Talking about entities like JP Morgan is talking about financial power. Well, we must know that it is not only the largest US bank by volume of assets, but we are also talking about one of the most powerful banks in the world. But what are its origins? Who is the man to whom such a financial empire is owed?
At the origin of one of the most important banks in the world is the American John Pierpoint Morgan (1837-1913).
The mark that the banker has left in history goes beyond the creation of a financial colossus, or being considered the first modern banker.
And it is that, his influence in the economy was such that he was known as “the market discipliner”, without forgetting his decisive role in several of the financial crises that have occurred throughout history.
The origin of a financial empire
“After working at George Peabody & Co, gaining valuable experience, he went on to take the reins of his own company, JP Morgan & Co.”
As the son of businessman Junlus Spencer Morgan, John Pierpoint Morgan (JP Morgan) was trained to manage the family estate. After graduating, he settled in New York City, where he began his journey in the world of finance.
After working at George Peabody & Co, accumulating valuable experience, he went on to take the reins of his own company, JP Morgan & Co. As early as 1871, after joining forces with banker Anthony Drexel through a merger, they became the great financier of the United States Government and the most prosperous investment firm in North America.
The death of his father in 1890, and later that of Anthony Drexel in 1893, propelled JP Morgan to the top of financial power, leading him to be known as “the master of money.”
John Pierpoint Morgan and the “robber barons”
“In this great economic transformation stood out businessmen like Rockefeller, Vanderbilt and Carnegie.”
In the 19th century, the United States economy underwent a major transformation process. Thus, in the end, the country would end up becoming a great industrial power.
Businessmen such as Rockefeller, Vanderbilt and Carnegie stood out in this great economic transformation. These wealthy businessmen were known disparagingly as “robber barons”, as they were considered to have had no qualms about the methods used to enrich themselves.
Precisely, one of the most profitable economic sectors was the railway, where the so-called “robber barons” made a killing. In that sector, competition was fierce, anything went as long as they prevailed or as long as they neutralized rival companies.
Thus, the intervention of John Pierpoint Morgan in the bitter dispute between the two biggest railway giants was decisive in avoiding a price war.
It all started when the tycoon and businessman Carnegie intended to build a new railway to end the monopoly of the Pennsylvania railroad, which monopolized the transport of its steel. In this way, Carnegie would be able to reduce freight costs.
He was planning a price war over the American railroad world. This war could go beyond the railway sector and would end up affecting the entire economy of the United States.
Using his influence, Morgan brought together the presidents of the two main railroad companies in the country. To do this, he summoned them on his yacht “El Corsario”. The choice of that yacht for the meeting had a powerful reason. No one could leave the yacht unless they complied with Morgan’s proposals, otherwise they would have to swim back. After a tense meeting in “El Corsario”, both presidents agreed not to compete.
This episode shows that, for Morgan, healthy competition was essential in the economy because it brought order, prosperity and stability.
JP Morgan’s role in financial crises
“Faced with such a scenario, it was the United States Government itself that turned to Morgan to intervene.”
Morgan was not only a key man on antitrust issues, but he also played a major role in the financial crises in the United States in the late 19th and early 20th centuries.
A clear example is the panic of 1893, which had a severe impact on the entire economy of the United States. US gold reserves were depleted and the US Treasury was facing the feared instability.
To tackle the situation, Morgan agreed with other bankers to purchase 200 million treasury bonds, which they would pay in gold. Although this action by Morgan and his fellow bankers made it possible to save the delicate situation of the US Treasury, in Congress they were accused of enriching themselves because of the commissions of said operation.
Once again, the crisis of 1907 brought an actor like JP Morgan back into the fray. The New York Stock Exchange plummeted dramatically (up to 51%) and financial institutions sank. The panic transcended beyond the stock market and affected businesses in other sectors.
Faced with such a scenario, it was the United States Government itself that turned to Morgan to intervene in order to cushion the effect of the devastating economic crisis. In response, Morgan met with the country’s great entrepreneurs, businessmen, and tycoons like Rockefeller, Frick, Harrigan, Rodgers, and Schiff. Together they agreed to inject large amounts of money to prevent the collapse of the economy.
Beyond his decisive role in the various financial crises, there is a permanent controversy over the large sums of money that Morgan obtained for the aid he provided to the United States Government.
«The successful banker was not only engaged in the financial business, but also maintained investments in various sectors, expanding his economic power and influence.»
By 1912, just a year before his death, JP Morgan was the great banker of the American economy. Proof of this was that two thirds of the financing of the United States was in the hands of Morgan.
On the other hand, the successful banker was not only engaged in the financial business, but also had investments in various sectors, expanding his economic power and influence. All this led to an investigation of Morgan for the establishment of a monopoly, from which he emerged unscathed.
Finally, on March 31, 1913, John Pierpoint Morgan died in Rome, leaving his son Jack Pierpoint Morgan as head of the largest bank in the United States. As a consequence of his death, paying honors to his memory, the New York Stock Exchange was closed until noon on the day of his funeral, something that in theory only happened when a president died.
It should also be remembered that Morgan not only left the largest financial institution in the United States to his son, but also consolidated strategic companies in the US economy, such as AT&T and General Electric.
In any case, the figure of Morgan, object of controversy, is debated between those who admire him for his entrepreneurial spirit and for his decisive role in the North American economy, and those who consider him simply rich and greedy.