by Jean Strouse
Combination, monopoly, merger, consolidation, trust: to Morgan and his colleagues, these forms of industrial organization made practical and financial sense. They had grown out of new mass-production and distribution capacities that were radically reducing operating costs, increasing efficiency, and creating immense national wealth. Elsewhere in America, however, the new industrial leviathans’ subjugation of labor, stifling of free-market competition, and concentration of financial and political power were widely seen as a threat to the country’s fundamental ideals.
Popular hatred of the trusts, along with a split in the Republican Party between Roosevelt’s Progressives and William Howard Taft’s Old Guard, had helped elect Woodrow Wilson in November 1912. The new chief executive would take office with Democratic majorities in both houses and a clear mandate for reform. He immediately declared war on monopoly concentration, promising to protect American farmers and workers from big business.
As if all that weren’t enough to keep Morgan awake on the eve of his appearance before the Pujo Committee, a number of his consolidations were in trouble. U.S. Steel, the largest jewel in his crown, had been charged with violating the Sherman Act. The New York, New Haven, & Hartford Railroad, on which he had hoped to base a New England transportation empire, was nearly bankrupt and under political attack. And the securities of his 1902 shipping combine, the International Mercantile Marine, had never sold at all. The disaster that hit the IMM’s White Star Line in April 1912 was not an antitrust suit but an iceberg. After the loss of the Titanic, people joked that the IMM stock held more water than the sunken ocean liner.
As the Pujo Committee began looking into Morgan’s “trustification” of banking and credit in March of 1912, J. P. Morgan, Jr., called “Jack,” hoped that Congress might “behave quite decently” about the inquiry, but his optimism collapsed when the committee appointed Samuel Untermyer—an experienced corporate lawyer and a strident critic of the “money trust”—as its chief counsel. “Investigation will probably proceed now on as unpleasant lines as can be arranged,” Jack had warned his father in April.
It was late by the time Morgan finished his last cigar at the Willard on Tuesday night, put away his cards, and went to bed. When his party arrived at the hearing room in the House Office Building on Wednesday afternoon, he looked worn-out, and was having difficulty breathing through his cold. Louisa and counselor Lindabury sat next to him on one side, the Davisons on the other, with Jack, the Lamonts, and former DA Nicoll directly behind them. They found Mr. Untermyer surprisingly accommodating. He quickly completed his examination of the statistician, and called Morgan to the witness stand at 3:00.
Untermyer’s opening questions were routine, establishing for the record the general organization of J. P. Morgan & Co., its connections to affiliated banks in Philadelphia, London, and Paris, the names of its partners, and the kind of business it conducted. He brought out that the firm accepted deposits and issued securities for its corporate clients. (The functions of commercial and investment banking were not separated until 1933, by the Glass-Steagall Act.) Morgan confirmed information prepared ahead by his partners that as of November 1, 1912, seventy-eight corporations had nearly $82 million on deposit at his bank, and that the total assets of those companies amounted to nearly $10 billion.
After half an hour, Chairman Pujo interrupted to say that the members of the committee had been called to the House: the proceedings would resume in the morning. Before the politicians left, Morgan told them he hoped his testimony could be taken as quickly as possible, since he was planning to go abroad.
At 9:00 A.M. on Thursday, he returned to find several hundred spectators packed into the committee hall, with reporters and photographers competing for space up front. He was accompanied, this time, by Joseph Choate, John Spooner, William Sheehan, and George Case, as well as Louisa, Jack, Davison, and Lamont. And this time he looked rested and alert.
As the questioning resumed he asked to move up to the committee table on a raised dais, within arm’s reach of Mr. Untermyer, “So I can hear better. I am a little hard of hearing: you know, I’m getting old.” When his voice grew hoarse, he turned to Louisa for throat tablets, and at one point Untermyer asked if he wanted a glass of water. “No, thanks,” said Morgan.
“If you get tired, don’t hesitate to say so,” the lawyer offered.
“I’m not tired,” Morgan replied.
The first light moment of the day came when Untermyer asked if his witness was not a large stockholder in another powerful bank, the National City. “Oh no,” answered Morgan, “only about a million dollars’ worth.” He seemed surprised when general laughter greeted this response, but after a minute he joined in.
Untermyer wanted to show that New York’s five leading banks—J. P. Morgan & Co., National City, the First National, Bankers Trust, and Guaranty Trust—had a stranglehold on the country’s capital and credit. The hearings brought out that officers of these five banks held 341 directorships in 112 U.S. companies—in banks, public utilities, insurance, transportation, manufacturing, and trade; the Morgan partners alone sat on 72 boards. Nonetheless, Morgan wanted to show that there was no such thing as personal control in the complicated business of money.
To dozens of questions he replied that he did not know or could not remember. Though he had once mastered every number on every piece of paper that came through his office, he was getting old, as he reminded Mr. Untermyer, and had been delegating the detail work to younger men for years. To other questions his answers were incomprehensible. As his partners and close friends knew, his intelligence was not verbal or analytic but perceptual and concrete: it dealt in numbers, objects, action. At times the exchanges between Untermyer and Morgan had the edgy/comic quality of absurdist drama, as if the two men were speaking different languages and earnestly pretending to understand each other.
On the question of free market competition versus monopoly concentration, Untermyer suggested: “You are opposed to competition, are you not?”
Morgan declined the suggestion: “No. I do not mind competition.…”
Untermyer pressed: “You are an advocate of combination and cooperation, as against competition, are you not?”
Morgan chose the less incendiary word: “Yes: cooperation I should favor.”
“Combination as against competition?”
“I do not object to competition, either,” Morgan said. “I like a little competition.”
Then he asked if he might continue for a moment on a “sensitive” subject which he really did not “want to talk of.… This is probably the only chance I will have to speak of it.”
“Certainly,” Untermyer nodded. “You mean the subject of combination and concentration?”
“Yes.” Perhaps thinking of the consolidations that had failed, and the competitive pressures that had given rise to the trusts, Morgan went on: “the question of control. Without you have control, you cannot do anything.”
Untermyer did not understand. “Unless you have got control, you cannot do what?”
“Unless you have got actual control, you cannot control anything,” Morgan enigmatically repeated.
Untermyer: “Well, I guess that is right. Is that the reason you want to control everything?”
Morgan: “I want to control nothing.…”
Untermyer: “What is the point, Mr. Morgan, you want to make, because I do not quite gather it.”
Morgan did not see himself as wanting control. All his life he had observed what happens to money as it moves through international markets, changing direction as swiftly as a school of fish. He had worked with it in cycles of expansion and contraction, through panics, depressions, competitive price wars, speculative gambles, and government defaults. When a Morganization succeeded, stock prices rose; when a combination failed, all his financial and political efforts could not keep share prices from falling. Asked to predict what the stock market would do, he invariably replied, “It will fluctuate.” Necessity, in his view, had d
rafted him to do what he could to police the markets and keep the U.S. economy on track, but in the end no one could control money, and it is in that context that his opaque, clumsy testimony makes some sense.
Urged to clarify his point, he went on: “What I say is this, that control is a thing, particularly in money, and you are talking about a money control—now, there is nothing in the world that you can make a trust on money.”
Plausibly enough, Untermyer found this statement difficult to follow: “Your idea is that when a man has got a vast power, such as you have—you admit you have, do you not?”
Morgan demurred: “I do not know it, sir …”
Untermyer: “Well, assuming that you had it, your idea is that when a man abuses it, he loses it?”
Morgan: “Yes: and he never gets it back again, either.”
Shortly after this exchange, Untermyer asked whether the witness would like to stop for lunch. Morgan: “I do not want to stop at all. I am ready to go right on. I would like to get through. That is all.… I wanted to have you understand my views about the thing. I will stop any remarks on my side, however.” The committee recessed for lunch.
The old man seemed at times to be enjoying the chance to say things he had long thought about, noted New York’s Evening Post, but then “suddenly, he would look about and discover the presence of the crowd, as if he had not seen the people before. A quick change would pass over his face; he would shrink visibly, and become again the man he has been so long, a hater of publicity and self-disclosure. Nothing more interesting could be imagined than this constant shift of personality, from the great power in finance, dominating, direct, and courageous, to the man of artistic tastes and retiring habit, shrinking before the faces of strangers.”
After lunch, Untermyer again tried to establish the reach of Morgan’s empire and again met with denials. “Your power in any direction is entirely unconscious to you, is it not?”
Morgan qualified his assent: “It is, sir, if that is the case.”
Circling around another way, Untermyer tried to get at the reasons behind the consolidation of railroad systems, steel plants, and banks. And this time he succeeded in drawing out of his witness a peremptory (and to democratic ears, an outrageous) assumption of political prerogative. Behind Morgan’s cryptic replies lay his conviction that the process of industrial concentration was a virtual force of nature—irresistible, certainly not invented by him, and better off in his hands than it might have been in others’, though he was also denying that it was by any stretch of the imagination in his hands at all.
Asked why he had amalgamated large corporations, Morgan replied, “If it is good business for the interests of the country to do it, I do it.”
“But Mr. Morgan,” objected Untermyer. “Is not a man likely, quite subconsciously, to imagine that things are for the interests of the country when they are good business?”
“No sir,” said Morgan.
Untermyer: “You think that you are able to justly and impartially differentiate, where your own interests are concerned, just as clearly as though you had no interest at stake, do you?”
Morgan: “Exactly, sir.”
Untermyer: “And you are acting on that assumption all the time, are you not?”
Morgan: “I always do, sir.”
Untermyer: “Of course, there is a possibility of your judgment being mistaken, is there not?”
Morgan gave a disarming reply: “Oh, I may be wrong in my judgment, but I do not think it lies in that direction.”
Untermyer: “Does it not go somewhat on the theory that the wish may be father to the thought?”
Morgan: “What is your question?”
Untermyer: “That the wish to bring these interests together may lead you to believe that the country is not injured by that sort of concentration?”
Morgan: “I do not think so.”
Finally, in what has become the most famous exchange in the hearings’ thousands of pages of testimony, the two men returned to the question of controlling money and credit. Untermyer said, “The basis of banking is credit, is it not?”
Morgan: “Not always. That is an evidence of banking, but it is not the money itself. Money is gold, and nothing else.”
There was in 1912 a significant difference between actual metal coin and loans represented by pieces of paper (banknotes, bonds, bills). When Morgan repeated yet again that money could not be controlled, Untermyer asked him whether credit was not based on money—that is, did not the big New York banks issue loans to certain men and institutions “because it is believed that they have the money back of them?”
Morgan: “No sir. It is because people believe in the man.”
Untermyer: “And he might not be worth anything?”
Morgan, with less than perfect regard for grammar: “He might not have anything. I have known a man to come into my office, and I have given him a check for a million dollars when I knew they had not a cent in the world.”
Untermyer: “That is not business?”
Morgan: “Yes, unfortunately it is. I do not think it is good business, though.”
Untermyer did not, apparently, think much of this answer, for he repeated his proposition: “Is not commercial credit based primarily upon money or property?”
Morgan: “No sir; the first thing is character.”
Untermyer: “Before money or property?”
Morgan: “Before money or property or anything else. Money cannot buy it”—and he elaborated, after a few more questions—“because a man I do not trust could not get money from me on all the bonds in Christendom.”
After the committee adjourned on Thursday afternoon, Morgan and his party went directly to Union Station and from there by private train to New York. Stock prices, which had dropped at the beginning of the week in what Wall Street analysts called a Pujo market, rose on Friday in a jubilant “Morgan market.” One trader told The New York Times, “We are wearing the Morgan colors to-day. He has helped us to get our nerve back.” Jack Morgan cabled the London partners that his father’s testimony had been “quite extraordinarily successful, perfectly frank, very helpful to situation. He himself is delighted and very well, and whole country appears to be very pleased and satisfied.”
With somewhat less enthusiasm, the Times reported that though the old man had not changed many people’s views about the questions under investigation, still, “If impressions gleaned the day after from conversation with Senators and Representatives count for anything, J. P. Morgan lost no prestige through his appearance.… On the contrary, his willingness as a witness and his evident sincerity and frankness seem to have created a distinctly favorable impression.”
An editorial in the Evening Post praised his “uncommon ability,” bowed to his expertise, and scolded those who were attacking the methods of high finance, yet found several of his positions “contrary to all that is settled in regard to the nature of man.… It will never do to say that unchecked power is a good thing because it is in the hands of good men.”
Two weeks later, Morgan left for Egypt with his daughter Louisa and several friends. On the Nile in early February he slid into a delusional depression. He could not eat, had “horrid” dreams, asked constantly about conspiracies, subpoenas, and citations for contempt of court, and felt, reported Louisa, that “the country was going to ruin, that his race was run, and his whole life work going for naught!”
The party retreated to Cairo, then to the Grand Hotel in Rome. The Pope, the Kaiser, and the King of Italy sent messages of concern. Morgan rallied for a drive up the Janiculum to see the new buildings at the American Academy. He attended Easter services on March 23 at St. Paul’s American Church. On March 31, just shy of his seventy-sixth birthday, he died in his sleep.
Two days later, a headline in the Paris Herald asked, HOW WEALTHY WAS HE? Toward the end of April, after the funeral and burial in Hartford, after memorial services in London, Paris, and Rome, there was a surprising answer. Morgan’s fortune seeme
d to be less than $100 million. When his estate was finally settled in 1916, his American banking interests, securities, and real estate were valued at approximately $58 million, and his art collections at $20 million.† He left another $2.5 million worth of property in England.
The total value of the estate came to about $80 million (roughly $1.2 billion in the 1990s). Morgan had made plenty of money, but not nearly as much as people had imagined. In buying out Andrew Carnegie to put together U.S. Steel in 1901, the Morgan syndicate had paid $480 million, of which Carnegie personally received nearly half. John D. Rockefeller, already worth nearly a billion dollars by 1913, reportedly learned of Morgan’s net worth from the newspapers, shook his head, and said, “And to think he wasn’t even a rich man.”
Tributes to Morgan that spring centered on his “rugged honesty and rock-ribbed integrity.” Theodore Roosevelt praised his “sincerity and truthfulness,” The Wall Street Journal his “first-class mind,” the London Times his “distinctly wholesome” influence on the stability of international finance. Others called him an uncrowned monarch and the “embodiment of the heroic age in American industrial history.”
Even some of Morgan’s critics said he was a builder and conservator, not a wrecker, liar, or cheat. Joseph Pulitzer’s World called him the “commanding figure” of a moribund financial feudalism: “Never again will conditions of government make it possible for any financier to bestride the country like a Colossus.… Having greater force, greater character, greater intellect and greater vitality than any other man in Wall Street, he naturally became the leader, and he remained the leader.… The system he built up with so much skill and effort is doomed to crumble.… In time little will remain except the feeling of bewilderment that a self-ruling people should ever have allowed one man to wield so much power for good or evil over their prosperity and general welfare, however much ability and strength and genius that man possessed.”