by Jean Strouse
Morgan’s regal manner had also increased with his eminence and income. When the managers of the White Star Line changed their sailing schedule one winter, dictating a slight modification in his clockwork travel plans, he asked them to reconsider: “I do not want to interfere” (which was clearly not the case), he wrote, “but cannot you turn it round” so the ship would leave as usual on the last Wednesday in May? White Star did not reschedule its transatlantic traffic to suit the convenience of one peremptory passenger, who wrote again: “sorry you cannot see your way clear to make the arrangement … the unexpected change puts us all very much out.”
* With his partner John W. Sterling, Shearman specialized in railroad reorganizations and managing large estates, and served as counsel to the National City Bank. He represented Jay Gould in the Erie wars, and also in the Albany & Susquehanna takeover attempt—against Pierpont Morgan, Joseph Ramsey, and Samuel Hand—and his penchant for tearful appeals to juries on behalf of his clients earned him the nickname Weeping Tommy. In 1881, Shearman joined the social reformer Henry George to argue for a “single tax” to offset the economic advantages of monopoly and redistribute wealth from rich to poor.
† Only a few New England boarding schools qualified for the training of America’s Protestant elite when Jack Morgan left home in 1880—St. Paul’s, founded before the Civil War, and Exeter and Andover, which dated to the eighteenth century. As increasing numbers of newly successful men wanted their sons to have the education and social imprimatur conferred by these preparatory academies, the schools came to play an important role in the definition of a national upper class, and several new ones were founded between 1880 and 1905—Groton, Choate, Taft, Hotchkiss, St. George’s, Middlesex, Deerfield, Kent. They came to be known collectively as St. Grottlesex.
‡ Morgan’s youngest daughter, Anne, expressed the casual anti-Semitism of her generation when she told Fanny that she didn’t feel like sharing a new sidesaddle with houseguests, “By which remark you may think I have some Jew in my pedigree even if I can get into the Colonial Dames on both sides of the house.”
§ When Rainsford published his first memoir in 1922, Jack told Fanny that it made him “very uncomfortable,” and he thought his father “would have hated” some of its revelations: Rainsford “doesn’t see that some people think their struggles and sorrows are not for the public, and that some people shun publicity for their inner feelings.”
‖ Most of the photographs were printed backward by D. Appleton and Company in 1883. In 1987, Arnold Lewis, James Turner, and Steven McQuillin reproduced the photographs with the negatives right side up in The Opulent Interiors of the Gilded Age; their new text supplies invaluable historical context and aesthetic assessments.
a The three-volume Art Treasures of America, Being the Choicest Works of Art in the Public and Private Collections of North America (1879) included the collections of the Drexels, Vanderbilts, William Rockefeller, Levi Morton, August Belmont, Harris Fahnestock, A. T. Stewart, James Gordon Bennett, Christian Herter, W. T. Walters, H. P. Kidder, Leland Stanford, Charles Crocker, Milton Latham, and Darius Ogden Mills—and also the Corcoran Gallery in Washington, the Museum of Fine Arts in Boston, the New-York Historical Society, the Lenox Library, and the Metropolitan Museum of Art.
b The Durand and the Vedder (the latter as Greek Girls Bathing) are now in the Metropolitan Museum of Art.
c Sabin’s father, Joseph (1821–1881), had been one of the leading book men in the United States—a publisher, cataloguer, auctioneer, importer, and seller of books, and compiler of the renowned Dictionary of Books Relating to America.
d The standard version of the early Edison business depicts the inventor as a visionary, folksy genius putting up a noble fight against ruthless capitalists (chiefly Morgan) who kept him begging for funds and used him for their own ends. Recent work in the Edison archives—most notably by Robert Friedel and Paul Israel (Edison’s Electric Light, Biography of an Invention)—and papers in the Morgan archives tell a different story.
Some of the confusion about Morgan’s role in the business stems from the fact that there were three different groups involved in the project, which most histories of the subject have conflated into one. These were (1) the incorporator/directors of the Edison Electric Light Company (Fabbri, the partners in Lowrey’s law firm, several Western Union men); (2) the syndicate of investors (including Fabbri, Drexel, Wright, and by early 1879, Henry Villard); (3) the company’s bankers (Drexel, Morgan & Co.). There was some overlap—Fabbri belonged to all three groups; Villard was a director and an investor—but they were not identical in their actions or interests. The fact that Morgan did not initially buy stock in the Light Company has been seen as a lack of commitment, but the $50,000 put up by the first investors was pocket change to Morgan; he made a much larger pledge in committing himself to the business, and by the early 1880s he was a large owner of Edison stock.
e At Edison’s request in the spring of 1881, the bank agreed to buy half of his stock in the Edison Electric Light Company of Europe at par, and put it into a syndicate “to be managed by us for our mutual benefit, with a proportionate division of profits.” A week after the bankers made this offer, the stock’s value dropped, and Drexel, Morgan told Edison it would cancel the transaction “to relieve you of any embarrassment.” Edison sent his thanks “for your consideration.”
Chapter 13
A RAILROAD BISMARCK?
At 23 Wall Street in the 1880s, Pierpont spent most of his time on railroad finance. Shortly after he secured the New York Central account with the sale of Vanderbilt stock in 1879–80, he agreed to handle a bond issue for the Northern Pacific. This still-unfinished line, intended to run from Lake Superior to Puget Sound, had brought down Jay Cooke & Co. when it went bankrupt in 1873. It had slowly reorganized (an appeal to the bondholders in 1875 urged, “Your road uncompleted is wholly unremunerative, but completed it becomes one of the great highways of the nation”), and in 1880 its president asked Drexel, Morgan to raise money for the last section of track, from Montana to the coast. Morgan put together a syndicate with Winslow, Lanier and August Belmont to sell $40 million of Northern Pacific general mortgage bonds—“the largest transaction in railroad bonds ever made in the United States,” reported the Commercial and Financial Chronicle.
Junius was skeptical, but after the New York partners answered all his questions—and quoted a letter from Interior Secretary Carl Schurz promising the road’s president that “Nothing can be further from the wish of this Department than to do anything which would impede or interfere with the success of the enterprise that you have in hand”—he agreed to manage European sales. The issue sold well on both sides of the Atlantic. “Warmest congratulations our joint great success,” cabled the London firm to New York. Drexel, Morgan replied, “We reciprocate congratulations. Great success is general subject conversation.”
Success in the financial markets guaranteed completion of the Northern Pacific, which made it a threat to other roads in the area even before the final track went down. The man most worried by the impending competition was the owner of a northwestern rail and steamship empire, Henry Villard. A German immigrant, Villard had covered the Civil War for several New York newspapers, and married the daughter of abolitionist William Lloyd Garrison. He saw the commercial potential of Pacific Northwest trade as soon as the transcontinental railroad opened access to the region in 1869, and proceeded to build a transportation network called the Oregon Railway & Navigation Company. Shortly after he joined the board of the Edison Electric Light Company in 1879, he installed an electric lighting system on one of his OR&N steamships. By 1880 he was wealthy enough to commission his million-dollar mansion from McKim, Mead & White at 451 Madison Avenue, and to buy one of the newspapers for which he had worked as a reporter, New York’s Evening Post.
When the Northern Pacific was bankrupt in the seventies he could afford to ignore it, but once the Morgan-generated $40 million was on its way to his rival’s coffe
rs, Villard had to act. In November 1880 he bought a controlling interest in NP stock, and announced that he would bring the railroad and his OR&N together into a holding company called the Oregon & Transcontinental; it would own enough voting stock in both subsidiaries to govern and coordinate their operations. Morgan did not oppose this plan. He had no objection to Villard, and approved of running potentially competing systems under one roof. The Northern Pacific elected Villard president in September 1881, and completed its construction over the next two years with further help from Drexel, Morgan. Pierpont took a seat on the NP board in September 1883. He was immediately drawn into action.
Not only had construction costs vastly overrun company estimates, but Villard had been liberally spending money on other projects as well. Stock market bears (speculators betting against the O&T) and the beginnings of a new recession crippled the overextended system in October of 1883. By the end of the year both Villard and the O&T were insolvent.
Morgan, sounding a familiar theme, wired his London partners that he would have to step in to protect the credit of the Northern Pacific, “with which we [are] all publicly identified.” When renewed attacks by the speculators in December “made radical steps essential” to put the property beyond the “machinations of those scamps,” he took charge with a mix of reluctance and pride: “I certainly have no desire to be burdened with all this trouble,” he grumbled to Walter Burns, “but there I am, representing interests which cannot be shirked.” He was annoyed at Villard for “not having been frank and open on all points” with the NP directors, but also felt sorry for him: “he no doubt believes he has done his best.”
Morgan and Fabbri persuaded Villard to resign from the presidencies of the NP, the OR&N, and the O&T. Then they bailed out the holding company by furnishing new capital in the form of loans, subscriptions for common stock, and additional bond sales. They put the proceeds of the NP second-mortgage bonds into a fund that could be paid out only under Morgan’s signature, and appointed a strong committee to “hold everything with a tight rein.”
By mid-December 1883—three months after he joined the NP board—Pierpont reported himself satisfied that the road’s “dark days” were over and its earning capacity “secured beyond doubt.” The stock market’s response to the rescue had been “marvellous,” but he cared less about share price than about routing the gamblers: “it is a great delight to see those fellows who have been destroying other people’s property severely punished.” He advised friends that the stock’s real value was considerably higher than current market quotations. At the end of 1883 his firm’s $40 million Northern Pacific loan showed a positive balance. The following summer, he leased the OR&N to the Northern Pacific, and reported that the company would net over $2 million in 1884.
“Whatever may be the profit of the account,” he concluded to Burns, “nothing will give me greater satisfaction than the knowledge of having been able to rescue from immanent [sic] danger the Northern Pacific and O&T Companies, as we have been able to do the last three months – but it has been a hard fight … you can never know, without being here, all we went through.”
Villard knew. Early in 1884 he had a nervous breakdown. His Italianate brownstones on Madison at 50th Street were still unfinished. That spring, he went to Germany with his family to recover. Two years later he returned to New York as the American representative of the Deutsche Bank, and sold his houses to Mr. and Mrs. Whitelaw Reid (Elisabeth Mills Reid was the daughter of financier Darius Ogden Mills; her husband published the New York Tribune). The Villards moved north, to the corner of Madison and 72nd Street, in 1886.
In the scandal-ridden presidential election of 1884, Morgan crossed party lines to vote for Grover Cleveland, a Democrat. Although he worked with men he trusted in Washington, the banker had little regard for politicians, and cared more about economic stability than party affiliation.
He had company in his contempt for politicans. The British journalist James Bryce, a correspondent for the liberal weekly Nation, observed that Americans toward the end of the nineteenth century did not say “politicians” but “the politicians,” because “the word indicates a class with certain defined characteristics.” “Politician” had become a term of reproach, Bryce went on, “not merely among the ‘superfine philosophers’ of New England colleges, but among the better sort of citizens over the whole Union. ‘How did such a job come to be perpetrated?’ I remember once asking a casual acquaintance who had been pointing out some scandalous waste of public money. ‘Why, what can you expect from the politicians?’ was the surprised answer.”
There were exceptions—ambitious, practical men with strong nerves and flexible spines such as Benjamin Bristow, Lincoln’s former private secretary John Hay, Henry Cabot Lodge, Albert Beveridge, and Theodore Roosevelt, Jr. The senior Roosevelt, an influential businessman of Knickerbocker descent, had turned away from politics in disgust after exposure to the corrupt Republican machine when he was customs collector for New York. His son led the reform Republicans in the New York State Assembly in the early 1880s, and later recalled the horror with which his upper-class friends had greeted the news of his interest in elective office: they “laughed at me, and told me that politics were ‘low’; that the organizations were not controlled by ‘gentlemen’; that I would find them run by saloon-keepers, horse-car conductors, and the like.”
Morgan had raised money for the successful Republican campaign of James Garfield and Chester Arthur in 1880. He had publicly endorsed Roosevelt, Jr., for the New York Assembly in 1881, and for reelection the following year. He did not, however, support the party’s 1884 presidential nominee, James G. Blaine. Called the Plumed Knight for his ornate tastes and ostentatious attire, Blaine had been Speaker of the House and Secretary of State. He freely traded favors, offices, and legislative votes for party campaign funds, and his history of dubious dealings with the railroads had deprived him of the Republican nomination in 1876. According to Richard Hofstadter, this champion spoilsman’s chief contribution to American politics was “to lower its tone.”
The Democrats had gained control of the House in the midterm 1882 elections, and hoped to win the presidency for the first time since 1856 by nominating New York’s Governor Cleveland in 1884. An obscure Buffalo lawyer who had been elected mayor of that city in 1881 and governor the following year, the corpulent Cleveland (he weighed 250 pounds) had a reputation for integrity, political courage, and fiscal caution. Known as Grover the Good, he opposed boss politics and big government while supporting civil service reform, free trade, the rights of private property, and the gold standard. The political heir of Samuel Tilden, he was on most issues indistinguishable from a Republican, and his nominators hoped that GOP opponents of Blaine, called Mugwumps,* would ignore party affiliation and vote Democratic—which is exactly what they did. Among the bolters were Mark Twain, liberal reformers E. L. Godkin, George W. Curtis, and Carl Schurz, and a number of prominent businessmen, including Morgan. Joseph Pulitzer’s World listed four reasons for endorsing Cleveland: “(1) He is an honest man. (2) He is an honest man. (3) He is an honest man. (4) He is an honest man.” Republican insider Levi Morton did not join the Mugwumps: having been appointed U.S. minister to France by Garfield in 1881 and retained there by Chester Arthur after Garfield’s assassination, Morton came home in the fall of 1884 to raise money for Blaine. Other loyalists who supported the party ticket were John Sherman, Andrew Carnegie, Jay Gould, and twenty-six-year-old Theodore Roosevelt, Jr.
Political issues played a far smaller role in the 1884 campaign than character did. When the Democrats revived charges about Blaine’s shady history with the railroads and the lies he told to cover it up, Republicans disclosed that the bachelor Cleveland had fathered a child—and Grover the Good suddenly turned into a “gross and licentious man,” a “moral leper,” a “coarse debauchee who would bring his harlots with him to Washington.” James Bryce called the election a contest over “the copulative habits of one and the prevaricative ha
bits of the other.” Mark Twain said Blaine’s deceptions had so taken the wind out of his own sails that “I don’t seem able to lie with any heart lately.” Republicans took to chanting, “Ma! Ma! Where’s my pa? Gone to the White House, Ha! Ha! Ha!” The Democrats tried to shrug off their candidate’s “youthful indiscretion,” and a Cleveland adviser came up with the slogan “Public Office is a Public Trust,” which was about all the governor tried to say during the preelection furor.
Morgan cabled his London partners that October: “Result elections very doubtful. Vote will be close.” Also, “stock market in hands of gamblers, public hold aloof—it is good time keep entirely quiet.” The vote was close—Cleveland won by three tenths of a percentage point on the popular ballot, and by thirty-seven votes in the electoral college. The first Democrat to occupy the White House in twenty-four years promised in his inaugural address to respect sound business principles, and filled his cabinet with conservatives.
The U.S. economy reached the peak of its latest expansion in March of 1882, then began to contract. International trade played a large role in the downturn. Domestic prices and incomes had risen rapidly between 1876 and 1881 as U.S. exports exceeded imports, while British prices suffered abrupt declines. America’s chief trading partner had been losing gold for some time. Accordingly, the Bank of England raised interest rates in 1881–82, which drew international capital out of the United States.