John Pierpoint Morgan (1837-1913) was a prominent American banker and businessman. His influence on American and world banking was so profound that he has come to be considered the first modern banker.
Morgan created a bank (JP Morgan) which, over time, became the largest US financial institution by assets. But his important role in the economy went beyond the financial sector, playing a decisive role during the banking panic that struck the United States in 1907.
JP Morgan and financial crises
Born in 1837 in the town of Connecticut, Morgan was the son of businessman Junlus Spencer Morgan. After finishing his university studies, he soon moved to New York. There he gained experience in the world of finance during his time at George Peabody & Co.
In 1871, after forging an alliance in the form of a merger with Anthony Drexel, his bank, he became the great financier of the United States federal government. At the head of such a powerful and influential banking entity, many referred to Morgan as “the master of money.”
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One of his most decisive interventions took place during the panic of 1893. With the federal government’s gold running out and the US economy faltering, Morgan pushed for the purchase of $200 million in treasury bonds. That intervention was a breath of fresh air for a United States government in a hurry.
But, the panic of 1893 would not be the last crisis that the American economy would have to face. In 1907 a new financial panic shook the United States. The New York stock market collapsed by 51% and the panic reached beyond the markets and its effects were felt by a large part of society.
Given the delicate situation, Morgan chose to meet with big businessmen and bankers to avoid the collapse of the economy. Thus, the injections of money from him prevented the American economy from collapsing.
competition issue
John Pierpoint Morgan, as a banker and businessman, was a fervent advocate of free competition. Precisely, in the 19th century, one of the most thriving sectors in the US economy was the railways. The fight between the railway companies was stark and everyone was looking for a monopoly.
Billionaire and businessman Carneggie sought to lower prices at all costs. To do this, Carneggie intended to build a new railroad in the State of Pennsylvania. By cutting costs, Carneggie could cut prices and beat the competition.
However, a price war between railway companies would not be limited to the sector. The effects on the entire national economy could be devastating. At this point, and aware of the risks, Morgan decided to intervene.
Thanks to his prestige and influence, he managed to convene the most important railroad businessmen on his yacht. After a more than complex meeting, Morgan managed to persuade the businessmen that they should avoid a price war. And it is that, the key to a flourishing and solid economy was found in respect for the principles of competition.
Criticism and legacy of John Pierpoint Morgan
In 1912, the year before his death, the bank headed by John Pierpoint Morgan was a solid financial pillar of the US government. Proof of this was that two thirds of the financing of the American government depended on JP Morgan.
But, Morgan went beyond the banking business, because as an avid investor, he also developed businesses in strategic areas for the United States. Thus, he also had a decisive role in companies such as General Electric and AT & T.
Despite his important performance in the financial panics that shook the US economy, his figure has not been lacking in detractors. In this sense, Morgan and several magnates were accused of enriching themselves with the commissions of the purchase of treasury bonds during the panic of 1893.
Similarly, Morgan was also investigated, as he was accused of monopoly, although he was not found guilty. And it is that, there are those who consider Morgan a decisive man in the US economy and finances, there are those who label him greedy.
