Some of Morgan’s friends wanted him to come back from Richmond. He was the central figure in American banking, was he not? And the banking world was imperiled. Surely he should be in Wall Street, to rally the forces of confidence. But Morgan and his partners thought he had better remain in Richmond, lest his return be taken as a sign of alarm. So remain he did, until the convention broke up on Saturday, October 19. Let Bishop Lawrence’s diary take up the story:
“As I was going out of the door [of the Rutherford house] to the House of Bishops on Saturday morning, Mr. Morgan called me into his room and said, ‘Bishop, I am going back to New York on the noon train.’ I said, ‘Why do you do that?’ He answered, ‘They are in trouble in New York: they do not know what to do, and I don’t know what to do, but I am going back.’ I replied, ‘Why do you go back at noon? You will arrive in New York in the middle of the night. Why not get Mr. Sherry to have your two cars hitched onto the early evening train tonight? We will all pack up and go with you.’ He said, ‘I had not thought of that: I do not believe it can be done, but I will try.’ It was done, and off we went by the evening train. Still, there was no suggestion of care or anxiety on his part, indeed rather the contrary: he was in the best of spirits. Held at Washington for an hour at midnight, he sat on the rear platform smoking until the train should start.
“Sunday morning, as we ran into Jersey City, we went again into Mr. Morgan’s car for some bread and coffee before arrival, and found him sitting at the table with a tumbler turned upside down in each hand, singing lustily some tune which no one could recognize.”
Arriving at the ferry house in New York, Morgan escorted his guests to cabs. When some of them asked if they would see him at St. George’s Church, he said, “Perhaps so.” But after driving his daughter Louisa Satterlee to the West Shore ferry so that she could proceed to Highland Falls, he then went on by cab, not to St. George’s, but posthaste to his Library. No. 219 was not open, for Mrs. Morgan was at Cragston, so he expected to have to live at a hotel for the next few days. But Herbert Satterlee, hearing from Louisa of her father’s fears, set out at once from Highland Falls for New York to open up the Satterlee house, the big stone house just east of the Library. It was there that Morgan would sleep during the next few nights—when there was time for sleep.
But he was not thinking of that now, as, like a general arriving at the headquarters of a beleaguered army, he climbed the steps of the Library and entered its massive doors.
3
He spent the rest of that Sunday, until after midnight, studying the problem which confronted him—talking with partners and friends, with bank presidents, with trust-company heads; hearing about the demoralized condition of the Stock Exchange, the widespread calling of loans, the runs on bank after bank; looking at financial statements; listening to the appeals of men who wanted him to lend cash to this institution or that. His own banking house was secure—or rather, would be secure unless everything went. What concerned him now was the general situation, the general mood of panic. Everybody seemed to look to him for leadership in averting disaster. But how could that leadership best be applied? Morgan listened, considered, played solitaire, was uncommunicative. He did not yet know what the situation demanded. Reporters took up their watch in Thirty-sixth Street outside the Library gate, and noted who arrived and who left, but there was no news. The commander of the forces of defense had not decided where or how to draw up his battle lines.
The next morning—Monday October 21—Morgan made a first move. He asked Satterlee to get in touch with some able young bankers—such as Thomas W. Joyce of the House of Morgan, Richard Trimble of the Steel Corporation, Henry P. Davison of the First National Bank (subsequently a Morgan partner), and Benjamin Strong of the Bankers Trust Company (subsequently head of the Federal Reserve Bank of New York)—who could go about and assemble figures and facts for him, and if necessary could make rapid examinations of the condition of a bank which applied for aid. Then he went downtown. Among the banks which appeared to be headed for trouble was a very big trust company, the Knickerbocker, whose fine main office was conspicuously situated at what was then the chief crossroads of the city, the corner of Fifth Avenue and Thirty-fourth Street, opposite the grand brick-and-sandstone pile of the Waldorf-Astoria. Some of the Knickerbocker’s funds were said to have been dubiously invested and depositors were beginning to draw out their cash. After banking hours a committee of the Knickerbocker’s directors came to see Morgan. They reported that because the name of the popular and amiable president of the Knickerbocker, Charles T. Barney, had been too closely linked in the public mind with those of Heinze and Morse, they had called for Barney’s resignation. That very afternoon the National Bank of Commerce, which customarily cleared checks for the Knickerbocker, had sent word that it would do so no longer. The committee appealed to Morgan for help for the bank.
Morgan would promise nothing. He was a stockholder in the Knickerbocker himself, some of his own firm’s money was on deposit in it, and he had a sentimental attachment for it because it had been founded by an old school friend of his; but he doubted if it could be saved. And anyhow he had too little precise information about its condition to offer help. There would be no sense in throwing valuable funds into a sinking institution. He advised the committee to assemble at once a meeting of all the directors of the Knickerbocker and to see whether they themselves could devise a plan to prevent its downfall.
The Knickerbocker meeting was held that evening—at Sherry’s restaurant, in a room so lamentably unprivate that strangers wandered in and out, picking up fragments of the talk, telephoning their friends, spreading the news that the Knickerbocker was in jeopardy. That evening Morgan remained by the fire at Satterlee’s house. Not yet had he decided where the lines of defense could be drawn. He went to bed after midnight, with a cold coming on—a tired and uncertain man.
Tuesday, the 22nd, came; and with it the expected run on the Knickerbocker, as depositors swarmed to Fifth Avenue and Thirty-fourth Street to draw out all their funds. Benjamin Strong, one of Morgan’s team of examiners, had been making a quick examination of the Knickerbocker’s condition, and his report, while incomplete, was unfavorable. There was nothing to be done. The run continued—and at two o’clock in the afternoon the Knickerbocker came to the end of its cash. It suspended payment. It had failed.
The news of the failure of this large and important and widely known bank came like a thunderclap in the midst of a gathering storm. Every banker, and especially every trust-company president, knew that he faced the possibility of a run on his own bank the next day. The Secretary of the Treasury, George B. Cortelyou, sped to New York to see what use could best be made of such government funds as were available. Again Morgan conferred with anxious financiers half the night. “It was at this time,” says Satterlee, that he “organized the group or committee of bankers who voluntarily submitted their statements to him and permitted him to allocate to each one the sum of money which he felt was appropriate and necessary to make up the total amount needed to carry the weaker institutions through the panic.” He tried to get the heads of the trust companies, too, to organize for mutual aid, but failed. Not until after three o’clock in the morning did he turn in, still miserable with the heavy cold that had fastened itself upon him.
4
Where would the lightning strike next? As a matter of fact, the direction it was to take was largely determined by something that happened on that very evening of Tuesday, October 22—an episode that was subsequently to become a subject of furious controversy.
Among the bankers who discussed possible plans of action that night with Secretary Cortelyou in his rooms at the Hotel Manhattan was George W. Perkins, one of Morgan’s partners. When the session was over the reporters clustered round, and Perkins attempted to brief them on the situation to date. As a result there appeared the next morning in The New York Times and Sun a statement that “the sore point” was now the Trust Company of America (which was located in Wal
l Street not far from the House of Morgan). The statement added that the Trust Company of America had applied for help, but that provision had been made to supply it with all the cash it might need the next morning, and that it was sound and would pull through.
That statement, centering as it did the attention of frightened men on a single bank, was so injudicious, to say the least, that the Associated Press refused to send it out. Under the circumstances it was not surprising that, although there were runs on many institutions the next day, by all odds the worst one besieged the Trust Company of America.
Oakleigh Thorne, the president of that particular trust company, testified later before a congressional committee that his bank had been subjected to only moderate withdrawals on Tuesday (one and a half million dollars, as against thirteen million on Wednesday), that he had not applied for help, and that it was the “sore point” statement alone that had caused the run on his bank. From this testimony, plus the refusal of Morgan to help the Knickerbocker, plus the disciplinary measures taken by the Clearing House against the Heinze, Morse, and Thomas banks, plus other fragments of supposedly pertinent evidence (even including Bishop Lawrence’s account of Morgan’s cheerful singing in the dining car on Sunday morning), certain chroniclers have arrived at the ingenious conclusion that the Morgan interests took advantage of the unsettled conditions during the autumn of 1907 to precipitate the panic, guiding it shrewdly as it progressed so that it would kill off rival banks and consolidate the pre-eminence of the banks within the Morgan orbit. To this hypothesis the most obvious answer, given over and over again by bankers, is that no banker in his senses encourages a bank panic. That would be like dropping a match in a powder keg; he would be too likely to go up in the explosion himself. Nor does this hypothesis accord either with Morgan’s character or with subsequent events, as we shall see. And Thorne had undeniably been consulting with Perkins that evening, whether or not he had specifically asked for help. There is, however, some ground for believing that Perkins, who later denied having given out any “sore point” statement but admitted that he had given the reporters such information as he thought it was “proper to give, of a reassuring and helpful nature,” may have felt that by directing attention to one bank he would be helping to localize the panic, and perhaps to keep it from enveloping other institutions whose safety he rightly or wrongly regarded as more essential. (Which, incidentally, raises the question, what would you do if called upon to give out news to reporters during a panic? Tell them nothing at all? Rumor thrives on ignorance. Tell them everything? That, in a panic, would be inflammatory to the last degree. Merely utter soothing generalities? That would convince nobody.) But let us see what happened after that statement appeared in the Times on the morning of Wednesday, October 23.
5
On that Wednesday morning “Morgan could not be waked up.” (I am quoting Satterlee, at whose house on Thirty-sixth Street he was staying.) “If he could not be aroused, the consequences were too serious to contemplate. He seemed to be in a stupor. I finally got him to open his eyes and answer my questions. His cold had made fast progress owing to his fatigue. He could hardly speak above a whisper. Dr. Markoe was summoned by telephone and came down provided with sprays, gargles, etc. After half an hour’s heroic work Mr. Morgan dressed and went down to breakfast.”
A cup of coffee appeared to revive him, and after a few conferences in the Library he went downtown by cab. His voice was hoarse and his eyes wept so that it was hard for him to read, but there was no staying home that day. When his cab turned into Wall Street he found the place full of crowds, gathered as if to watch a fire; and outside the door of the Trust Company of America there was a long line of depositors reaching down the street and round the corner into William. President Oakleigh Thorne of the Trust Company had opened seven paying tellers’ windows that morning instead of the customary one window, hoping thus to reduce the crowd of panicky depositors, but this had had no appreciable result. Two members of Morgan’s team of examiners were inside the bank, appraising hurriedly the securities in its vaults; they had been there since four o’clock that morning, but as yet had not finished their survey. Morgan could not yet know whether the bank was worth saving.
Meanwhile he invited the presidents of all the other trust companies to meet in his office—discovering to his dismay that many of them had to be introduced to one another—and urged them to organize a committee to get together funds to help such of their own group as might, like the Trust Company of America, be in trouble. And he also asked the two most important national bankers in the city, George F. Baker of the First National and James Stillman of the National City, to meet with him. The hour for decision was approaching, and he needed their aid and counsel. They joined him in one of the back rooms of the Morgan office—while frantic messages came from Thorne that the cash in the tills of the Trust Company of America was dwindling fast.
At about half-past twelve Morgan knew that he could wait no longer; so he sent for the men who had been examining Thorne’s bank. One of them, Willard King, went into the meeting of the trust-company heads to make a report. The other, Benjamin Strong, joined Morgan and Baker and Stillman in the back room. Morgan sat and listened while Strong consulted Baker and Stillman as to the value of certain securities on which their judgment would be valuable. It was a slow business. Minutes dragged by—half an hour, three-quarters of an hour. Morgan was well aware that meanwhile Thorne’s cash was getting lower and lower. Finally Morgan asked Strong whether he believed the Trust Company to be solvent. Yes, said Strong.
“This, then, is the place to stop this trouble,” said Morgan.
At once, with the aid of Baker and Stillman, he made cash available to Thorne’s bank. It arrived in the nick of time, and the Trust Company of America did not close.
6
It was a very tired man of seventy who heaved himself into a cab on Fifth Avenue late that evening and rode home to the Satterlee house. He had spent the entire evening at the uptown office of the Union Trust Company, at Fifth Avenue and Thirty-eighth Street, in a prolonged session with the committee of trust-company presidents which he had succeeded that day in getting organized. He had told them that the panic was now a trust-company panic, and that they positively must subscribe among themselves a fund of ten million dollars which could be used for the support and rescue of their weaker brethren such as the Trust Company of America. Secretary Cortelyou was going to put federal funds at the disposal of certain of the national banks, which would pass them on to the trust companies; but there was no time now to wait for that. They must act themselves, at once. The talk had been interminable, and at one time Morgan had dozed off for half an hour or so, his cigar out, his head down on his chest. But at last they had subscribed up to eight and a quarter million, and he had told them that his firm and the leading national banks would be responsible for the remaining million and three-quarters; and then he had left for home.
All in all, it had been a terrible day. The Westinghouse Company had failed. The Pittsburgh Stock Exchange had suspended. Western banks which had money on deposit in New York were drawing it away, for the panic was now national. No one could tell what turn it would take next. But here in New York disaster had been halted, at least for the moment. And it looked as if the forces of defense were at last getting organized. So far, so good. Morgan played a last game of solitaire and went slowly up to bed.
7
But Thursday and Friday proved to be even worse.
At about ten o’clock Thursday morning, Morgan drove downtown with Satterlee “in the Union Club brougham drawn by the white horse and driven by the faithful Williams.” Satterlee has given an account of that ride: “The newspapers had been carrying his picture on the first page, and his name had been biggest in the headlines. All the way downtown people who got a glimpse of him in the cab called the attention of passers-by. Policemen and cabbies who knew him well by sight shouted, ‘There goes the Old Man!’ or ‘There goes the Big Chief!’ and the peo
ple who heard them understood to whom they referred and ran beside the cab to get a peep at him. Near Trinity Church a way through the crowd was opened as soon as it was realized who was in the cab. The crowd moved with us.… All this time he looked straight ahead and gave no sign of noticing the excitement, but it was evident that he was pleased. Wall Street and Broad Street were filled from curb to curb with an excited throng through which messengers forced their way. As Mr. Morgan got out of the cab and hurried up the steps into his office the hubbub ceased, and there was a moment’s pause; and then the struggling mob fought their way on, all looking up at the windows of J. P. Morgan & Co.”
There was new aid available now for the forces of defense. John D. Rockefeller had put up ten millions to aid the trust companies. Cortelyou stood ready to follow the leading bankers’ advice as to where the United States Government’s money should be applied. But the bank runs continued, especially at the Trust Company of America; and the ten-million-dollar fund which had been subscribed the preceding evening had been “swallowed up … so quick you couldn’t tell where it went to,” as Perkins later testified. And now the storm center had shifted to the Stock Exchange, which was feeling the full brunt of the universal urge to turn anything and everything into cash. Prices were tumbling; that morning Union Pacific fell from 108½ to 100, Reading from 78⅝ to 70½, Northern Pacific from 110 to 100½; and what was much worse, there was practically no money at all available to lend on the Stock Exchange floor for the purchase of securities. Toward the end of the morning, sales had almost stopped—there was no money with which to buy stocks. President Thomas of the Stock Exchange thereupon crossed the street to 23 Wall.
The Great Pierpont Morgan Page 23