspire a humble-hearted friendship among men?

  Perhaps Morgan recalled how desperately his grandfather, the crusading John Pierpont of Boston, had missed the support of the congregation of the Hollis Street Church; perhaps he had resolved that he himself would never be so blindly obstructive as those Bostonians had been. More likely the chief reason was that when Morgan believed in a man he believed in backing him with full faith and with few questions; and Rainsford, a big, handsome, straightforward fellow who knew how to meet loyalty with loyalty, attracted his belief. At any rate, despite his misgivings over Rainsford’s program of social work, he gave the clergyman his sustained support, and even went so far as to build for St. George’s a parish house—Memorial House, given in memory of his wife’s parents—which was the first building of its kind in New York. But the story of Morgan and Rainsford would not be complete if it omitted a rift between them which opened up in the middle eighteen-nineties, not very far in time, probably, from Steffens’ confrontation of Morgan at 23 Wall Street.