The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance

by Ron Chernow

  From his days at New York Life, Perkins would always carry a faint spice of scandal and a reputation as a master manipulator. In 1905, the New York State legislature held sensational hearings regarding the life-insurance industry. They were named after Senator William Armstrong and they made the reputation of chief counsel Charles Evans Hughes, later secretary of state and chief justice of the Supreme Court. The committee showed how rapacious insurance executives poured money into trust companies in which they held stock and squandered policy-holders’ money on fancy balls. There were stories about a racy house of mirth in Albany and other devices used by New York Life and other insurance companies to sway legislators. Perkins had been in too high a position at New York Life to get off scot-free. Against Pierpont’s advice, he had retained his New York Life position and Hughes pummeled him with conflict-of-interest issues. Perkins was charged with illegal campaign contributions and falsifying company records related to the sale of railroad securities. Although the indictments were later thrown out, he had to resign from New York Life.

  Where Pierpont’s theorizing was largely nonexistent, Perkins’s was sophisticated. He gave speeches and published pamphlets on every conceivable subject. He was an oddity at the world’s most cryptic bank. He preached a gospel of industrial cooperation, contending that small-scale business depressed wages and retarded technological advance. Not Wall Street, he said, but steam engines and telephones produced trusts. “What is the difference,” he proclaimed, “between the U.S. Steel Corporation, as it was organized by Mr. Morgan, and a Department of Steel as it might be organized by the Government?”43 He drew a parallel Pierpont wouldn’t admit to—that trusts, with their centralized production and distribution, were a form of private socialism. And unlike Pierpont, he saw that they had acquired a public character, and he favored government licensing of interstate companies and extended worker benefits, including profit sharing, social insurance, and old-age pensions. This, he boasted, would be “socialism of the highest, best, and most ideal sort.”44 Although Teddy Roosevelt sometimes wondered whether Perkins simply rationalized a selfish Morgan agenda, there was a striking likeness between their views.

  That a Morgan partner should advocate socialism is not so startling. After all, Pierpont, starting with his railway associations of the late 1880s, espoused industrial cooperation instead of competition. He liked his capitalism neat, tidy, and under bankers’ control. The House of Morgan was banker to established enterprises—the great industrial planning systems that favored stability over innovation, predictability over experimentation, and were threatened by upstart companies; so the bank had a heavy stake in the status quo. Perkins wasn’t the only one in the Morgan camp to applaud moves toward a planned, integrated economy. Later on, Judge Elbert Gary of U.S. Steel, who held private dinners to fix prices in the steel industry, testified: “I would be very glad if we had some place where we could go, to a responsible governmental authority, and say to them, ’Here are our facts and figures, here is our property, here our cost of production; now you tell us what we have the right to do and what prices we have the right to charge.”45

  As we shall see, the mortal attacks on the House of Morgan came not from socialists but from such trustbusters as Louis D. Brandeis, Felix Frankfurter, and William O. Douglas, who favored small economic units and sharp competition. This tradition would lambaste the Morgan Money Trust as the biggest and most dangerous trust of all. Because the House of Morgan preached socialism for the rich, it always had a partial affinity for those who preached it for the poor.

  Yet another dimension of the Pierpont Morgan-Teddy Roosevelt relationship may be seen in the Panama Canal affair. Even as TR fulminated against excessive financial power at home, he gratefully exploited it abroad. In 1902, Congress authorized Roosevelt to pay $40 million to France to buy its uncompleted assets in the Isthmus of Panama for the construction of a canal. Two years later, Pierpont carried out the financing for this largest real estate transaction in history. He traveled to France to oversee the shipment of gold bullion and paid the rest in foreign exchange to the Banque de France. After receiving payment from the United States, the new state of Panama—which TR helped to pry loose from Colombia—named J. P. Morgan and Company its fiscal agent on Wall Street, with exclusive rights to receive its U.S. government payments. The House of Morgan also handled Panama’s single biggest investment: $6 million of first mortgages on New York City real estate. So integral was Pierpont in the whole shady Panama Canal affair that one biographer has dubbed him “Roosevelt’s bagman in the taking of the Panama Canal.”46

  Thus, in the sparring between Roosevelt and Morgan there was always a certain amount of shadow play, a pretense of greater animosity than actually existed. In the 1904 campaign, the Morgan bank gave $ 150,000 toward Roosevelt’s reelection. In return, Pierpont was sternly lectured by TR at a 1907 dinner of the Gridiron Club, the president wagging his finger at Morgan and Standard Oil’s Henry Rogers and thundering for business reform. “And if you don’t let us do this,” he insisted, “those who will come after us will rise and bring you to ruin.”47 When TR enunciated the famous phrase about “malefactors of great wealth,” reporters thought he glanced in Morgan’s direction.48

  Nevertheless, some of the most eloquent encomiums of Pierpont came from TR himself, who “was struck by his very great power and his truthfulness. Any kind of meanness and smallness were alike wholly alien to his nature.”49 Morgan was less forgiving. When Roosevelt went on an African safari, Pierpont declared that he hoped the first lion he met would do its duty.

  BADGERED by trustbusters, Pierpont turned with relief to other matters in his later years. By the 1900s, in his early sixties, he was often an absentee boss. Cabling instructions to Wall Street two or three times daily from vacation haunts, he never loosened his grip. He was a restless, frustrated man. He didn’t gloat over the stupendous sums he earned, and one doesn’t picture him counting up his net worth in the dead of night. He never mistook business for the whole of life. His real passions and temptations were women, art, and religion.

  Pierpont tried to suppress press gossip about his escapades, but the Morgan estrangement was no secret. Husband and wife had little in common, and Fanny remained aloof from the social rigors required of a famous man’s wife. In a 1902 photograph, she still looks tall, refined, and handsome, with her wavy hair swept up. Yet she was frail and sickly and sometimes lacked the strength to travel. By the early 1900s, she had become rather deaf and used an enormous ear trumpet; she was a semi-invalid and ate alone upstairs when the family gathered for Sunday breakfast.

  Despite the tensions between Pierpont and Fanny, the Morgans were family-oriented. In 1904, Pierpont bought Jack a big Victorian brown-stone at the corner of Madison Avenue and Thirty-seventh Street, almost a twin of his own. Unexpectedly light and spacious inside, it had forty-five rooms, twenty-two fireplaces, and a dozen bathrooms. By tearing down an intervening house, Jack and his father lived as next-door neighbors, with a common garden in between, from 1905 until Pier-pont’s death, in 1913.

  Jack continued to manage emotional acrobatics, propping up his mother’s failing spirits while retaining his father’s love. In later years, he functioned as a post office, informing his mother of Pierpont’s movements abroad and reporting to his father on his mother’s whereabouts. It was formal and awkward, yet Pierpont and Fanny never turned their children against one other. A thoroughgoing Victorian, Pierpont would inquire respectfully after Fanny and try to minimize Jack’s discomfort.

  In letters often heavy with piety, Jack preached resignation to Fanny. Life, he argued, was simply a matter of bowing to eternal verities. Hadn’t he dealt with his father by accepting the inevitable? In the stuffy, patriarchal Morgan world, Fanny’s options were terribly limited. In one 1900 letter, he congratulated her for her better health, then said, “Do keep hold of it now it’s come at last and don’t squander your health on things which seem a necessity to you because they would be a pleasure to others
. Keep on letting people do things without you, you’ll be better able to do things for them later on. Here endeth the sermon—and there is no collection.”50

  Fanny never achieved such holy resignation and suffered terrible anguish. In 1901, when she visited Rome, Jack wrote her a letter that poignantly stated his conviction that she had to submit to her fate. Although Pierpont isn’t mentioned, his ghost hovers in the air:

  Your letter from Rome struck me as distinctly blue. . . . I know there are lots of things in your circumstances which you and others would like to have differently but one must accept the inevitable as a thing which is not in one’s own hands, as one does a death or a great anxiety. Nothing one could ever have done and left undone would make two and two into five—if the four is unpleasant there is a moral and religious necessity for accepting the fact and believing in the eternal love which lies behind the troubles.51

  It seems doubtful that any woman could have wholly gratified Pierpont’s appetites. There were two Pierponts—the proper banker and the sensualist—yoked together under extreme pressure; Pierpont could never integrate the two. His attitude toward women was characterized by the common double standard. At the bank, he was stoutly opposed to women employees, and he didn’t discuss business with women, whom he saw as inhabiting a separate realm. Once a year, on New Year’s Day, Fanny lunched at the Corner—the only time women were invited. At home, however, he was a different man. A female visitor to 219 Madison Avenue once teased Pierpont, saying that while he was charming at home, she heard of the fear he inspired at work. Pierpont blushed, began to protest, then said, “I’m afraid you are right.”52

  For Pierpont, marriage required discretion, not fidelity. It was a matter of paying homage to convention. In January 1902, Charles Schwab, now president of U.S. Steel, motored to Monte Carlo with Baron Henri Rothschild; their scandalous escapades at roulette made the front pages of New York papers. Disgusted with the “wicked” Schwab, Andrew Carnegie wrote Pierpont, “Of course he never could have fallen so low with us. His resignation would have been called for instanter had he done so.”53 George Perkins cabled Schwab that the incident hadn’t scandalized Pierpont and that Schwab should go ahead “and have a bully good time.”54 When he returned to New York, Schwab defended himself, telling Morgan he hadn’t resorted to closed doors. “That’s what doors are for,” snapped Morgan.55 There’s no question he possessed a wide streak of cynicism. He once told an associate, “A man always has two reasons for the things he does—a good one and the real one.”56 A revealing comment from a man who styled himself Wall Street’s conscience.

  In matters of art, Pierpont’s standards were puritanical. As a member of the board of the Metropolitan Opera, he was instrumental in canceling production of Richard Strauss’s Salome. The first-night audience had found the story of the crazed princess who wanted John the Baptist’s head too daring for its tastes. Also, rehearsals had been held on Sunday mornings, which infuriated the local clergy. The production was spiked. In embarrassment, another board member, Otto Kahn, wrote to Strauss that “the responsibility for the Salome veto must be shared by the clumsiness and the honestly felt, but in this case, totally inappropriate religiosity of Morgan.”57

  While protecting public morals, Pierpont conducted amorous escapades aboard his yachts, in private railroad cars, and at European spas. Wall Street wits said he collected old masters and old mistresses. “Few women could withstand his leonine love-making,” insisted an early Pierpont biographer.58 In his larks can be seen the familiar comedy of the older man suddenly unbuttoned—he could be a jovial Santa Claus. In Paris, he would squire mistresses to a jeweler on the rue de la Paix and invite them to indulge themselves. Once, in Cairo, he tossed a handful of gold jewelry on a hotel table and cried to the ladies, “Now, help yourselves!”59 (The party included a bishop: did he join in the merriment?) During one Seattle outing, everyone was given a fur. A New York joke of the early 1900s apparently referred to Pierpont’s florid face and generosity. One chorus girl says to another, “I got a pearl out of a fresh oyster at Shankley’s.” “That’s nothing,” replies her friend. “I got a whole diamond necklace out of an old lobster.”60

  Given Pierpont’s theatrical approach to business, it is fitting that he preferred the company of actresses. He gravitated toward women who were free and independent, sassy and high-spirited. Rumors had him competing with Diamond Jim Brady for the affections of Lillian Russell. His most celebrated affair involved the tall, voluptuous Maxine Elliott. She was a stately woman with dark eyes, a long neck, and an imposing presence. She had a provocative tongue—something that always seemed to attract Morgan. “Why, you men in Wall Street are like a lot of cannibals,” she taunted him. “You devour anything that comes along—if it is edible.”61 She made such withering comments about the design of Corsair III—especially Pierpont’s having placed the cabins below-decks—that he shifted the arrangements.

  Maxine Elliott was the first woman to build a Broadway theater, purchasing the needed lot two months after the 1907 panic. Scandalmongers attributed the financing to Morgan. When he and Maxine returned from Europe aboard the same ship in 1908—a rare lapse in Morgan discretion—reporters asked him if he had a stake in the theater. “The only interest I have in Maxine Elliott’s Theatre is that I’d like to get a free ticket on opening night,” he said.62 Legend claims he shared her favors with King Edward VII, whom she met at Marienbad in 1908.

  These larks, concentrated in Pierpont’s later life, were not without Falstaffian pathos. Yet Pierpont could also be a courtly, old-fashioned lover. His last mistress seems to have been Lady Victoria Sackville-West, the daughter of a former British ambassador to Washington. She recorded how the portly old banker, randy as a schoolboy, suddenly crushed her in his embrace. She wrote in her diary in 1912, “He holds my hand with much affection and says he would never care for me in any way I would not approve of, that he was sorry to be so old, but I was the one woman he loved and he would never change.”63 For a financial god, how tenderly apologetic!

  Even at the end of his life, Pierpont had a craving for romance that had probably not been satisfied since his brief marriage to Mimi Sturges fifty years before. Some spot inside him was left untouched by the storied maneuvers on Wall Street, some emptiness that his giant exploits couldn’t fill. Even after Pierpont’s death, his family would track his liaisons as objets d’art he had owned mysteriously surfaced in the collections of other families. In 1936, a German wrote to Jack claiming to be a bastard from Pierpont’s student days at Gottingen. Jack wasn’t sure the whole thing was a hoax until he established that the man hadn’t been born until after his father had left the university. Yet years after his father’s death, Jack didn’t dismiss the notion out of hand.

  In spite of their number, these affairs consumed less of Pierpont’s time and interest than his true aphrodisiac—art collecting. When Junius died, Pierpont had a Thackeray manuscript and a few Egyptian antiquities. Then his collecting blossomed along with his banks’ profits. At first, he concentrated on books and manuscripts and letters of British royalty, storing them in his Madison Avenue basement. Soon they were heaped upon chairs, and he couldn’t keep track of them. Other works gathered dust in 23 Wall’s vaults and in a warehouse on East Forty-second Street.

  In 1900, he bought property adjoining his house, on East Thirty-sixth Street and drafted architect Charles F. McKim to design a library for his collection. McKim created an Italian Renaissance palace of a coldly remote and balanced beauty. Its marble blocks were so perfectly fitted they required no binding material—a method McKim copied, at considerable expense, from the Greeks. When he settled into the library in 1906, Pierpont took for his office the magnificent West Room, with its walls of crimson damask from the Chigi palace in Rome. A door in the corner opened into the vault. Junius’s portrait hung above the mantel. The library was nicknamed the Uptown Branch of J. P. Morgan and Company.

  To catalogue the collection, Pierpont in 1905 hired a pretty
young woman named Belle da Costa Greene. Only twenty-two, she had impressed Pierpont’s nephew with her knowledge of rare books at Princeton’s library. She was the product of a broken marriage—she grew up in New Jersey with her mother, who was a music teacher—and had no college education. Dark and enchanting, with green eyes, she had a complexion so dusky that she referred fancifully to her “Portuguese origins,” and she was probably part black. Belle Greene had a ferocious wit and remarkable self-confidence. She became more than Pierpont’s librarian: she was his confidante, soul mate, and possibly mistress. She read Dickens and the Bible to him and would even attend him at the all-night library session during the 1907 panic.

  If the financier liked saucy women, Belle Greene surpassed all rivals. When a lumber magnate proposed to her, she cabled back “All proposals will be considered alphabetically after my fiftieth birthday.”64 She daringly posed nude for drawings and enjoyed a Bohemian freedom. Also the toast of the Harrimans and the Rockefellers, she stayed at Claridge’s in London and the Ritz in Paris when on Morgan missions. She could be a buccaneer as well; she once told an assistant, “If a person is a worm, you step on him.”65 Even when she became famous as the director of the Pierpont Morgan Library, she was as mysterious as her mentor and never lectured in public or accepted any honorary awards. Like Pierpont, she burned her letters and diaries before she died in 1950.