Blog Discussion: Economic Influencers Between 1900 and 1929

One of the most powerful and influential financiers of the early 20th century, J.P. Morgan embodies the manifestation of political clout gained through wealth at the onset of the Progressive Era. Far from the philanthropic Andrew Carnegie who sought to enrich the lives of his fellow citizens, Morgan – the “Cutthroat Capitalist” – was a ruthless financier who consolidated several corporations into massive conglomerates and who directly altered the course of the nation’s finances in both 1895 and 1907. Focused on accruing as much power, wealth, and influence as possible, Morgan demonstrates a cold, calculating kingmaker of a financier at the start of the 20th century, subconsciously shaping many individuals’ first impressions of a scheming – and incredibly successful – businessman.

Cutthroat Capitalist, Fedor Encke (1903). Wikimedia Commons.

Morgan came from a wealthy family – the son of a banker (J.S. Morgan) himself, Morgan first entered the business world in 1860. [1] Though Morgan would prove influential in the Civil War and postbellum era, his true wealth and influence came roughly around the turn of the century. 1893 saw a massive economic disruption, widely known as the Panic of 1893. Seeing an opportunity to underwrite national debt and sell gold to the federal government, J.P. Morgan met with President Grover Cleveland two years later to suggest such a solution, using a Civil War-era statue in order to justify such an action. [2] Morgan would ultimately loan gold worth over $65 million to the federal treasury, allowing a chronic run on the banks to lessen and helping abate continued financial collapse. [3] Simply put, “Mr. Morgan’s contract to furnish the U.S. Government with gold in the year 1895 made his name known throughout the country.” [4] While this action would be disastrous for the Cleveland administration, it would prove that private citizens such as Morgan could sway the national economy on a scale heretofore unseen, and would come to characterize Morgan’s power, wealth, and influence in the early 20th century.

Outside of leading the charge to bail out the federal government, Morgan was also responsible for buying out Carnegie Steel Company in 1901,[5] a sale which would make the Scottish steel tycoon one of the wealthiest men in the world. While paying ~$85 million (over $3 billion today) for a controlling stake in the company,[6] this purchase would allow Morgan to create the juggernaut United States Steel Company.[7] This merger would come less than a decade after his restructuring of Edison’s General Electric Company in 1892,[8] and closely preceding Morgan’s consolidation of International Harvester in 1902.[9] With the International Harvester and US Steel mergers, Morgan oversaw two of the “largest modern industrial combinations” of the era in back-to-back years.[10]

However, the Panic of 1907 displays Morgan’s power and influence once again, this time on an even greater scale than 1895. Caused by speculative investing in the copper industry, the failure of Knickerbocker Trust Company caused an economic panic that threatened the entire financial system in New York.[11] In the midst of this situation, Morgan once again saw opportunity where many saw ruin. Referring to Morgan as “a bank in human form,” a New York Times article from 1907 describing Morgan’s role in stemming the Panic of 1907 states that “always it was Morgan behind the situation, moving the pieces on the financial chess board at will, whether they were kings or pawns.”[12] Altogether, Morgan and his associates would float more than $25 million (worth over $800 million today) to other financial institutions to help keep them afloat and dissuade fear in a collapsing market.[13] Hailed as the Morgan Colossus, he was lauded at the time as “carrying the Nation’s banks across the troubled waters of shaken confidence.”[14]

"The Central Bank," Puck (February 2, 1910),
Wikimedia Commons.

The caption reads "Why should Uncle Sam
establish [a central bank], when Uncle Pierpont
is already on the job?" 

As a result of this financial disaster in 1907, Morgan would be one amongst the many voices directly calling for a Central Bank of the United States,[15] even going so far as to arrange a secretive meeting of wealthy financiers at the Jekyll Island Club off the coast of Georgia in 1910.[16] This meeting – itself the source of countless conspiracy theories concerning its “true intentions" – would ultimately lead to the creation of the Federal Reserve in 1913, allowing for the nation to move away from a gold-backed reserve standard and adopt practices such as fractional-reserve banking. A controversial decision, one economist/historian has stated that the system has empowered “a governmentally created and sanctioned cartel device to enable the nation’s banks to inflate the money supply in a coordinated fashion, without suffering retribution from depositors or note holders demanding cash.”[17]

Though Morgan would die a few months before the passage of the Federal Reserve Act, the creation of the Federal Reserve – itself a response to the vulnerability demonstrated in the crisis of 1907 – is one of the most enduring portions of his legacy today. However, to say that this piece of legislature is the only relevant part of his legacy today would drastically underscore the importance of Morgan to the American – and therefore global – financial situation. In 2023, JPMorgan Chase and Co. topped the list of leading banks worldwide, with Morgan-descended firm Morgan Stanley also cracking the top five.[18] Over a hundred years later, Morgan’s shadow still looms large on the American economic landscape.

In short, J.P. Morgan was a shrewd financier of the early Progressive Era. A cutthroat businessman, Morgan became a magnate focused on consolidating industries under his control and became such a wealthy figure that he was directly integral in swaying national economic policy in not just 1895, but also in 1907. His legacy would continue through the establishment of the Federal Reserve System, and JPMorgan Chase remains exceptionally important to the world’s finances. A quote from Frederick Upham Adams in 1901, reprinted in the Baltimore Sun at the time of Morgan’s death in 1913, sums up the true nature of his wealth: “His place in history will be fixed not by his millions, but by his admitted and unquestioned dominance in that movement which revolutionized industry and established a new code of business and commercial ethics.”[19] Though never topping – nor even realistically nearing the top of – the list of “wealthiest American in history,” Morgan was a shrewd businessman who invested wisely and frequently courted influential capital rather than raw wealth in itself.

––––––––––––

[1] “Morgan, Generalissimo of Capital,” The [Baltimore] Sun, April 1, 1913, 9.

[2] Carl Hovey, The Life Story of J. Pierpont Morgan: A Biography (New York: Sturgis & Walton, 1912), 175-176.

[3] Ibid., 178-183.

[4] Ibid., 146.

[5] “Carnegie Sold Out? J. P. Morgan Said to Have Bought Control of the Steel Plant,” The [Baltimore] Sun, February 6, 1901.

[6] Ibid.

[7] Susie J. Pak, Gentlemen Bankers: The World of J.P. Morgan (Cambridge, MA: Harvard University Press, 2013), 72-73.

[8] Ibid., 203.

[9] Hovey, 263.

[10] Ibid.

[11] Pak, 21.

[12] “John Pierpont Morgan a Bank in Human Form,” New York Times, November 10, 1907.

[13] Ibid.

[14] Ibid.; interestingly, Hovey, 302-303 intimates that, though outright denies the existence of, a popularly-held conspiracy at the time was that Morgan manufactured the whole crisis to purchase back stocks that had recently been sold at a higher price.

[15] Pak, 21.

[16] “John Pierpont Morgan a Bank in Human Form,” New York Times, November 10, 1907.

[17] Ibid., 50.

[18] “Leading Banks Worldwide in 2023, By Revenue from Investment Banking,” Statista.com, https://www.statista.com/statistics/371143/leading-global-investment-banks-by-revenue/.

[19] "Morgan, Generalissimo of Capital."