Morgan

by Jean Strouse

  When Pierpont traveled on his own, he ordered confections of satin, crepe, silk, and lace for Fanny and the girls from French couturiers—chiefly, Charles Frederick Worth (who was actually English) in the Rue de la Paix. With his family in tow in the spring of 1877, he had seven different seamstresses come to their hotel room one morning for fittings, and in the afternoon took Fanny to Worth’s to present her formally to “that potentate.” The New Yorkers crossed the Channel at the end of April, stopped in London for a last round of dinners, museums, and country weekends, and in mid-May sailed home.

  * Ancient Egyptians called their country “The Two Lands,” referring to the southern portion between Aswan and Asyut as Upper Egypt and to the northern region as Lower. Parties sail up the Nile heading south and down returning north.

  †† The old Bristol, at No. 3-5 Place Vendôme, has been demolished. The current Hôtel le Bristol, on the Faubourg Saint-Honoré, appropriated the name after World War I.

  ‡ The Drexel, Morgan records are incomplete, and there is no statement about the initial division of profits. The new firm started out with $1 million in capital, $900,000 of which was put up by the Drexel brothers as a “special bills payable” fund. Of the remaining $100,000, $61,000 came from the Philadelphia partners Tony Drexel, Francis Drexel, and J. Hood Wright, and $39,000 from New York ($15,000 each from Pierpont and Joseph Drexel, $9,000 from J. Norris Robinson).

  § In the new partnership 45 percent of the profits went to Morgan, 40 percent to the Philadelphia house, 15 percent to Fabbri. Each partner left half his share of the annual earnings on deposit at the firm, to assure it adequate capital.

  ‖ The daughter of John, first Earl Spencer, Georgiana had married the fifth Duke of Devonshire when she was seventeen in 1774. (She was the great-great-great-great-aunt of Diana, Princess of Wales.) Her celebrated beauty and libertine ways made her the talk of late-eighteenth-century England, and nineteenth-century modistes copied her extravagant style.

  a There were questions about its authenticity. It had been sliced down to three-quarter length, allegedly by an English schoolmistress to fit the space over a mantel. The painter John Everett Millais inspected the canvas at Christie’s and announced, “I don’t believe Gainsborough ever saw it.”

  b Adams had backed Bristow, as had Henry Cabot Lodge and Samuel Bowles, editor of the Springfield Republican, who wrote in February 1876: “Bristowism … is breaking out now on all sides.” After the Republican convention, Democrats published a paper saying that in rejecting Bristow the GOP had demonstrated its indifference to real reform.

  c† Belmont’s signature appeared at the top of the contract, and the Rothschilds took 41.25 percent of the first $40 million pledge. Drexel, Morgan and J. & W. Seligman, with their London associates, split 33.75 percent. Morton, Bliss took the other 25 percent.

  Chapter 10

  “THE FUTURE IS IN OUR OWN HANDS”

  Pierpont and Fanny celebrated their twelfth anniversary in New York at the end of May 1877. His hair and walrus mustache were flecked with gray. She still had a pretty face at thirty-five, but had steadily put on weight as she entered early middle age, and the strains in their marriage had begun to show.

  She tolerated the visitors he brought home, and the companions, usually female, he engaged for their travels, but he so rarely came up to Cragston by himself in the late seventies that the event was worth noting in her diary: “Pierpont brought no one with him.”

  Even more than most couples in their circle, the Morgans lived in different worlds. He spent long days immured at 23 Wall Street, which allowed women in only once a year (on New Year’s Day, when the bank was closed; a new partner some years later who insisted on keeping his female secretary had to install her in an office across the street). Several nights a week Pierpont went out to meetings, dinners, or his clubs. And he did not discuss business with his wife. According to a family friend, Fanny once made the mistake of mentioning at a party something he had told her in confidence, and he never again trusted her with private information. Her days were taken up with supervising the household staff and the activities of her children. She served on charitable committees, exchanged calls with friends, and went out occasionally to operas, lectures, and concerts. She remained close to her own family—in 1874 her parents bought Stonihurst, the house just north of Cragston that she and Pierpont had rented. But she was discontented and increasingly depressed.

  Complaining of dyspepsia and “oppression” after returning from Europe in June of 1877, she went off in August to stay with her friends Fred and Adele Stevens in Newport. She had known the former Adele Livingston Sampson, daughter of a wealthy manufacturer, as a child. Adele had married Frederic W. Stevens, an attorney, Yale graduate, and grandson of Jefferson’s Treasury Secretary Albert Gallatin; though Stevens was not wealthy, Adele became one of the richest women in America after her father’s death. The couple had four children (one named after Fanny), and summered in a Newport villa designed for them by the architecture firm of McKim, Mead & Bigelow. In town they had just built a Romanesque mansion on Fifth Avenue at 57th Street. Visiting them at Newport in August of 1877, Fanny noted in her diary that Fred liked to discuss “all the high questions of race and development and moral responsibility about which he thinks so much”—implying that her own husband did not. Adele for her part found Fred dull, and greatly admired Pierpont: it was she who had said, after he saw her off on a steamer to Europe, how much she loved him now that he was “on such a grand noble scale.”

  When Pierpont joined the party for a weekend in Newport, Fanny left to spend the day with her sister Clara. Back in New York he wrote: “I hope with all my heart that you will feel brighter & brighter which however is scarcely to be expected as long as you bear the load of such a brute of a husband.” He celebrated her return a week later by filling 6 East 40th Street with flowers.

  It is not clear what transgression elicited his amends, but Pierpont at least in this case acknowledged his faults and was eager to make up, while Fanny tended to nurse her sense of wrong. Each had, in various ways, begun to criticize the other. In the summer of 1878, Louisa, age twelve, went to spend a few days in Warwick, Rhode Island, with the elderly William Warner Hoppin and his wife. Hoppin had been governor of Rhode Island in the 1850s, and Fanny’s sister Clara was married to his son, Fred. Fanny had promised to stop for a visit when she picked Louisa up, but sent her father instead. Pierpont scolded her from Saratoga: “I wish it had been arranged for [Louisa] to stay a little longer & for you to go for her—Old Mr. & Mrs Hoppin I could see were hurt [by] your not going & you might stand it for a day or two to give those who have always been most kind to us a little pleasure if they feel so strongly about it.”

  Fanny had spent much of that winter in bed with headaches. In March, though she rarely commented on her husband’s taste, she noted in her diary that he had bought at a picture sale “a hideous Toulmouche for $950.”*

  Morgan had returned in May 1877 to a country in political and economic turmoil. As far as he was concerned, the most important action of the Hayes administration was the appointment of Ohio Senator John Sherman to the Treasury. This adroit politician, brother of Civil War general William Tecumseh Sherman, had years of experience with government finance. He had been chairman of both the Senate Finance and the House Ways and Means committees. Like the Morgans, he had watched European investors pull money out of U.S. markets after the 1873 panic, and he firmly believed that returning the country to the gold standard would bring back foreign confidence and capital. Accordingly, at the urging of then Secretary Bristow, Sherman in the Senate had drafted a bill that would put the United States back on gold for the first time since 1862. Called the Specie Resumption Act and passed by the lame-duck Republican Congress early in 1875, it authorized the Treasury to resume paying all its obligations in gold—at the prewar price of $4.86 to the British pound—by January 1, 1879.

  Designed as a compromise, this vaguely worded act had two essential, related
problems. The first was financial—how to bring the value of a greenback dollar up to equivalence with gold by the target resumption date. As long as gold, pegged to the pound sterling, was worth more than greenbacks on the market, people would spend the paper and hoard the gold, causing the latter to disappear from circulation (Gresham’s law: Bad money drives out good). To solve this problem, the act proposed to make greenbacks scarce and gold more abundant: it set a limit of $300 million on greenback circulation, which required the Treasury to withdraw $82 million in paper dollars, and it authorized the Secretary to build up a gold reserve from sales of U.S. bonds.

  By deliberately reducing the money supply, however, this plan led to the second problem. More than ever in the long 1870s depression, people in the crippled rural economies of the South and West wanted “easy” money, and they violently opposed any further currency contraction. Several dissident groups formed an independent Greenback Party in 1875: seeing the move back toward gold as a malignant plot by eastern and foreign capitalists, they demanded more greenbacks, abolition of the “money monopoly,” an end to foreign investment in the United States, reduction of the federal debt, and repeal of Sherman’s Resumption Act—which Ohio’s Democratic Governor William Allen denounced as a conspiracy of the “money power” to “drain the life-blood of the American people.” The Greenbackers ran a third-party candidate for president in 1876—the eighty-five-year-old former industrialist turned reformer, Peter Cooper—and won about 1 percent of the vote.†

  Morgan, like most eastern bankers and international traders, did not see any way to free the United States from dependence on foreign money except through the mechanisms he was promoting—the growth of domestic capital markets and careful reduction of the Civil War debt. Intently focused on the ability of a debtor nation to keep borrowing abroad, he never wavered in his long-term commitment to gold. Cheapening the currency by printing more greenbacks promised to accelerate the flight of foreign capital and increase borrowing costs, since inflation would erode the value of dollar-denominated assets. While monetary easing might provide temporary relief in Iowa and Kansas, Morgan was convinced it would destroy U.S. credit in international markets, and damage the domestic economy even further.

  Passage of the 1875 Resumption Act had reassured Europe that U.S. obligations would ultimately be paid in gold, and foreign investors had eagerly taken up the Rothschild/Morgan/Seligman syndicate’s 1876 refinancing loan. Most of the bonds sold at a premium, up to four points above the bankers’ contract price. In the midst of ferocious conflict over the currency, reports of the profits on this $200 million issue heightened western antipathy to the “money power.” The syndicate earned over $3 million—$1 million in commission (one half of 1 percent), plus the spread between their buying and selling price.

  Treasury Secretary Sherman began in 1877 to build up a gold reserve through bond sales as authorized by his own Resumption Act. That June he contracted with private bankers for another $235 million re-funding issue, as well as a $40 million loan just for gold. Wall Street’s critics in and out of Congress began demanding that the Treasury sell its bonds directly to the public rather than through banking syndicates, and that the debts be payable in greenbacks or silver rather than gold.

  Silver added yet another tangle to the monetary confusion. In the 1830s, Andrew Jackson’s Treasury had defined the silver–gold ratio as 16 to 1—there was sixteen times as much silver in a silver dollar (371.25 grains) as gold in a gold dollar (23.22 grains). For various reasons, not much silver had been coined after 1848, but the discovery of large lodes in Nevada after the Civil War raised the prospect (on the plains) of more cheap money, and (on Wall Street and in Washington) of another threat to the sound dollar. Congress had “demonetized” silver in 1873, voting no longer to mint it into coin and eliminating it for the moment as a factor in the currency wars. In retrospect, demonetization would be called the “Crime of ’73.”

  Pressure to restore silver as legal tender mounted during the seventies depression, especially after the Resumption Act tied the greenback to gold, limiting its inflationary potential. Silver had wider popular appeal than greenbacks, probably because it seemed like “real” money in a way that paper certificates did not. And the silver coming out of the West drove the price down until a silver dollar was worth only 90¢ in gold—exactly as the inflationists hoped. Support for remonetization was running so high by the fall of 1877 that the House easily passed (163 to 34) a bill proposing “free and unlimited coinage of silver” introduced by Missouri Representative Richard Bland.

  August Belmont warned Secretary Sherman that the Bland bill would completely stop sales of the current refunding loan—and in fact the price of the bonds quickly fell below par: the syndicate bought back $750,000 worth to keep the market from collapsing, then suspended sales. A delegation of bankers, including Morgan, called on Sherman in Washington to make the case against silver.

  Speaking for the group, Belmont argued that Europe would take the remonetization of silver as an act of repudiation by the federal government. Foreigners had bought hundreds of millions of dollars in U.S. bonds on the assumption that they would be redeemed for gold. Changing the contracts now—substituting silver, worth 10 percent less than gold—would be tantamount to theft. Belmont’s rhetoric identified gold with the national honor: Treasury Department records showed the history of “a nation’s faith kept inviolate with a most punctilious and chivalrous spirit.” At this crucial moment, “sound financial policy and love of our country’s fair name alike” demanded from the administration “the most uncompromising hostility to the blind and dishonest frenzy which has taken hold of Congress.”

  The bankers made their case in language of high moral necessity, setting “discipline,” “sound” money, “inviolate” faith, and America’s integrity off against “wild” inflation, a “corrupt” currency, “blind and dishonest frenzy,” and “reckless booming anarchy.” Despite their Olympian assumptions, they were not neutral observers of this debate but intensely interested participants who represented millions in foreign investment and held substantial wealth of their own. The long-term postwar deflation was increasing the value of those assets, while inflation would have exactly the opposite effect. Speaking as experts in international capital markets, the bankers had a powerful point, but the fact that they were also profiting from the course they advocated made it hard for their opponents to see any legitimacy in their claims.

  The anticapitalist Greenback Party drew most of its strength from the rural West and South. With agricultural productivity on the rise while prices declined worldwide, small farmers slipped further than ever into debt, tenant farmers could not buy land, and agricultural wages fell. Grange cooperatives continued to press for easier money and regulation of railroad rates, and state legislatures in the Midwest passed laws setting freight rate ceilings in the 1870s. The railroads challenged the power of states to regulate private property, but the Supreme Court ruled in a landmark case, Munn v. Illinois (1877), that private enterprises operating in the public interest ought to be subject to public regulation.

  The overall number of workers employed in manufacturing actually rose during the depression of the seventies, and real wages on average declined only slightly, since falling prices offset cuts in pay. Still, sixty-five months of economic contraction produced pockets of severe unemployment in cities and nominal wage cuts across the country. Many people worked twelve-hour days, seven days a week, for a few cents an hour. In January 1874 New York City police broke up a throng of seven thousand protesters who were demanding “Work or Bread” in Tompkins Square, and sent dozens to jail. A year later a secret order of militant Irish American coal miners called the Molly Maguires waged guerrilla warfare against the owners of Pennsylvania’s anthracite coalfields. The miners had been forced to accept medieval living and working conditions, and the owners—chiefly Franklin B. Gowen, head of the Philadelphia & Reading Railroad—fought all attempts to form a trade union. In 1873 Gowe
n hired a Pinkerton detective to infiltrate the Irish “terrorists,” and when, as a result, the Mollys were brought to trial, Gowen served as both a prosecutor (he had a law degree) and a witness. Twenty of the group’s leaders were eventually executed. They blamed Gowen.

  In the summer of 1877, with railroad income still declining, the Baltimore & Ohio cut wages for the second time in a year. On July 16 B&O workers went out on a strike that quickly spread to other lines and industries across the country. Skilled and unskilled workers joined to demand an eight-hour day, an end to child labor, restoration of wages to predepression levels, and nationalization of the railroads. General strikes shut down Chicago and St. Louis. State governments called out citizen armies. When militiamen shot protesters gathered in the Pittsburgh rail yards, the crowd set fire to engines and cars. Over a hundred people were killed, hundreds more injured, and millions of dollars in property destroyed. President Hayes sent federal troops to restore order, and by July 29 the nationwide Great Strike—the most violent Americans had known—was over. It left widespread fear of class warfare in its wake, and laid bare the country’s deep-seated hatred of the railroads.

  Americans were not entirely preoccupied with politics and economics in this turbulent decade. In 1873 Mark Twain published the satirical novel that he wrote with Charles Dudley Warner, The Gilded Age, and The Adventures of Tom Sawyer three years later. Louisa May Alcott wrote Eight Cousins, Rose in Bloom, and Under the Lilacs, while Emily Dickinson was quietly composing poems in Amherst. William Dean Howells edited The Atlantic Monthly in the seventies, and published novels and essays of his own. Charles W. Eliot, the new president of Harvard College, appointed Henry Adams an assistant professor of history; from Cambridge Adams edited the literary/political quarterly North American Review. Henry James moved permanently to England, where he began to explore his great theme of the American encounter with Europe in The American (1877), Daisy Miller (1878), and The Europeans (1878); he published his first real masterpiece, The Portrait of a Lady, in 1880–81.