Paper on John Pierport Morgan: Father of Modern United States Economy
John Pierpont Morgan is considered one of the founding fathers of the modern United States economy. Morgan was a banker, railroad czar, industrialist, financier, philanthropist, yachtsman, and ladies’ man. The wealth of the Morgan family did not begin with Pierpont but with his grandfather Joseph Morgan. Joseph’s first son was Junius Spencer Morgan, also destined for the life of a businessman. In 1864 Junius took over the Peabody Company and changed the name to J. S. Morgan & Co. John Pierpont Morgan was born on April 17, 1837 in Hartford, Connecticut.
The family prospered in Hartford until Junius moved the family to Boston where Morgan began Boston English High. In 1857, Junius Morgan decided to broaden his son’s experience by sending him to New York. The firm of Duncan, Sherman & Co. was the American representation of the George Peabody Company. In less than three years Morgan went from clerk to cashier in the company. In 1860 Morgan left Duncan, Sherman and founded J. P. Morgan and Company to act as an agent for his father’s business.
In 1864 Morgan joined up with another former businessman of Duncan, Sherman & Company, Charles Dabney. Charles Dabney and Morgan started their own company named Dabney, Morgan & Co. Morgan’s business continued to grow as he intensively involves his company in more trade and commerce transactions. In 1871 Dabney retired and Anthony J. Drexel became Morgan’s new senior partner. Drexel was already the head of the Philadelphia investment bank Drexel & and Company. The new company Drexel Morgan & Co. became one of the largest and most successful companies on Wall Street.
When Junius Morgan died in 1890, J. P. became head of the London house. Anthony Drexel also died in 1893, and Morgan reorganized the Morgan and Drexel firms two years later. The New York based Drexel Morgan became J. P Morgan & Co. Morgan was an imposing figure on Wall Street and in the financing world but was virtually unknown to many until 1869. That year a war over railroads began including Jay Gould and Jim Fisk, both famous financiers. Gould already had dominant control over the Erie railroad and began to buy up stock in the Albany & Susquehanna Railroad.
The board of the railroad was prevented from issuing new stock to protect itself and the president of the company, Joseph Ramsey, was suspended. Ramsey and the board of the company fought Gould buy acquiring more shares of the company. The board of directors and Ramsey asked Morgan for his financial support. Morgan deposed the Erie railroad directors and was more than happy to assist the Ramsey plea. Through legal feuds with Boss Tweed and other characters and holding covert stockholder meetings, Morgan was able to obtain a lease over the company.
The state supreme court upheld the lease and ensured ownership over the company to Morgan, Ramsey and the original owners. The legislature, at the time, began to propose control of railroad management, prevent stock watering, and tax profits. William H. Vanderbilt, the legislature, at the time, began to propose control of railroad management, prevent stock watering, and tax profits. Vanderbilt inherited eighty seven percent of the stock of the New York Central Railroad. He made a secret agreement with Morgan to sell 250,000 shares of his stock to English investors.
Vanderbilt also agreed to combine the Central railroad with the Wabash, St. Louis & Pacific Railroad. When the news broke out about the deal, Morgan was praised as an economic genius and stepped out of his father’s shadow. As Morgan enjoyed his position on the board of the New York Central, he used his position to settle a dispute of railroad organization in 1885. New York Central was competing with Pennsylvania railroad for control over the West Shore line. The two companies were engaging in rate wars and for control over surrounding lines.
A second offspring, the South Pennsylvania line, was built by the Central to compete with the Pennsylvania line. Morgan argued that is was senseless for Vanderbilt and Gould, the two leaders, to compete over the lines. The two parties agreed and Morgan was again hailed as an industrial wizard. Mr. Morgan developed into the nation’s railroad reorganizer. Morgan was brought in to slash the value of the watered stock, reduce interest rates on the bonds, and assess the shareholders for more money.
Morgan’s plans for the Philadelphia and Reading lines were working well until their president A. Archibald McLeod waged was against Pierpont. In 1888, John Pierpont was again called on to reorganize railroads in the east. Morgan was unsympathetic with governmental regulation; however, he sought to help enforce the Interstate Commerce Act of 1887. After the Panic of 1893, the government called on Morgan once more to reorganize a large number of leading railroad systems of the country. Various devices were used to ensure Morgan’s continued control and that of his associates over the companies. Morgan’s methods of railroad organization followed a standard pattern with small variations.
Third, Morgan and his associates would always charge enormous fees for their services. Morgan’s reputation most likely grows from his role in the emergence of many modern companies. Morgan, through his innate business sense, helped launch some of America’s largest corporations. Morgan was now known throughout the land for reorganizing the railroad system. Morgan was one of the earliest of Thomas Edison. Morgan continued to support the growing company by acquiring many stock shares and facilitating the company’s merger with the Thomson-Houston Electrical Company.
This merger created the General Electric company, one of the most prominent companies in the modern world. Morgan went on to help create the Federal Steel Company, the National Tube Company and the American Bridge Company. One of Morgan’s most famous business deals was the formation of the United States Steel Corporation in 1901. Morgan collaborated with Elbert Gary and John Gates to consolidate different steel companies to form a “supercombination. ” The U. S Steel Corporation was organized and acquired the outstanding bonds and stocks of the Carnegie Company.
The company also bought the preferred stocks of Federal Steel, National Steel, National Tube, American Steel & Wire, American Tin Plate, American Steel Hoop, American Sheet Steel, Lake Superior Consolidated Iron Mines and American Bridge Company. Morgan agreed to reorganize the situation and the two companies Deering Harvester and McCormick Harvesting Machine were merged with three other small companies to create the International Harvester Company. A Boston firm primarily financed the American Telephone and Telegraph Company when they faced a consortium of New York bankers in 1902.
The New Yorkers, led by J. P Morgan, brought back Theodore Vail as head of the company and funded the company with one hundred million dollars to reorganize the company on a national scale. After 1906, the company was revived and a commanding force it was also principally backed by the house of Morgan. At the time many people believed that Morgan as well as other wealthy financiers including Carnegie and Rockefeller were stronger than the government and were not subject to ordinary laws.
Morgan was said to have greatly profited from the transaction, although much upheaval was caused when Morgan refused to reveal his profits to a congressional committee. The panic of 1907 had begun with the public in mayhem and the government turning once again to Morgan for his leadership. Morgan pooled together an emergency committee with Rockefeller, Harriman, Frick, Schiff and H. H. Rodgers. This meaning of great financial leaders decided to help deal with the problem and deposit money into the government funds.
Morgan rejected this idea; however, the group did instruct the secretary of Treasury to deposit substantial government relief funds and organize thousands of banks nationwide to deposit excess money into the relief fund. Pierpont Morgan was a man of many pecuniary gains and along with these gains came speculations and controversy into his financial dealings. The public often questioned the large undisclosed sum of money Morgan made by supporting the Treasury in 1895. This event was only one of many debatable issues that concerned Morgan and his control over the government and the American market.
President Roosevelt investigated Morgan’s large deal with the U. S. Steel Corporation and Tennessee Railroad Company but found that that the “means employed were none the less effective, as well as profitable. ” The culmination of the government and public’s suspicion of Morgan’s activities were the Pujo hearings of 1912. The House Banking and Currency subcommittee headed by representative Arsene Pujo had been trying to establish that a “money trust” ruled over America’s major corporations, railroads, insurance companies, securities markets, and banks.
The attorneys prosecuting Morgan made the pivotal point that eighteen financial institutions effectively controlled a two-thirds majority of the 1912 capital resources, over twenty five billion dollars. The lead attorney questioned J. P. Morgan about his actions in a famous cross-examination. Morgan was questioned on his supposed monopolies, earnings and business practices. The value of Morgan’s organization of companies and funding is immeasurable, as these companies are some of today’s leading corporations. Pierpont built America with more in mind than that of personal financial gain.
