by Jean Strouse
To help finance the enormously expensive war, Congress had passed a Legal Tender Act early in 1862 authorizing paper dollars called “greenbacks” to circulate as currency; the first modern fiat money issued by the U.S. government effectively put the North on a double monetary standard of paper and gold. There was no official link between the greenback dollar and gold, and neither currency traded at a fixed price. Still, gold was always worth more than paper: it was a relatively scarce precious metal, and served as the medium of foreign trade, which meant that international markets determined its value. Paper dollars had no intrinsic value, and could be printed whenever the government needed more.‡ As a result, the exchange rate between gold and greenbacks was highly sensitive to political events. If the Northern armies did badly, investors bought gold in a “flight to quality,” driving up the price. When good news from the front brought hopes of peace, hoarders sold gold and the price fell.
Pierpont was ideally situated to follow these fluctuations as he traded domestic and international exchange. He had reported to Peabody & Co. in the fall of 1862 that gold, “which governs in a great measure the exchange market, has now become a speculative value at the Stock Exchange and is consequently as variable as the most speculative shares upon the list.… Favourable news from the seat of war naturally makes the price fall while the contrary produces the opposite result.”
Late in the summer of 1863 he began quietly buying gold on joint account with Edward Ketchum, a member of his expedition to the mountains that July. By early October they had accumulated a cache worth over $2 million, financing the venture by borrowing against the gold, and betting on being able to sell it for enough to clear the debt and make a profit. In mid-October, they shipped $1.15 million of their hoard to England, which took the markets by surprise, created a temporary gold shortage in New York, and drove the price up. They sold the rest as the price climbed, netting $132,407—over $66,000 each.
The New York Times reported that the shipment had been made by “a young house in Exchange-place, respectably connected on the other side” of the Atlantic, and went on: “Though shrewdly conceived, this manoeuvre is not wholly new to the market”—a similar attempt by other parties had failed earlier in the year. Wall Street regarded the “manoeuvre” as a clever coup in turbulent times that did not seriously disrupt the markets; those who lost out were chiefly other speculators. The gold corner did no appreciable damage to Pierpont’s reputation.§ R. G. Dun & Co. a few months later characterized the partners at 53 Exchange Place as able bankers conducting a “first-rate” business.
Pierpont’s gambling so outraged Junius, however, that he threatened to sever their professional connection. He objected not to the fact that the gold operation took advantage of the Union’s monetary troubles for private gain—which was what other critics charged—but because it constituted evidence of character flaws: willful disobedience, recklessness, and greed.
He was, Junius told Jim Goodwin early in the new year, “disappointed & pained to learn that P. continues his speculations on such a scale notwithstanding my repeated admonitions. His head seems to have been turned by the position he has been able to attain & he thus goes on disregarding any opinion but his own.”‖ Junius examined the New York profits and losses for 1863—together the cousins had earned almost $90,000: Jim $29,000, Pierpont $58,000—and fumed: “Is it not surprising that persons having such a snug good business—giving them without risk or trouble all the profit they ought to desire are willing thus to jeopardise every thing for the purpose of speculating to make a little more[?]” Pierpont’s $66,000 extracurricular windfall amounted to a lot more.
Junius said he had felt for some time that his son was neglecting the London business in favor of his own, and that “People who put themselves in position to lose twice their capital by speculation are not safe people to be entrusted with the business of others—to say nothing of their ability to protect & look after such interest.” He would not rely on such people—“I decide therefore to transfer from you all our business on the 1st of April”—and closed this tirade to Jim: “I have been made most unhappy by the course your business has taken & that P. has so utterly disregarded my warnings. I feel that I have done my duty & shall leave him in the future to act without any such hindrance.”
The senior Morgan did not withdraw the London accounts, and did not leave the junior for long without the “hindrance” of paternal advice. Instead, in 1864 and for the next two decades he made sure there was a senior partner in New York keeping a firm hand and eye on his headstrong son.
The elder statesman he brought in that fall was Charles Dabney, the banker who had taught Pierpont accounting at Duncan, Sherman. Pierpont got along well with Mr. Dabney, whose daughter had married his friend Frank Payson. On November 15, 1864, the firm of J. Pierpont Morgan & Co. dissolved, and Dabney, Morgan & Co. opened for business at 53 Exchange Place.
Of the new firm’s $350,000 capital, Pierpont and Junius put up $100,000 each, Jim Goodwin and his father $75,000 and $50,000, respectively, and Dabney $25,000. Pierpont and Dabney would each have 40 percent of the profits, Jim 20 percent. Dabney’s name and prestige apparently counted for so much that he did not have to contribute a significant share of cash. Junius told the senior Goodwin in December with a practically audible sigh of relief that the new arrangements in New York seemed “just right & if they don’t make money it is their own fault. All they want is to exercise sound judgement & patience—not to be too eager for business or profits.… I don’t know of a man better suited for Pierpont & James than Mr. Dabney, or one in whom we all can place more entire reliance.”
In a message to Congress at the end of 1862, Lincoln had predicted that this “fiery trial through which we pass, will light us down, in honor or dishonor, to the latest generation.” Pierpont gave no indication that he felt any sense of dishonor about his actions during the nation’s fiery trial. His son-in-law later claimed that Morgan had been exempted from military service by ill health—that fainting spells followed by varioloid in the winter preceding the draft led his doctor to declare him unfit. There is no mention of fainting spells in the Morgan or Sturges papers from this period, and Pierpont had varioloid, from which he recovered completely, in the early summer of 1862. The first draft calls took place a year later. If he had a medical exemption, he would not have been required to hire a substitute, although he might have done it anyway. In the summer of 1863 he was well enough to race Henry Sturges up Mount Washington, and win.
Perhaps it was his son-in-law and not Morgan himself who felt it necessary to “excuse” his nonparticipation in the war on grounds of health. As to Morgan’s business activities, Wall Street regarded the Hall Carbine deal and gold speculation as standard transactions in trade, and Junius condemned the latter on practical rather than moral grounds. Both Morgans considered themselves patriots high above the political fray, their sights trained on the nation’s long-term economic progress. Only in retrospect did they come to see Lincoln as having presided over a federalist consolidation that was integral to the future they had in mind.
Pierpont eventually viewed everything connected with the Civil War in a sentimental light—particularly its commander in chief. As the conflict receded he collected documents on the death of John Brown, Walt Whitman’s war diaries, autographs of leading generals, and battle-scene illustrations by the artists Edwin Forbes, A. R. Waud, and Thomas Nast. He also acquired dozens of documents relating to Lincoln—portraits, letters, legal papers, speech drafts, an 1863 message to Congress about the Freedman’s Aid Society, and the manuscript of a twenty-two-stanza poem Lincoln wrote in 1846 called “The Bear Hunt.” He bought plaster casts of Lincoln’s hands, and in 1910 was offered a letter written by Lincoln in March 1863 to New York’s Governor Horatio Seymour. His librarian replied that the letter would be an important addition to the library’s collection of Lincoln materials—“As you may know, Mr. Morgan is a great admirer of Lincoln.”a
Morgan contributed
to private pension funds for Generals Sherman and Grant. In 1873 he joined the Union League Club, founded in 1863 (by Jonathan Sturges, among others) to support the Northern cause; after the war it played an active role in Republican politics, military affairs, and the fine arts. And in 1877, when Congress adjourned without appropriating funds for army and navy salaries, Morgan told the Secretary of War that in view of the government’s failure to perform this “obvious and sacred duty,” he wanted to prevent “loss and distress” to “a class of men whose interests should in our judgment, command the greatest and most earnest solicitude of the Government and of the Country.” He organized a syndicate to furnish the army with $550,000 a month for four months. Congress authorized funding for the military that fall, and repaid the syndicate’s $2.2 million with interest. Like Mr. Peabody’s underwriting of the American exhibits at the 1851 Crystal Palace fair, Morgan’s diplomatic gesture enhanced the reputation of his firm. His great admiration for Lincoln and sense of “sacred duty” to support the men responsible for the nation’s defense significantly revised his wartime views.
In Junius’s ten years with Peabody & Co. the partners had shared £444,468 (roughly $2.2 million) in profits. They suffered their only losses in the first two years of the Civil War; by 1863 earnings were back up to £61,217. George Peabody retired in the fall of 1864. Having spent his entire life making money, he directed his energies in retirement to giving it away—nearly $9 million.b On October 1, 1864, his firm was reorganized as J. S. Morgan & Co.
While Junius restructured the Morgan firms in London and New York, Pierpont was making some changes of his own. Early in 1864 he and Jim moved out of the 21st Street house and rented another from Levi P. Morton, on Madison Avenue just north of 38th Street, for $4,500 a year. He hired the firm of Herter Brothers (Gustave had been joined by his half brother, Christian)† to help furnish the interior, though he himself bought $700 worth of bronzes at an auction and various items at the department stores A. T. Stewart and W. & J. Sloane. For domestic help in their bachelor quarters, the cousins had a housekeeper, waitress, and cook.
And toward the end of 1864 Pierpont began to court a young woman named Frances Louisa Tracy, whom he had probably met at St. George’s Church. Her father, Charles, had graduated from Yale, read law with the Honorable Joseph Kirkland in Utica, married Kirkland’s daughter Louisa, and come to New York to practice law in 1849. Living at 81 East 17th Street, the Tracys had five pretty daughters and a son.
“Fanny” Tracy was taller and larger-boned than Memie Sturges, with a slight underbite and wide-set blue eyes that seemed to take the world in with timid trust. Though not as imaginative or high-spirited as her predecessor in Pierpont’s affections, she had a sober, appealing sweetness. She was twenty-two, and he twenty-seven, when they met.
Over the next few months he became a regular caller at 17th Street, and escorted Miss Tracy to concerts, the opera, and church. The day before he left on a trip to the South in March of 1865, he sent her a note saying he would call that evening, since he could not go “without seeing you once more.” When he appeared after dinner, the Tracys granted the couple a few minutes alone. Pierpont proposed marriage, and Fanny accepted.
They decided to keep the engagement secret until his return, but he imagined that his evident excitement as he said good night “must have left a good many very curious people at No. 81.” In Baltimore two days later he started a letter to “My own dear Fannie”—spelling her name his own way: “How strange it seems to be able to write this: to feel that I have a right to say so & to know that it is true, so true.” He had not heard a word of that morning’s sermon in church: “My thoughts Fannie dear were with you and of you as I looked back over the past few months and saw how you have entwined yourself around me, how essential you have become to me, how little happiness I have in any associations except those of which you are the center. I can hardly believe it, but still it is true. I can only throw myself in humble gratitude before Him who has showered upon my poor unworthy head a cup so full, so overflowing with blessings.”
People attuned to words tend to find conventional language inadequate for intense emotion, but Pierpont used the standard forms with no apparent unease. He had been so conditioned by Memie’s death, Junius’s pessimism, and long observation of an unhappy parental marriage that he had more to say about the difficulties this new love would face than about its pleasures. “Oh Fannie do you realize the solemnity of the scene we went through on Friday night,” he went on—“do you realize that henceforth our lives are to be as one to each other – that we are to bear one another’s joys & sorrow for sorrow will come Fannie, that we are to sustain each other in every difficulty and that our hearts must always be as an open book to the other, no doubt no fear unknown & unshared by the other[?]” Although such union was a “fearful mistery” [sic], it alone could “satisfy a love like mine for you & like the love I know & feel you have given me in return.”
The next day found him at Hampton Roads in southeastern Virginia. He was traveling with Frank Payson, but did not confide his secret to this friend whose “curiosity” was “very much excited” by his mysterious correspondence. The correspondence discloses nothing about the purpose of his trip except that it had to do with the army. Looking out his bedroom window at streets filled with troop transports, Pierpont wrote: “I cannot tell you how calm and happy I feel.… Oh Fannie, you ought to be very grateful for having the power of making any human being as happy completely happy as you have me—can I ever do enough for you to repay you for it all[?]”
He was headed for the front, as Union forces surrounded Lee’s deteriorating army at Petersburg, Virginia, and he hoped the fighting would not delay his return to his fiancée’s side: “These separations are very trying dearest but we ought to be thankful that it is no worse.”
Newly in love, he appears intoxicated less with the object of his affections than with aspects of his own experience—his right to claim Fanny as his own, the curiosity aroused by their secret, the shower of God’s blessings on his head. He thought his fiancée ought to be grateful for having the power to make him so happy, and saw the war chiefly as an impediment to his return.
The war was in fact drawing to an end. Its last great battles took place at the beginning of April in Virginia, not far from Hampton Roads. Lee surrendered on April 9. Five days later John Wilkes Booth assassinated Lincoln. By the end of May Jefferson Davis was in custody and the last of the Confederate troops had surrendered. The surviving Morgan correspondence mentions none of these events. On March 31 Pierpont wrote to Junius about his engagement to Fanny, and Junius on April 11 and 15 sent back his “warmest and fullest approval of what you propose.… I cannot doubt that you have acted wisely, and altho’ the event will bring up sad thoughts of the past yet you must not dwell upon them.”
In New York for his twenty-eighth birthday on April 17, Pierpont wrote out a promise “to allow Frances to attend the opera at least once in three weeks during the opera season and I further agree to accompany her thither provided she prefers said escort to any other.”
That spring, as the Union mourned Lincoln, Andrew Johnson moved into the White House, and the country began adjusting to the end of the war, Pierpont’s chief concerns were domestic. He had known Memie for three years before they got married, during which time she contracted a fatal disease. This time he was in a hurry. He had proposed to Fanny on March 17, and set their wedding date for the first of June. When the government declared June 1 a national day of mourning for Lincoln, he moved the ceremony to May 31. It took place at St. George’s Church. None of his immediate family attended, but Goodwins, Tracys, Ketchums, Dabneys, Peabodys, Sturgeses, and Paysons joined the celebration. The couple took a two-week tour of New England, then sailed for Europe on the Persia.
Pierpont had made this honeymoon passage before. In October 1861 Memie had rallied in cold ocean air. On calmer seas in June of 1865 Fanny was miserably sick. Her husband spent his time “being nurse”
and heartily enjoying five meals a day. His high spirits did not abate once they landed. He introduced his wife to his family and friends in London, showed her the principal sights, then took her to Paris, where she spent most of the time in her room.
Virginia and William Henry Osborn met the Morgans in Paris, and a letter from Virginia to her mother explains Fanny’s discomfort and Pierpont’s good cheer: the new Mrs. Morgan had been pregnant since early June. “She has been almost totally deprived of sightseeing,” wrote Virginia, “and I fancy will find the happiest moment she has had since leaving home will be that in which she returns to it. Pierpont has selected her the most exquisite toilette money can buy … but she is too miserable to enjoy [it].”
Pierpont’s sisters, Sarah and Juliet, returned with the couple to New York. Jim Goodwin had moved out of the Madison Avenue house he and Pierpont had shared. At the beginning of September nearly half the Morgan family moved in.
While Pierpont traveled that summer, Edward Ketchum, his partner in the 1863 gold maneuver, was arrested. Ketchum had stolen $3 million in securities from his father’s bank—unhappily called Ketchum Son & Co.—and forged $1.5 million in gold certificates, some of them in Pierpont’s name. The New York Times reported on “startling scoundrelism” at the foot of Trinity Church, and described Wall Street as “agitated beyond anything” since Grant took Lee. Edward’s felonies bankrupted his father. Morris Ketchum repaid several of the victims, and eventually moved to Georgia.
Junius, horrified, called this filial betrayal “the most astounding news I ever heard.” He told Jim Goodwin that Edward’s conduct “would almost lead one to fear he was at heart bad. How else could he keep up such appearances when he knew he had at that moment brought ruin and disgrace upon his father?” Who, the elder Morgan wanted to know, “are the parties interested with him in these enormous speculations?”