#139 J.P. Morgan

Summary Notes


In "The House of Morgan," Ron Chernow chronicles the influential Morgan banking dynasty, focusing on the key figures J.P. Morgan Sr. and Jr., whose reputations as either venerable financiers or ruthless tycoons polarized opinions. The Morgans, often seen as financial ambassadors, wielded immense power, shaping American and global finance through their discreet, club-like wholesale banking practices. The book delves into the family's rise, their strategic avoidance of speculative ventures, and their role in rescuing the U.S. economy during panics. It also explores J.P. Morgan's complex personality, his strained relationship with his son Jack, and his ultimate disillusionment with public scrutiny and the erosion of privacy. Chernow reflects on the impossibility of such concentrated financial power recurring, as the monopoly once held by bankers like the Morgans has dissipated in the modern, diversified financial world.

Summary Notes

Rise, Fall, and Resurrection of the House of Morgan

  • The book focuses on the House of Morgan, a dominant American banking empire.
  • It details the empire's influence from its 23 Wall Street headquarters, interactions with influential figures, and secretive operations.
  • The Morgans (J.P. Morgan Sr. and Jr.) are portrayed either as trustworthy bankers or as manipulative financiers.
  • The House of Morgan catered to elite families and was involved with major industrial companies, arousing fears of excessive power.
  • It played roles similar to a central bank and a private bank, involved in financial stability and international affairs.
  • The Morgans practiced a discreet, club-like form of wholesale banking, avoiding retail banking practices.

"This book is about the rise, fall, and resurrection of an American banking empire. The House of Morgan."

This quote introduces the central subject of the book, the historical significance of the House of Morgan in American finance.

"The old house of Morgan spawned a thousand conspiracy theories."

This quote highlights the widespread speculation and theories surrounding the secretive nature of the House of Morgan's operations.

"The early house of Morgan was something of a cross between a central bank and a private bank."

This quote describes the unique financial role the House of Morgan played in the American economy.

Evolution of Wall Street and Financial History

  • Ron Chernow sought to explain the transformation of Wall Street from an elite, partnership-driven model to a landscape of impersonal conglomerates.
  • He aimed to make financial history accessible and engaging by focusing on a single entity that encapsulated the broader story.
  • The House of Morgan was chosen due to its significant role over a century and a half of Anglo-American finance.

"As I dipped into the richer literature of financial history, I was struck that the old Wall Street elite, clubby and dominated by small, mysterious partnerships, bore scant resemblance to the universe of faceless conglomerates springing up across the globe."

Chernow observed a stark contrast between the old Wall Street and the modern financial world, prompting his exploration of this evolution.

"Was there a single family or firm whose saga could serve as a prism through which to view the panoramic saga of Anglo-American finance?"

Chernow's methodological approach was to find a central figure or firm that could represent the entire history of Anglo-American finance, leading to the focus on the Morgans.

Ron Chernow's Journey as an Author

  • Chernow had no formal training in historical methods when he began writing the book.
  • He was driven by the discovery of compelling stories in financial history and the challenge of writing his first book.
  • Despite the time pressures and lack of experience, Chernow produced a comprehensive and coherent narrative.

"I had no training in historical methods, nobody to steer me in the right direction as I bumbled about in my early research."

Chernow candidly reflects on his inexperience and the self-taught process he underwent while researching for the book.

"I was sustained by the sheer excitement of my findings, the knowledge that I had luckily stumbled upon the foremost drama in financial history."

Chernow's passion for the subject matter fueled his dedication and productivity in writing the book.

Founding of the House of Morgan by George Peabody

  • George Peabody, an American in London, laid the foundation for the House of Morgan.
  • Peabody was a self-made man with a frugal lifestyle who accumulated a vast fortune.
  • Junius Spencer Morgan, J.P. Morgan's father, was chosen by Peabody as his successor due to his sociability, family, and experience in foreign trade.

"Peabody amassed a $20 million fortune in the 1850s. As he financed everything from the silk trade with China to iron rail exports to America, he mostly hoarded his money in preparation for the next panic."

Peabody's wealth accumulation strategy was conservative, focusing on saving for potential financial crises.

"Junius Spencer Morgan had been with J. M. Bieb Morgan for three years."

This quote introduces Junius Spencer Morgan, who would become a pivotal figure in the House of Morgan's history.

Idolization of Old Practices and Business Affairs

  • The Morgan family held a deep reverence for traditional ways of conducting business.
  • They split their banking operations between London and New York, reflecting the shift of the financial capital from London to New York.
  • Despite their business being anchored in New York, they spent significant time in Europe.

"For the entire history of the Morgan banks, it would be split between London and Morgan. And the story of the Morgan family is also the story of the transition from the financial capital of the world, going from London to New York."

This quote highlights the historical significance of the Morgan family in the context of global finance, emphasizing the geographical and strategic shift of financial dominance from London to New York.

Junius Morgan's Influence on J.P. Morgan

  • Junius Morgan was extremely iron-willed and hard on his son, J.P. Morgan.
  • He constantly lectured and taught J.P. with the aim of making the Morgan name as prominent as the Rothschilds.
  • Junius used the panic of 1857 as a teaching moment for conservative business practices.

"Junius's goal was to have the Morgan name associated with names like the Rothschilds."

Junius Morgan's ambition for the family name is compared to the prestigious Rothschild family, indicating his high aspirations for the Morgan legacy.

J.P. Morgan's Early Life and Health Challenges

  • J.P. Morgan had a difficult childhood with health issues like constant headaches and scarlet fever.
  • His father, Junius, was concerned with J.P.'s temperament and aimed to mold him into a disciplined individual.
  • Early in life, J.P. was included in his father's business plans, mirroring the Rothschild and Baring family business models.

"With granite will, he began to mould Pierpont, instructing him to associate with those of his grammar school classmates."

This quote demonstrates Junius Morgan's strict and deliberate approach to shaping his son's character and future role in the family business.

The Morgan Family Wealth and Business Strategy

  • The Morgan family was financially well-off, with Junius inheriting and earning significant wealth.
  • J.P. was tasked with providing his father with political and financial intelligence, a crucial role in merchant banking.
  • The Morgans believed in an absolute monarchy style of leadership within their family and business.

"The Morgans always believed in absolute monarchy. While Junius Morgan lived, he ruled the family and the business and his sons and his partners."

This quote encapsulates the Morgan family's governance philosophy, with Junius Morgan maintaining tight control over both family and business matters.

The Expansion of Banking Power and J.P. Morgan's Role

  • The era of J.P. Morgan's rise coincided with the expansion of banking power, railroads, and heavy industry.
  • Financial markets were limited, and bankers like J.P. were pivotal in allocating scarce credit and dictating terms to states and countries.
  • Junius Morgan advised J.P. to maintain a pristine reputation and be selective in business dealings.

"Merchant banks, that's what JP and his father are doing, functioned as their treasury departments or central banks before economic management was established as government responsibility."

The quote describes the critical role of merchant banks like the Morgans' in the absence of modern government economic management systems.

J.P. Morgan's Business Philosophy and Personal Struggles

  • J.P. Morgan believed in the power of railroads to unlock American resources.
  • He faced corporate warfare and personal health issues, leading to contemplations of retirement.
  • Despite acknowledging his father's influence, J.P. struggled with the pressure and responsibilities of his position.

"If I've been able to succeed in the station and life in which I've been cast, I attribute it more than anything to the endorsement of my father's friends."

J.P. Morgan recognizes the significant role his father played in his success, attributing his achievements to the support and endorsement he received from his father's network.

The Panic of 1873 and J.P. Morgan's Financial Acumen

  • The panic of 1873 was a defining moment in American financial history, analogous to the 1929 Great Depression.
  • J.P. Morgan profited from the panic and established himself as a key figure in government finance.
  • He adopted a cautious approach to business, dealing only with established and reliable companies.

"Morgan stood with miraculous suddenness at the apex of american government finance."

This quote signifies J.P. Morgan's rapid ascent to the top of American finance following his successful navigation of the panic of 1873.

The Legacy of J.P. Morgan and His Reluctant Power

  • J.P. Morgan was a moralist who became a powerful figure in the economy, believing in his own views on economic order.
  • He was known for his brusque manner and leadership style, often struggling with delegating authority.
  • Despite his immense power, J.P. Morgan was often exhausted by his responsibilities and desired peace.

"Perhaps never in financial history has anybody else amassed so much power so reluctantly."

The quote reflects the paradox of J.P. Morgan's life, amassing significant power yet feeling burdened and weary from the responsibilities that came with it.

The Father-Son Dynamic and J.P. Morgan's Drive for Success

  • Junius Morgan's demanding parenting style had a profound impact on J.P. Morgan's relentless drive for achievement.
  • J.P. Morgan's personal life was marked by a quest for order and a disdain for disorder, mirroring his father's influence.
  • The Morgan family's view of competition as disorderly led to their belief in controlling industries for the perceived benefit of consumers.

"Under his somber and iron rule, he [Junius] strengthened those already relentless impulses in Pierpont's [J.P.] nature."

This quote captures the intense and influential relationship between Junius and J.P. Morgan, with Junius reinforcing J.P.'s innate ambition and sense of responsibility.

Junius's Relationship with Pierpont

  • Junius had an affectionate relationship with his son Pierpont, despite a stern exterior.
  • He recognized Pierpont's talents and groomed him for success.

"etimes stern facade, Junius clearly adored Pierpont. The obsessive grooming was a tacit acknowledgement of his son's gifts."

The quote illustrates Junius's deep affection and pride in Pierpont's abilities, which he fostered through careful guidance.

Pierpont's Desire to Quit Banking

  • Pierpont Morgan experienced periods of wanting to leave banking due to the immense pressure.
  • He felt overburdened by the responsibilities towards others' interests, which prevented him from quitting.

"Yet again, he contemplated giving up the business he's writing. He says, I am pressed beyond measure. So far as my time is concerned, I have no leisure whatsoever."

This quote conveys Pierpont's sense of being overwhelmed by his work in banking and his yearning for personal time.

Privacy and Image of the Morgans

  • The Morgan family valued privacy and maintained a public image of power and secrecy.
  • Pierpont, in particular, was known for his private nature and intimidating public persona.

"The Morgans were very private. Pupront was fanatic about his privacy and creating an enduring image of a top hated tycoon, snarling and brandishing a stick at photographers."

The quote emphasizes the Morgan family's commitment to privacy and the lengths to which Pierpont went to cultivate a formidable public image.

Pierpont's Personality and Business Style

  • Pierpont was laconic, not given to prolonged analysis but capable of intense, focused thought.
  • He preferred informal business dealings and avoided litigation, emphasizing gentlemanly resolutions.

"Pierpont was by nature a laconic man. He had no gift for sustained analysis. His genius was in the brief, sudden brainstorm."

This quote captures Pierpont's intellectual style, marked by brief but intense periods of concentration rather than extended analytical thought.

The Death of Junius and Family Dynamics

  • Junius's death was sudden, resulting from a carriage accident, ending his influence and guidance.
  • Family expectations and business pressures created intense father-son dynamics within the Morgan family.

"Perhaps it was appropriate that Junius's death was dealt by one stunning blow in his 77th year, rather than by a dribling away of strength."

The quote reflects on the abruptness of Junius's death and its symbolic alignment with his decisive nature.

The Burden of Merchant Banking Families

  • Merchant banking families like the Morgans faced the pressure of maintaining a dynasty through a single male heir.
  • This legacy created a sense of duty that often conflicted with personal desires.

"In merchant banking families, the whole weight of the dynasty was at once placed on the male infants."

The quote highlights the immense responsibility placed on the male heirs of banking families to uphold the family's financial empire.

Pierpont's Business Acumen and Attention to Detail

  • Pierpont was known for his attention to detail and intimate knowledge of his bank's operations.
  • His ability to perform any job at the bank was a point of pride and strategic advantage.

"Despite the scope of his vision, Pierpont was extremely attentive to details and took pride in a knowledge that he could perform any job in the bank."

This quote demonstrates Pierpont's hands-on approach and his belief in understanding every aspect of his business.

Morganization and Financial Crises

  • Pierpont capitalized on financial crises to reorganize and control bankrupt railroads.
  • The practice of "Morganization" became synonymous with the restructuring of failing companies under Morgan's influence.

"Virtually every bankrupt road east of the Mississippi eventually passed through such reorganization."

The quote signifies the extent of Pierpont's influence in the railroad industry and his strategic use of financial crises to expand his control.

Pierpont's Power and Government Influence

  • Pierpont's power extended to influencing government decisions, particularly in financial matters.
  • His involvement in the gold standard crisis showcased his ability to shape national economic policy.

"Pierpot Morgan's power flourished during the steep industrial recession that began in 1893."

The quote underscores the growth of Pierpont's influence during economic downturns, highlighting his strategic positioning during such times.

Pierpont's Relationships with Other Industrialists

  • Pierpont had complex relationships with other titans of industry, such as Carnegie and Rockefeller.
  • His interactions with these figures were marked by mutual respect but also underlying tensions.

"In forging us steel, Pierpon had to deal with two industrialists who represented very different aspects of american business."

This quote sets the stage for Pierpont's dealings with Carnegie and Rockefeller, indicating the varied nature of American business at the time.

Pierpont's Personal Image and Sensitivities

  • Pierpont was sensitive about his appearance, particularly his deformed nose.
  • His sensitivity extended to his portrayal in the media and personal interactions.

"He was very, very sensitive about his giant nose."

The quote succinctly captures Pierpont's personal insecurity about his physical appearance, which affected his public and private life.

E. H. Harriman and Banking Dynamics

  • E. H. Harriman represented a different approach to finance and banking compared to Pierpont.
  • Harriman's outsider status and aggressive tactics contrasted with Pierpont's establishment methods.

"Harriman was a very different type from JP."

The quote introduces Harriman as a foil to Pierpont, illustrating the diversity of personalities and strategies in the world of finance.

Legacy and the End of Pierpont's Era

  • Pierpont's death marked the end of an era and the transition of the Morgan legacy to his son, Jack.
  • The continuation of the Morgan banking dynasty faced new challenges and changes in leadership.

"When JP dies, he dies in 1913."

The quote marks the end of Pierpont's life and his era's influence, setting the stage for the future of the Morgan family's banking legacy.

Interest in J.P. Morgan Over Other Historical Figures

  • Ron Chernow expresses a preference for studying individuals like J.P. Morgan who are involved in the rise of businesses rather than the management of already established large corporations.
  • The focus is on the ascent to power and the building of empires, which is more fascinating to Chernow than the subsequent management phase.

"I'm going to spend hours reading about somebody, I'd rather read about somebody like e h Harriman than Jack. And so that's why I chose to focus just mainly on JP. I'm more interested in the climb than I am of the application and the management of a business when it's already gigantic, multinational, multi billion dollar company."

The quote highlights Chernow's fascination with the journey of building a business empire as opposed to managing an already successful one.

J.P. Morgan and Teddy Roosevelt's Rivalry

  • J.P. Morgan was seen as a symbol of Wall Street manipulation, which was a public concern during his era.
  • President McKinley's assassination marked a turning point for Morgan as Teddy Roosevelt, who had a more ambivalent view of big business, became president.
  • This change in leadership resulted in Morgan having a famous adversary, leading to significant historical events and rivalries.

"The most famous of that, of course, being JP. It says, for the most part, President McKinley was deaf to such outrage. Then on September 6, 1901, he was shot by an anarchist. We have graphic descriptions of Pierpont's reaction to this. News goes from having an ally to an adversary just by the pulling of one person pulling a trigger."

The quote illustrates the dramatic shift in Morgan's political environment following President McKinley's assassination, which brought about a formidable adversary in Teddy Roosevelt.

Morgan's Influence During Financial Crises

  • J.P. Morgan's life was characterized by his responses to financial crises and his ability to capitalize on them.
  • Even in semi-retirement, Morgan played a pivotal role in stabilizing the American financial system during the 1907 panic.
  • His actions during the panic, including preventing the New York Stock Exchange from closing and organizing a substantial bailout, were seen as demonstrations of his willpower and influence.

"The 19 seven panic was pure Pont's last hurrah. Although semiretired, reporting to work periodically for only an hour or two, he suddenly functioned as America's central bank."

This quote encapsulates Morgan's significant role in addressing financial crises, even in his later years.

J.P. Morgan's Personality and Cynicism

  • Morgan was known for his laconic nature and tendency to hide his emotions, but significant events like McKinley's assassination revealed his shock.
  • He is described as possessing a wide streak of cynicism, as evidenced by his quote about the dual reasons behind people's actions.
  • Morgan's handling of crises and his demeanor during the 1907 panic are depicted in vivid detail, painting a picture of a man of great determination and focus.

"There's no question he possessed a wide streak of cynicism. He once told an associate, a man always has two reasons for the things he does, a good one and the real one."

The quote reflects Morgan's cynical view of human motivations and the hidden agendas behind people's actions.

Morgan's Later Years and Views on Success

  • In his later years, Morgan felt misunderstood and was angered by the public's negative perception of his trusts.
  • He valued privacy highly, going so far as to destroy a significant historical record of finance by burning his correspondence with his father.
  • The narrative questions the value of success if it leads to an unhappy and isolated end, as was the case with Morgan.

"Morose and fatalistic. In his last years, Pierpont felt misunderstood by the public and angered by the uproar over his trusts."

This quote describes the somber mood of Morgan's final years, where despite his success, he felt alienated and criticized by the public.

Morgan's Ruthlessness and Family Relations

  • Morgan's ruthlessness is exemplified in his reaction to his daughter's estrangement, where he took revenge on her partner by denying her an award she coveted.
  • His relationship with his son Jack was complex, with Morgan only delegating authority towards the end of his life, unlike the close involvement his own father had in his early life.

"Pierpont could be grimly implacable when crossed, and he blamed Bessie Marbury for stealing away his daughter."

The quote demonstrates Morgan's unforgiving nature when he felt wronged, particularly in personal matters.

The Pujo Hearings and Morgan's Legacy

  • The Pujo hearings investigated the influence of bankers on the economy and put Morgan in the spotlight.
  • Morgan's testimony revealed his belief in the moral responsibility of bankers, which was a core aspect of his business philosophy.
  • The hearings led to a shift in the Morgan firm's approach to public relations, recognizing the need to engage with the media proactively.

"The Pooho hearings were always portrayed as Pierpont's martyrdom, the public confrontation that had led to his death."

This quote signifies the impact of the Pujo hearings on Morgan's health and reputation, suggesting that the stress from the hearings contributed to his death.

Death of J.P. Morgan and Reflection on Wealth

  • Morgan's death was preceded by a period of physical and mental distress, with his health deteriorating rapidly.
  • Despite his unhealthy lifestyle, Morgan's longevity was seen as remarkable by contemporaries.
  • His estate's value at the time of his death sparked conversations about the true extent of his wealth, with some peers expressing pity.

"That he lasted until 75, with his myriad ailments and resolutely bad habits, is close to miraculous."

The quote reflects on Morgan's resilience and the surprising nature of his survival to an advanced age given his health and lifestyle choices.

Conclusion and Legacy

  • The narrative concludes by reflecting on the lessons from Morgan's life and the repeated pattern of successful individuals ending their lives in discontent.
  • The importance of financial independence and strength to avoid being taken advantage of by powerful figures like Morgan is emphasized.
  • The story of J.P. Morgan serves as a cautionary tale about the pitfalls of success and the importance of personal happiness.

"What is the point of being successful if this is the end of your life? This isn't it. He lost the thread. Maybe he never had the thread his entire life, but I don't consider being close in your early 70s, close to death, and being this unhappy with the way your life turned out to be successful."

This quote questions the value of success when it does not lead to personal fulfillment, highlighting the tragedy of Morgan's final years.

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