Morgan

by Jean Strouse

  Being “King of America” had its price.

  On questions of finance, Witte found Morgan at last willing to sponsor a Russian government loan. Witte proposed that the Americans lend $400 million to Russia as part of an international syndicate. Morgan agreed in principle but radically scaled the American share down, offering $50 million to $100 million. The Russians had also approached Stillman and Schiff, but Morgan insisted that his own house manage the American issue alone. He specifically asked that “the Jewish group of bankers headed by Jacob Schiff” have no part in the deal, according to Witte. In fact, Schiff was refusing to raise money for Russia because of its “shameful policy” toward Jews, and claimed that the American people shared his abhorrence.

  The Russian government and its European bankers wanted Morgan’s participation because selling bonds for a defeated, virtually bankrupt country at a time of violent political turmoil seemed nearly impossible. Although cognoscenti on Wall Street and in London considered the old man a “back number,” his name still inspired more confidence than any other banker’s in the world.

  In early October Morgan delegated Perkins to negotiate for him in St. Petersburg, and to carry out a second assignment as well: the rails of the Trans-Siberian road needed replacing, and U.S. Steel hoped to get the contract. Gary and Frick accompanied Morgan to see Perkins off on the Kaiser Wilhelm II (called Rolling Billy by those who knew her motion at sea) on October 10.

  Morgan asked Jack, who was visiting London that fall, to go to Russia as well. “Our scheme there is a broad one which GWP will explain,” he cabled—“think most important you accompany [Perkins] to Russia not only for your information but the experience.” The other parties to the negotiations would be France, Germany, England, Holland, the Russian Finance Minister Vladimir Kokovtsoff, and Witte, who had just been made a count for his work at Portsmouth.

  Perkins and Jack were on their way to Petersburg on October 17 when Morgan wired a change of heart. He had consulted George Baker and “reluctantly” concluded that in the unsettled condition of U.S. money markets it would be “absolutely impossible make successful issue here for some time.” Other factors darkening prospects for the loan were the “imbroglio” over the life insurance investigation and a report that “the Jews are combining in opposition.”

  The Americans took rooms at the Grand Hôtel d’Europe in St. Petersburg, and conveyed this news to the Russians. Witte and Kokovtsoff wanted Morgan in the group so badly, “even if for nominal amount,” that they were “willing make any and all concessions they can,” reported Perkins and Jack.

  Cables flew back and forth between Petersburg and New York for the next few days, with the Russians offering steadily easier terms, and Morgan insisting that an unsuccessful issue “would have very injurious effect in future on what we so much desire—to open American market to Russian loan.”

  His envoys invoked patriotism and “moral responsibility”: “Please do not think we fail to appreciate your point of view and arguments,” they urged, “but when the choice is between facing a temporary non-successful issue of small amount and seriously hampering Russian Government in their plan of an international issue undertaken largely because of your advice, we feel your name and credit, and credit of USA, so much involved that we are most unwilling drop business and thereby show ourselves so weak that we disappoint Russian Government and strongest financial group ever formed in Europe.”

  That did it. Morgan warned the Russians once again of his pessimism about the issue’s success, but authorized his partners to take $20 million of a $250 million loan. Two days later a Russian railroad strike turned into the October Revolution of 1905. The bankers called off negotiations.

  Train service stopped. Factories, hospitals, newspapers, schools, food delivery, and electrical generators shut down. Crowds marched through dark city streets hoisting red flags. Witte persuaded the Czar that the only way to stop the rebellion was to grant liberalizing reforms—a constitution, civil liberties, a democratic constituent assembly—and Witte himself drew up a manifesto announcing these promised changes.

  “What a time to be in Russia!” Jack wrote to Fanny on October 31. He had come in late the night before after calling at the British embassy, and was getting ready for bed “when I heard a triumphant shout from the street.” Running outside, he found people reading the Czar’s (actually, Witte’s) proclamation, which someone translated for him into German. “For about an hour the whole town … was shouting and cheering. The people cheered even the Cossack patrols and the policemen!… It was really an historic moment and gave me quite the proper thrill.” He sent his mother a copy of the manifesto.

  To his father, he and Perkins cabled: “We have seen death of old and birth of new Russia … business postponed for the present.”

  With rail transport at a halt, the Americans left by boat. Jack went back to London. Perkins, arriving in Berlin on the same day as the King of Spain, wired Morgan: “Have changed government of Russia, separated Norway from Sweden‖ and welcomed the King of Spain to Germany. Am leaving for France tonight. If there is anything you think needs attention there cable me at Paris.”

  The “birth of new Russia” was still a long way off. The Czar refused to yield power to the constituent assembly. The country’s internal struggles continued. Witte tried to hold the international banking consortium together. In April 1906 he found Morgan willing to take part in a $500 million loan, but this time Perkins and Jack objected: it would, they said, be “impolitic and very injurious” to issue the bonds in New York in view of uneasy U.S. money markets, the opposition of the financial world, and public hostility to Russia. The house of Morgan did not take part in the 1906 Russian loan. Witte borrowed two billion francs ($500 million) from France.

  Morgan’s indecision and conflicting instincts regarding a Russian loan are striking. He said no for years, then at a peculiar moment said yes, only to change his mind after consulting colleagues in New York, then change it again under pressure from his partners and foreign politicians. External circumstances took matters out of his hands in October, but a few months after the 1905 revolution he was once again willing to proceed, until the son he usually ignored persuaded him not to. It was curious, as a Baring partner observed on a related question, “that the Old Man should not be better posted.”

  Only half attending to business as he devoted most of his energies to travel and art, he appears to have been operating more on past principles and innate bullishness than on a careful gauge of political or economic facts. The Old World’s premier private banks had built financial empires on their relations with royal courts, and Junius Morgan had earned prestige and profit with an audacious loan to France at the end of the Franco-Prussian War. Moreover, the Russian empire had come to Pierpont Morgan essentially on its knees. He may have hoped to counter speculation about his “collapse” by scoring an international coup: if the liquidation of Russia’s war debt and the opening of American markets to Russian bonds went well, the house of Morgan stood to play a leading role in the economic future of a vast, resource-rich country and to secure new markets for its corporate clients. Morgan apparently did not credit the force of political opposition to ancien régime despotism abroad any more than he accommodated to the progressive spirit in the United States.

  By the end of 1905 Roosevelt was as concerned about domestic radical social unrest as he was with checking corporate corruption. The Socialist Party led by Eugene Debs had won 3 percent of the vote in 1904, and violent conflicts between labor and capital in the West continued to alarm the “respectables” (now including TR) in the East. In December 1905 Idaho’s former Governor Frank Steunenberg was killed by a bomb in his own front yard; the man charged with the murder claimed to be working for the militant Western Federation of Miners.

  Convinced that investigative journalists reporting on the country’s social and political ills were no longer working in a sober spirit of reform but instead whipping up national hysteria, Roosevelt wrote t
hat fall to Samuel S. McClure, the leading publisher of exposés. TR praised the editor’s “crusade against corruption,” but wished “very much that you could [also] have articles showing up the hideous iniquity of which mobs are guilty, the wrongs of violence by the poor as well as the wrongs of corruption by the rich.” Could not McClure’s journalists put more “sky in the landscape”—give a sense of perspective rather than “encourage people to believe that all crimes are connected with business, and that the crime of graft is the only crime”?

  Early in 1906, partly in response to sensational charges made by David Graham Phillips in an article on “The Treason of the Senate,” the President launched a series of attacks on the “scandal-mongering” press. Speaking at a Gridiron Club dinner in January, he declared that certain journalists had become like “the Man with the Muck-Rake” in Bunyan’s Pilgrim’s Progress “who could look no way but downward … [who] continued to rake to himself the filth of the floor … [who] consistently refuses to see aught that is lofty, and fixes his eyes with solemn intentness only on that which is vile and debasing.” This man “speedily becomes, not a help to society, not an incitement to good, but one of the most potent forces for evil.”

  Roosevelt himself did not look in only one direction as he assigned blame for the country’s troubles. In March he told his Secretary of War, William Howard Taft, that the greed, arrogance, and “dull, purblind folly of the very rich men” was combining with the muckrakers’ evidence of corruption in business and politics to produce “a very unhealthy position of excitement and irritation in the popular mind, which shows itself in part in the enormous increase in the socialistic propaganda” and the building up of “a revolutionary feeling.”

  Roosevelt’s opposition had little effect on either journalists or the public response to abuses of power, and his derogatory sobriquet, “muckraker,” became to liberals and the left a term of praise.

  Wall Street was more concerned with uneasy financial markets than with presidential denunciations, although a number of people on and off the Street blamed Roosevelt for undermining business confidence with his “attacks.” After the economy recovered from the 1903–4 contraction, the Dow Jones average had more than doubled, rising from a low of 42 in November 1903 to 103 in January 1906. This surge in economic growth created an enormous demand for capital, but world gold production had not kept pace with industrial output, and money everywhere, pegged to gold, was in short supply. Morgan and his colleagues had been worried since the 1890s that the antiquated, decentralized U.S. banking system could not meet the needs of a modern industrial economy. At the beginning of 1906 Jacob Schiff warned a group of financiers that “if the currency conditions of this country are not changed materially … you will have such a panic … as will make all previous panics look like child’s play.”

  * Holmes never revised his view of the Sherman law. Years after Northern Securities he asked Solicitor General John W. Davis: “Mr. Solicitor, how many more of these antitrust cases have you?”

  Davis: “Quite a number, Mr. Justice.”

  Holmes: “Bring ’em on and we’ll decide ’em. Of course I know and so does every other sensible man that the Sherman Law is damned nonsense, but if my country wants to go to hell I am here to help do it.”

  John W. Davis was solicitor general from 1913 to 1918, when Woodrow Wilson appointed him ambassador to the Court of St. James; after he returned to the United States in 1921 he became head of the “Morgan” law firm, formerly Stetson, Jennings and Russell, eventually Davis, Polk & Wardwell.

  † When the London firm organized an underwriting syndicate to subscribe for £1 million of 5 percent Collieries debentures and sell them to the public, the New York partners declined participation, but Perkins’s New York Life took £125,000 of the bonds. Suffering from bad management and declining coal prices, the Collieries trust earned no profit and its bonds never sold. J. S. Morgan & Co. loaned it hundreds of thousands of dollars over the next two years, and by the spring of 1904 faced several lawsuits. Morgan was furious. The London firm cabled Jack in New York that April: “We talked matter over with JPM who declined to go into details but said we had got into bad business with which we must deal.”

  ‡ Ryan had started out as an errand boy in Virginia, and built a financial empire worth over $1 billion; by 1905 he was personally worth about $50 million. William C. Whitney, with whom he had organized American Tobacco and New York’s Metropolitan Traction Company, described him as “the most adroit, suave, and noiseless man” he knew, and said that if Ryan lived long enough he would “have all the money in the world.”

  § TR wrote to a friend that July: “when I feel gloomy about democracy I am positively refreshed by considering the monstrous ineptitude of the ideal absolutism [in Russia],” and “the more I saw of the Czar and the Kaiser the better I liked the United States Senate.”

  ‖ Norway, having been ruled by Sweden since 1814, had just claimed independence.

  Chapter 27

  “MORE COLOSSAL THAN EVER”

  Though Morgan kept an eye on the unsettled U.S. money markets in 1905–6, he was directing most of his attention to art. At the end of 1905 he purchased through Junius an outstanding collection of Rembrandt and Dürer prints assembled by George W. Vanderbilt. The youngest son of William Henry Vanderbilt was, like Junius, the scholar/aesthete in a largely mercantile family. He told Junius that both collections were “as complete as is possible. Many examples are unique, and I only secured them at auctions by bidding against museums & Baron Rothschild, & the latter is now the only private collection which can rank with mine as a whole, for quality of impressions.” With this acquisition, for which he paid $150,000, Morgan added 112 Rembrandt etchings to the 272 he had bought from Theodore Irwin in 1900, to create what became the finest collection of Rembrandt prints in the United States.

  He continued to acquire individual works as well as collections en bloc. Early in 1905 he bought a Thackeray manuscript from the children of Leslie Stephen. Stephen’s first wife had been Thackeray’s daughter, Minny, who died in 1875. A few years later Stephen married the widowed Julia Duckworth, who already had three children, and had four more with him—Vanessa, Thoby, Virginia, and Adrian. Julia Stephen died in 1895, her husband in 1904. At the beginning of 1905 Jack reported to his father from London that he was in the process of acquiring Thackeray’s draft of Vanity Fair—“the family are disposing of the manuscript for their benefit so if you get it you may be quite sure of its pedigree.” Jack sent George Duckworth (Julia’s son) £1,600 for the manuscript in January, regretting “that there was not a great deal more of it preserved.” A month later he told Teddy Grenfell, “It may interest you and Duckworth to know that we got ahead of the man who offered JPM the Vanity Fair Ms. for £5,000!”

  In July of 1906, Morgan bought another Thackeray manuscript from the Duckworth/Stephen clan. Virginia told her friend Violet Dickinson: “Thoby made £1,000. one thousand pounds by selling 10 pages of Thackerays Lord Bateman. George sold it to Pierpont Morgan.… I wish my manuscripts would sell for more than their meaning!”*

  The collector of Rembrandt and Thackeray also struck out in an entirely new direction in 1906. Edward Sheriff Curtis, who lived in Seattle and had been taking hauntingly beautiful photographs of American Indians for eight years, had come East in 1905 to raise money for his documentary study of the “Vanishing American.” Theodore Roosevelt endorsed the project: “There is no man of great wealth with whom I am on sufficient close terms to warrant my giving a special letter to him,” he wrote to Curtis on White House stationery in December 1905, “but you are most welcome to use this letter in talking with any man who has any interest in the subject.”†

  Curtis probably used the letter to help secure an interview with Morgan in January 1906, since there is a copy of it in the Morgan archives. Just before the meeting he sent the banker detailed descriptions of his current work and plans to publish twenty large-format volumes of photographs, text, and drawings, port
raying the surviving Indian tribes in the North American West, and using the finest paper, binding, and photogravure work available; in addition, he proposed to publish seven hundred separate portfolios containing large prints of his most important pictures. Morgan agreed to fund Curtis’s fieldwork with $75,000 ($15,000 a year for five years) in exchange for twenty-five sets of the books and five hundred prints.

  “I congratulate you with all my heart,” Roosevelt wrote to the photographer on February 6: “That is a mighty fine deed of Mr. Morgan’s.”

  At Morgan’s suggestion, Curtis submitted his proposal to Harper & Brothers, who said they could not publish the books unless Morgan supplied the capital and guaranteed their firm against loss. When other publishers said much the same thing, Curtis and Morgan decided that the photographer ought to produce the volumes himself, charging $3,000 each for five hundred sets.

  Curtis went back to work in the West, sending Morgan occasional news of his progress, inviting editorial criticism of his introduction to the first volume, and asking how his patron would like to be acknowledged. Morgan’s secretary replied that the banker had no textual changes to suggest, and would leave “the matter of mentioning his connection with the work entirely to you: he says, ‘the less said the better.’ ”

  The first two volumes of The North American Indian were published at the end of 1907, with a Foreword by Theodore Roosevelt, to scholarly and popular praise. Morgan gave sets to Edward VII, the Metropolitan Museum, the Museum of Natural History, the Guildhall Library in London, and several American libraries that could not afford them.

  Self-publication of these exquisite volumes proved to be even more difficult and expensive than the photographer and his backer had expected. Some potential donors refused to contribute on the assumption that Morgan would. Curtis secured more money from Morgan ($60,000 more in 1909), and sold $3,000 subscriptions to many of the banker’s friends. After Morgan died, Jack supported the project. Complete publication of the twenty volumes took twenty-three years and cost about $1.2 million, of which the Morgans contributed $400,000.