by Jean Strouse
The double nomination of Bryan and his single-minded commitment to silver united the formerly bipartisan conservative establishment. In what amounted to a twentieth-century fund-raising effort orchestrated by Mark Hanna, wealthy individuals, banks, railroads, insurance companies, and corporations contributed roughly $7 million to the McKinley campaign, while the Populist national treasurer took in about a dozen letters a day containing “twenty-five cents to a dollar.” Brooks Adams claimed that Hanna got $2 million out of one Boston office building in the first week of August.
Hanna also ran a modern publicity campaign in 1896. He distributed propaganda by the ton—posters, pamphlets, leaflets, banners, buttons—and sent Republican speakers, including former President Benjamin Harrison and New York City police commissioner Theodore Roosevelt, out to rally voters all over the country. McKinley refused to go on the stump, partly on account of his wife’s poor health, but also, he said, because “I might just as well put up a trapeze on my front lawn and compete with some professional athlete as go out speaking against Bryan. I have to think when I speak.” Instead of sending McKinley to the voters, Hanna brought the voters to the candidate’s front porch. Pro-McKinley railroads offered such low rates to Ohio that over 750,000 people made the trip—somebody quipped that visiting the Republican nominee was cheaper than staying home.
While the Democrats fanned popular fears of malevolent foreign bankers, Republicans played up the specter of revolutionary anarchy and appealed to widespread anxieties about radical foreign ideas. At the Chicago Coliseum in October, Roosevelt warned an audience of thirteen thousand against people who read Tolstoy, Marx, and Proudhon—and against anyone who “believes that at this stage of the world’s progress it is possible to make everyone happy by an immense social revolution.”
Just the word “revolution” was enough to unhinge the stock market and renew the Treasury drain. The new Dow Jones average of twelve industrial stocks had opened at 40.94 on May 26, 1896. By the end of August it had fallen over 30 percent, to 28.28.
The day after the Populists nominated Bryan in July, Morgan put together an informal combination of New York’s leading international bankers to restrict gold shipments and stabilize the markets for foreign exchange, just as he had done under the 1895 Treasury contract. In effect, he appointed himself extragovernmental Secretary of the Treasury, and Assistant Secretary Curtis applauded his efforts in a private letter home: “The New York people have come up well,” Curtis wrote, “& we see the curious spectacle of the U.S. finances being controlled by a committee, of which J. P. Morgan is the Chairman, & the majority of whom are Hebrews, while the Secretary of the Treasury sits, practically powerless, in his office.”a
To the Republicans’ delight, Bryan focused on silver to the exclusion of all other issues: he did not press for agricultural loans, railroad regulation, or an income tax, nor did he address the troubles of the urban working class. Hanna exulted that the Democratic/Populist candidate was “talking silver all the time, and that’s where we’ve got him.” Henry Demarest Lloyd, the author of Wealth Against Commonwealth, pronounced free silver “the cow-bird of the reform movement. It waited until the nest had been built by the sacrifices and labour of others, and then it laid its eggs in it, pushing out the others which lie smashed on the ground.”
On November 3, McKinley defeated Bryan by 610,000 on the popular ballot, and 271 to 176 in the electoral college. Bryan had won 6,493,000 votes—more than any previous presidential victor—but carried no state north of Virginia or east of Missouri, and not a single industrial urban state. The Republicans won majorities in the Senate and House, and in many state legislatures as well. “If the primary purpose of the old [Democratic] party was a national victory for silver,” concludes the historian C. Vann Woodward, “the campaign was a failure. If on the other hand the purpose was the destruction of the Populist party, it was a success.” The sweeping Republican victory meant a return to conservatism, an uncontested gold standard, and the dominion of big business, but many of the issues that animated the Populist revolt resurfaced in the Progressivism of the early twentieth century.
The day after the 1896 election, Morgan cabled Walter Burns: “Have won glorious victory—from present returns McKinley has secured 310 Electoral votes at least. Heart full thankfulness.”
Burns replied: “Result most gratifying, gives great satisfaction here as evidencing determination maintain country’s credit. We congratulate you most heartily & we feel you have contributed largely to the result.” Ironically, just as the hard-money men were winning their fight against silver, huge deposits of gold were discovered in Colorado, Alaska, and South Africa. The doubling of the world’s gold supply between 1890 and 1914 brought about the monetary easing that Bryan and his supporters desperately wanted. Moreover, a combination of crop failures abroad and a bumper U.S. harvest in 1897 helped American farmers and ended the trade deficit, bringing in a steady flow of European gold: at the end of that year the Treasury reserve stood at $137 million, and by mid-1898 at $245 million.
From the edge of bankruptcy the U.S. economy recovered, and the country embarked on a new period of expansion. Farm prices rose steadily in the first decade of the twentieth century, as did the price of land—without the benefit of silver, and without the loss of national credit that Morgan had fought to prevent in his long defense of gold.
* Accounts of this meeting differ as to whether it was Morgan or a member of the administration who proposed the 1862 statute as a solution. Some claim that Morgan simply recalled the law as he sat in the President’s library with the minutes ticking down, although that scenario seems unlikely. He had been worrying for months about the impending crisis, and had told Olney on Monday night that he had a plan. It seems more likely that Stetson or one of his partners had found the old law on the books and provided Morgan with the information he brought to the White House; that, after all, was what Morgan had first-class lawyers for. A week after the meeting, Stetson sent Cleveland a list of references to the 1862 debate “out of which has emerged the present section 3700 of the Revised Statutes.”
What was there to gain from telling the story as if Morgan simply remembered the obscure law on the spot? It clearly made for better drama, and also indicated no premeditation on anyone’s part. Both the bankers and the White House came under fierce attack for the 1895 loan, and participants on both sides had every reason to emphasize in retrospect the improvised nature of the proceedings. In March, after the first round of censure, Stetson told Cleveland that “your last public service is beginning to be seen aright; were it otherwise I should not cease to regret that even incidentally I was the occasion of drawing upon you criticism where you should have had only grateful praise.”
† Morgan had expected to make a $100 million loan in exchange for bonds paying 3⅝ percent. Cleveland and Carlisle ultimately agreed to the higher 3¾ percent rate, but not on a full $100 million. Over Morgan’s protest they reduced the amount of the loan to $65 million—just enough to restore the reserve to $100 million. Cleveland later said he thought Morgan had been right: the government should have taken the full $100 million to give the Treasury a healthy surplus—“and I have always since regretted that [Morgan’s ‘wise suggestion’] was not adopted.”
‡ In a retrospective account of these events, Cleveland dated his initial meeting with Morgan three days later than it actually took place, making it seem as though he had negotiated with the bankers only after Congress rejected the public bond issue on February 7. In fact he had carefully worked out terms for the private loan before the congressional vote.
On Friday, the eighth, he sent a message to Congress announcing the terms of the deal. He had reserved the right to substitute 3 percent gold bonds at par for the 4 percent coin bonds selling at a premium—bonds that might ultimately be redeemed in silver—if he could get congressional authority within ten days of signing the contract. The full 1 percent difference in yield indicated that investors would have been willing
to earn substantially less interest for guaranteed payment in gold. Substituting a gold bond bearing lower interest would have saved the government $16 million, but congressional silverites rejected the alternative and gave up the $16 million. Morgan would have been delighted to substitute a 3 percent bond payable in gold for precisely the reason Congress refused it—it would have substantially strengthened the country’s commitment to gold.
§ The Morgan and Belmont firms earned a ¾ percent commission for managing the loan, paid out of the syndicate account, which came to $116,841 each. Pierpont also received 40 percent of the London house’s profits. Total figures for the European syndicate are not available, but J. S. Morgan & Co.’s earnings came to £18,400, or about $89,424.
‖ It is impossible to say what would have happened if Morgan had not intervened in 1895. Going off the gold standard would probably have escalated the flight of foreign capital, as he feared, leading to a market collapse, a deeper depression, and an increase in unemployment, but it probably would not have derailed the essentially vital U.S. economy for more than a few years. Milton Friedman and Anna Schwartz have characterized the 1893 panic and subsequent depression as “at bottom simply the way in which an adjustment, forced by other considerations, worked itself out.” World gold prices dropped 11 percent between 1891 and 1897, and as long as the United States remained on the gold standard, it had to reduce prices and income accordingly. Unlike Morgan, however, Friedman and Schwartz do not think it would have been economically undesirable for the United States to abandon the gold standard: “On the contrary, our own view is that it might well have been highly preferable to the generally depressed conditions of the 1890s. We rule it out only because, as it turned out, it was politically unacceptable.”
a Once again, Morgan created sufficient capital inflow to forestall a flight from the dollar. Just the formation of a Morgan syndicate virtually stopped the gold drain. At the end of August, when the seasonal export of agricultural produce began to bring in new supplies of gold, the syndicate dissolved without having made a single transaction.
Chapter 19
ACQUISITIONS AND LOSSES
Morgan turned sixty in 1897. He had emerged from the Treasury gold crises as one of the most influential bankers in the world, to applause in some quarters and vilification in others. The complicated arrangements of his private life were bringing him more pleasure than his marriage had in decades. And he was making a great deal of money. The profits of his American firms rose from $2 million in 1895 to over $8 million in 1899, and his share of those earnings came to nearly $8 million. For the same period in London, J. S. Morgan & Co. posted profits of £622,000, or $3,110,000, to his account. Not including investment returns, he earned about $11 million in five years—nearly half of what his father had accumulated in a lifetime.
The explosion of activity in Morgan’s public and private lives over the decade that followed Junius’s death would have been remarkable in a man half his age. During the closing years of the Victorian century he extended his railroad consolidations, began organizing industrial trusts, bought four more country properties, built a new yacht, and started in earnest on his second career as collector of art.
In the fall of 1895, a month after Town Topics first reported on his liaison with Adelaide, Morgan bought a “fishing box” in Newport. Fanny apparently never saw it. Louisa described it to her many years later as “quaint, and so entirely different from anything suggested by the name ‘Newport’ that it amuses me greatly.” It amused her father to hear that drivers of tour buses stopped there after showing off the nouveaux châteaux of the Vanderbilts, Belmonts, Wetmores, and Astors to announce, “And this is the Newport residence of Mr. Pierpont Morgan.”
Mr. Morgan’s Newport residence consisted of six small wooden buildings on fifteen acres of coast at Graves Point. Everywhere else he hired white servants, but at Newport he had a cook named Lizzie, whom Louisa described as “a big, fine negress and a real cordon bleu,” married to “a well trained butler of the days ‘fo de war’ beginning to be a bit shaky on his pins, but with all the old ideas and ways.” Sadie, the assistant cook, was “a more modern darkey with an amiable smile and her frizzy hair in curl papers.” The man in charge of fishing, “a native New Englander” named Eugene, had “never been off the island of Rhode Island in his life!”
Morgan stopped at Newport once or twice a summer, usually with Adelaide and the Markoes, Bowdoins, or Laniers. The women took walks and paid calls in town while the men, not including their host, fished from wooden stands set on jagged shelves of rock. As a joke for friends who said Morgan did nothing at Newport but play cards and eat, Lanier posed him one day for a photograph with someone else’s catch: in a yachting cap, white pants, and a navy blue jacket buttoned across his ample girth, the resolute nonsportsman sits beside a string of large bass with a fishing rod in one hand and a Pekinese on his lap.
In 1897, two years after acquiring the Newport “box,” he bought an apartment on Jekyl Island, a former plantation turned into a resort off the coast of Georgia. Incorporated in 1885, the Jekyl Island Club drew half of its original members from Manhattan’s Union Club, and The New York Times predicted that it would become a winter Newport. (Residents spelled Jekyl with one l until 1929, then changed it to two.) The attractions of the island resort included a racecourse, stocked fish and game, wide beaches, ocean views, salt marshes, live oaks draped in Spanish moss, and a past populated by Indians, Spanish missionaries, and French planters. In 1904, Munsey’s Magazine called Jekyl the “richest, the most exclusive, the most inaccessible” club in the world.
Several members built houses on the island, and five of them constructed a six-apartment complex called Sans Souci in 1896. Morgan bought the sixth unit the following year. He saw it for the first time in 1898, and after that brought Adelaide and other friends down for occasional respite from New York winters.
He acquired property in the Adirondack Mountains in the late 1890s as well. Dr. Thomas Clark Durant, one of the promoters of the Union Pacific Railroad, had built a short rail line from Saratoga Springs to North Creek in the central Adirondacks in 1865, and bought up tracts of surrounding land. In the seventies he enlisted his son, William West Durant, to develop the heavily wooded wilderness. By the early nineties, W. W. Durant had brought in telegraph lines, a post office, a general store, and Episcopal and Catholic churches. He also built private camps, using local white pine and inventing the style—part log cabin, part Swiss chalet—that has defined Adirondack architecture ever since. After he sold his first camp to the railroad magnate Collis P. Huntington in 1895, Durant moved into the second, on Lake Mohegan, which he named Uncas after the hero of James Fenimore Cooper’s Last of the Mohicans. He had borrowed money from Morgan, and at the beginning of 1896 he offered Camp Uncas as partial payment of the debt.
Morgan went up to see the property in February. From the train station he drove by sleigh through miles of dense forest, past frozen lakes banked with drifts of snow; the only sounds to break the winter silence were an occasional animal cry and the snap of trees cracking in the cold. He took one look at Camp Uncas, recalled one of his granddaughters, “and decided that he wasn’t interested, as he was not at all an outdoor gentleman.” The following year he changed his mind, taking title to the camp in July of 1897 on the theory that his family and friends might enjoy it.
They did. His Adirondack property consisted of fifteen hundred wooded acres with its own iron foundry and sugarhouse, just south of Raquette Lake. Two of Durand’s peeled-log cabins had been named Chingachgook and Hawkeye, after other characters in The Last of the Mohicans. The main lodge, built on a stone foundation, had polished pine beams, built-in bureaus, wraparound banquette window seats, and enormous stone fireplaces. In the summers, tame bears named Ursula and Uncas came to the cabins for handouts.
Morgan held no romantic notions about the virtues of roughing it in the woods. He kept Durant’s Adirondack “stick” furniture, guide boats, earthenware cr
ockery, and Franklin stoves, but installed fully equipped modern bathrooms, long-distance telephones, and a twelve-griddle kitchen range. He eventually sent two Steinway pianos up to Camp Uncas, along with three dozen champagne glasses, blue and white china, thick fur sleigh rugs, embroidered linens, iron beds, brass lamps, horsehair mattresses, feather pillows, ice cream molds, asparagus kettles, angelfood-cake tins, jardinières, a white polar-bear rug, and 125 Plymouth Rock hens. He retained Durant’s cook and caretaker, along with carpenters, stable hands, farmers, gardeners, and maids.
He visited his northern preserve only in the winter. In the summers he preferred yacht cruises and European travel to this isolated retreat, but his children took their friends to the Adirondacks in all seasons.
Shortly after he bought Camp Uncas, Morgan financed construction of a winter access road through the forest from Durant’s North Creek railroad terminal. Then in 1898 he and his Adirondack neighbors built an eighteen-mile rail line linking their properties to the New York Central branch station at Clearwater. Among the other directors of the new Raquette Lake Railway were W. W. Durant, Bob Bacon, William C. Whitney, Collis Huntington, Chauncey Depew, and W. Seward Webb (who owned property on both sides of Lake Champlain). For its size, this tiny road probably had the wealthiest board of directors in the world.
Construction proceeded quickly, and in the fall of 1899 Huntington took an inaugural run up to Raquette Lake on his private train, Genesta. More impressive to the locals than his extravagantly appointed cars was his Japanese staff, imported from California. Morgan chartered Pullman Palace coaches for his own visits to the Adirondacks, creating another kind of sensation by keeping an engine waiting at the station twenty-four hours a day, steam up and ready to go, in case he wanted to leave on a moment’s notice for New York.