Morgan

by Jean Strouse

  Once again, the popular image of Morgan as Wall Street commando barking orders to his minions was wide of the mark: he had not been able to impose his will on Perkins from the outset, had kept him on for longer than he wanted to, couldn’t get any of his partners or friends to do the firing, and did it himself only when he thought he had no choice.

  It was Davison who found an effective replacement for Perkins—Thomas W. Lamont, a Harvard graduate (’92) who had worked briefly as a reporter before making a career on Wall Street. Davison had brought Lamont to Bankers Trust in 1903, enlisted him to work for the junior trio during the 1907 panic, promoted him as his own successor at Baker’s First National in 1909, and then to Morgan late in 1910. At the end of October, Morgan summoned Davison’s candidate to 23 Wall Street and said, “Lamont, I want you to come down here as a partner on January 1st”—he had already talked to George Baker, who was again willing to give up one of his top young associates. On January 1, 1911, Lamont joined the Morgan bank.

  One of his chief attractions was his knowledge of journalism and publishing. Although Morgan made few concessions to popular opinion, the younger members of his firm were acutely aware of the need for an effective public relations campaign, specifically for ways to answer the muckraking press. Lamont owned stock in several magazine ventures, including the steel industry’s Iron Age, and had a controlling interest in the Crowell Publishing Company. Early in 1911 the Crowell company bought the progressive American Magazine, which had a circulation of 1.7 million and a list of contributors that included Ida Tarbell, Finley Peter Dunne, Lincoln Steffens, Ray Stannard Baker, and William Allen White. Several of these writers had grown disillusioned with the literature of exposure, and left McClure’s in 1906—shortly after TR coined the term “muck-rake”—to start the American. They described their aim as neither utopian nor cynical: the new magazine would be “wholesome, hopeful, stimulating, uplifting.” Ida Tarbell observed years later, “The idea that there was something fundamentally sound and good in industrial relations, that in many spots had gone far beyond what either labor or reformers were demanding, came to the office as a new attack on the old problem.”

  Reporting on the Crowell/Lamont acquisition of the American in 1911, The New York Times announced the birth of a “Magazine Trust,” and noted rumors that “the interests” were swallowing up the muckrakers. Morgan’s publishing trust, said the New York Press, planned to control editorial policy and increase magazine profits, as well as to build an empire that would include the Morgan-financed Harper publications and perhaps Munsey’s magazine. Among the opponents of this latest Morganization were Condé Nast, the conservationist Gifford Pinchot, Robert Collier of Collier’s Weekly, and S. S. McClure.i

  Over the next two years, as opposition to the Morgan “interests” ratcheted up, Lamont bought newspapers, syndicates, and reporters in an attempt to disseminate what he termed “proper” facts.

  No thanks to Lamont’s rearguard action, some of journalism’s leading muckrakers concluded on their own that popular antagonism to Morgan had gotten out of hand. Lincoln Steffens mocked the national hysteria about the banker’s power one afternoon as he walked along a railroad track with his young assistant, Walter Lippmann. Gauging their footsteps, Lippmann noted that the ties had not been designed for an ordinary man’s stride. Of course not, Steffens explained: “You see, Morgan controls the New Haven and he prefers to make the people ride.”

  Lippmann himself observed that as monopoly became the “New Devil” in the United States, “Big Business” with its “ruthless tentacles” served as material for “feverish” popular fantasies: with “everything askew—all the frictions of life are readily ascribed to a deliberate evil intelligence, and men like Morgan and Rockefeller take on attributes of omnipotence that ten minutes of cold sanity would reduce to a barbarous myth.”j

  If the Morgan bankers hoped that cooperating with the Taft administration in China would give them leverage on the trusts, they were wrong: in the spring of 1911, the President ordered his Attorney General to cooperate with the Stanley Committee’s investigation of U.S. Steel. Also that spring the Supreme Court found Standard Oil and American Tobacco to be in violation of the Sherman law, and ordered them dissolved.k

  Morgan remained abroad for the first eight months of 1911. The Stanley Committee’s “revelations” about his role in the 1907 panic made front-page news all summer. Belle Greene told him by mail in June that she was “very much disturbed over this disgusting political exhibition, which is called an ‘investigation’.…” Other people said “there is too widespread respect and admiration for you, as the biggest man in the country, to permit you to be called to the witness-stand in this miserable affair,” she reported. “However, I do hope for your sake and for all of us who feel this way toward you, that you will not return here until this matter is well over.”

  When Roosevelt was called to testify about the acquisition of TC&I, neither the committee nor the public believed his version of events. Jack evoked genealogical superiority as he denounced to Fanny the “insinuations made about Father by a lot of curs who want to make people think he is the same breed as they are.… There is no country in the world except this where Father would not have had the highest honour and the greatest respect and affection for what he has [done] all his life.… Here the press and the legislature and the public only say ‘he probably found it profitable to cause the panic.’ ”

  Morgan returned to New York in mid-August. Fanny left for Europe three weeks later. In October, Attorney General George Wickersham—although handpicked by Perkins—filed suit against U.S. Steel. The government charged, among other things, that Gary and Frick had tricked Roosevelt into permitting the purchase of TC&I, in violation of the Sherman Act.

  Satterlee read the charges to his father-in-law aloud. Morgan sat silent for several minutes, then said, “Well, it has come to this!” He seemed baffled and “very much depressed” by the lawsuit.

  Two weeks after the acquisition of TC&I, on November 20, 1907, Steel Chairman Gary had held a famous dinner meeting in New York. He told his guests—executives representing 90 percent of the industry—that the business needed “a friendly exchange of views rather than [the] unreasonable and destructive competition” that had led to “violent fluctuations” in price and had injured manufacturers, customers, and workers. For the next two years U.S. Steel officials met regularly for dinner with independent producers to set prices at levels that enabled them all to survive. U.S. Steel’s bankers and lawyers supported this policy, but its steel experts hated it, since they steadily lost market share to the independents: one of them complained to Schwab’s successor, William Corey, “it is better by all odds to make … profit on a full output at competitive prices than by half output at artificial prices.”

  Gary and Morgan wanted specifically to control competitive prices in the interest of steel-industry stability. “It is not at all certain that if the management that was in force [in 1900] had continued,” Gary testified in 1911, “the Carnegie Company would not have driven entirely out of business every steel company in the United States.” The executives at U.S. Steel also wanted to avoid prosecution under the antitrust law, however, and largely for that reason they abandoned the “Gary dinners” in 1909. Price stabilization did create an umbrella under which the 40 percent of the industry that was not part of the trust could survive, and Big Steel rarely engaged in the kind of pricing that would ruin its rivals. Gary took as much care to secure Washington’s approval of his “friendly intercourse” with the independents as he had for the takeover of TC&I, but what he and Roosevelt considered friendly intercourse the Taft administration regarded as price-fixing.

  Morgan sailed for Europe again at the end of December. His partners told The New York Times that the Stanley Committee had made no attempt to require his appearance: “His departure for Europe at this time was not hastened or affected by the Committee’s activities.” Belle confided to Berenson, however, that “JP went
a fortnight earlier than he expected and we were all glad to get him off—on account of the Steel investigation and the cold weather.” Jack told Grenfell: “the Senior’s leaving early was a great coup, as he thereby avoided even the least appearance of running away.”

  In Paris in early January, Morgan stayed with U.S. Ambassador Bob Bacon, spent several evenings with James Stillman, then went on to Monte Carlo. Stillman cabled his son that the old man (code name “Zorew”) seemed “optimistic, but I think was whistling to keep his courage up.… I have just returned from lunching with Zorew at Monte Carlo. He sails tomorrow for Egypt. He had no news, but was very genial.”

  An outraged Roosevelt denounced the U.S. Steel suit in private letters and in the press—Taft had endorsed the TC&I takeover in 1907, TR said, and “a succession of lawsuits” was about as likely to solve the complicated problem of the trusts as “a return to the flintlocks of Washington’s Continentals.” Roosevelt believed more in administrative regulation than judicial prosecution, saw U.S. Steel as a “good” trust, and thought his political enemies were out to embarrass him about the 1907 “deal” over TC&I. They were. These charges, reinforcing the antagonism between the former president and his former protégé, helped bring Roosevelt into the presidential ring for 1912, as the Morgan lawyers prepared to defend U.S. Steel.l

  Although Morgan was not listening to his critics, his partners, lawyers, and friends tried to play down the image of the Trio’s power. When, prompted by three decades of habit, Morgan suggested via cable from Europe that Baker and Stillman be appointed to the new Equitable voting trust in May 1910, Baker warned of “probable public feeling … that Wall Street would have too much to do with Equitable,” and Stillman concurred. The board appointed Ledyard and Perkins (six months before he left the bank) instead; though no less affiliated with Wall Street than Baker and Stillman, these men had somewhat lower profiles.

  Ledyard, a senior partner in the firm of Carter, Ledyard, & Milburn, was counsel to the New York Stock Exchange and a director of dozens of banks and railroads. He had been at Morgan’s right hand during the 1907 panic, the way Stetson had been in 1895; he did not supplant Stetson as attorney for the bank, but handled many of Morgan’s legal affairs, and belonged to the intimate group that met almost daily at the Markoes’.

  When Morgan tried to dictate the timing and outcome of a new presidential election at the Equitable in April 1911, Jack, recovered from his breakdown, wired Davison that Ledyard thought it “most unwise for Trustees or Flitch [Morgan] make any effort dominate the situation or control election of President.… It is impossible to exaggerate importance there should be no possibility of criticism of Flitch’s actions all through this matter, and that no opportunity for suggestion of Wall Street domination be given.… Have not kept Flitch informed from day to day of this matter, understanding that Trustees were in charge acting for him, and as long as no action was called for by him he did not want to be bothered.”

  Morgan did not need to be bothered. Financial consolidation was proceeding smoothly in Davison’s hands. In 1910–11, when the Equitable and Mutual Life insurance companies divested themselves of their controlling interest in the National Bank of Commerce—the country’s second-largest bank, after National City—the Trio banks bought the shares. They had considered the Commerce stock just as well off in the insurance companies’ vaults as in their own, but once it came onto the market, Davison arranged for them to acquire it and share control: “decidedly in the interest of Bank, of Group [Trio], and of general situation,” he cabled Morgan.m The “Group” appointed its own representatives to the Commerce finance committee and board.

  In 1912 Davison arranged further trust-company mergers, absorbing the Manhattan Trust into the Bankers Trust, and buying the Standard Trust for the Guaranty, which brought the Guaranty’s capital to $33 million and its deposits to almost $190 million.

  Meanwhile, Aldrich’s National Monetary Commission and its allies in politics, journalism, banking, and the universities were trying to explain the need for financial reform. Charles Conant published a series of articles on “A Central Bank of Issue” in The Wall Street Journal in the fall of 1909, giving a concise account of the “requirements of modern commerce” and proposing a detailed plan for national economic stabilization. President Taft that fall urged the country to “take up seriously the problem of establishing a central bank.” Paul M. Warburg pointed out in articles and speeches that modern financial markets could no longer regulate themselves but required periodic intervention by experts: “Our present scandalous system, of attempting to regulate the money market of the entire country by first pouring money into the stock market, and then withdrawing it, creating inflation and exorbitant security prices, followed in due course by stringency and unnecessary price depression, will [under a central reserve bank] give place to more orderly movements, as our discount markets develop.” Most of the country’s financiers were in favor of a central bank, reported Warburg, as long as it was not controlled by “ ‘Wall Street’ or any monopolistic interest.”

  In mid-November 1910, several members of the Aldrich Commission went down to the Millionaire’s Club at Jekyl Island, probably courtesy of Morgan, to work out a specific plan. The expedition included Aldrich, Davison, Vanderlip, Warburg, A. Piatt Andrew, and Ben Strong, now a vice president at Bankers Trust. Eager to deflect public suspicions of a Wall Street cabal drawing up plans for the country’s economic future, they told reporters they were going duck hunting, and on their way south in Aldrich’s private railroad car addressed each other by first name only. Davison and Vanderlip went so far as to call each other Orville and Wilbur, though a sighting of the famous Wright brothers was unlikely to forestall gossip among the porters.

  Over the next two weeks, these men drew up plans for a national system of regional reserve banks led by a central board of private bankers. They hoped that coordinated regulation of the money supply would prevent drastic contractions, check impulses toward “overheated” expansion, forestall panics, and establish an official lender of last resort. And by giving control to bankers rather than government officials, they meant to take finance out of politics. Like Morgan, these men saw themselves not as serving their own interests, but as devising a financial system that would benefit the country as a whole.

  The Democratic Congress did not agree, and over the next two years it rejected the “Aldrich plan” as giving too much power to private banks. When the Federal Reserve Act finally passed in December 1913, it provided for a governing board in Washington, appointed by the President, to represent the public interest.n

  Convinced after 1907 that the country could not wait for government action on the Aldrich Committee’s plans for a monetary policy—and that the government would not police vast flows of capital as well as they themselves could—Morgan, Baker, and Stillman were constructing a private regulatory system of their own. The Trio’s concerted actions as the nation’s self-appointed central bankers brought on charges that they were running a “money trust.” Charles A. Lindbergh, a progressive Minnesota congressman (and the father of the future aviator), called in 1911 for an investigation of “financial combinations in restraint of trade.” The United States so urgently needed monetary control, said The Wall Street Journal, that if a money trust didn’t exist somebody ought to invent one.

  * A professor of neurology at the Columbia College of Physicians and Surgeons, Dr. Starr had studied in Heidelberg, Vienna, and Paris (under Jean-Martin Charcot). He wrote extensively about nervous disorders, and was an editor of the Psychological Review and the Journal of Mental and Nervous Diseases.

  † Before 1910, Pierpont and Jack had been partners in J. S. Morgan & Co., which was independent of the other Morgan banks. With the reorganization, Morgan Grenfell would have no individual American partners: the American firms, J. P. Morgan & Co. and Drexel & Co., acted as a single partner, putting up £1 million in capital and entitled to 50 percent of the London profits.

  ‡ Valentin
er thought Morgan’s “urge for collecting came naturally to him and had nothing to do with a concern to improve his social standing, as was the case with Frick, since Morgan already belonged to the elite. He was really interested in all kinds of art … especially those not readily accessible to the general public, such as early manuscripts, medieval jewelry, enamels, Chinese porcelains, etc. Paintings, usually the most obvious field for a collector, interested him least, although in his library he was surrounded by masterpieces of the early Renaissance.”

  § He compared the profile of the bust with a drawing by Verrocchio’s greatest student, Leonardo, at Windsor Castle, and suggested that teacher and pupil had used the same model. Later, other experts dismissed this work as a fake, or as a study of a nineteenth-century figure in Renaissance dress. In 1997, however, it turned up at a London auction room, having been tested by a process called thermoluminescence, which established that it had been fired in about the fifteenth century. “Whatever it was,” wrote James Fenton in The New York Review of Books in 1998, “there was no reason to call it a fake. And if it was not a fake, perhaps Valentiner’s opinion might merit further consideration.” After Valentiner left the Met, he worked at the Detroit Institute of Arts and in various capacities with the Los Angeles County Museum of Art. He helped start the J. Paul Getty Museum in Malibu, and was director of the North Carolina Museum of Art in Raleigh from 1956 until he died in 1958.

  ‖ Davis’s men had recently found a cache of items bearing the name of Tutankhamun, but did not realize what it was—a sacred pit for materials gathered up after the burial of the famous god-king. Not until 1922 did the British archaeologists Lord Carnarvon and Howard Carter discover the actual tomb of Tutankhamun nearby. In the spring of 1909 Davis gave the cache of jars, linen bags of powdered natron, and dried floral wreaths to the Metropolitan.