This is the fifteenth in my series of posts about the five businessmen the History Channel profiled in a terribly inaccurate and un-historical TV miniseries titled The Men Who Built America. I’m writing these posts in response to several comments and e-mails from TV viewers who have expressed interest in a more accurate version of the story. (Click here to see all Al’s columns on the program and its subjects.)
Post #15: JP Morgan Goes from Riches to Riches
American history is replete with inspiring stories of people who grew up in poverty or near-poverty and went on to achieve great financial success. John Pierpont Morgan’s story is not one of these.
His great-grandfather Joseph Morgan was a prosperous farmer; his grandfather, also named Joseph, made a lot of money in several different industries and helped found more than one bank; his father Junius Morgan was able to use his bloodline to secure a partnership in a Wall Street bank when he was only twenty-one years old. John Pierpont “JP” Morgan was born in April of 1837 with the proverbial silver spoon in his mouth.
Like Carnegie and Rockefeller, the young JP Morgan expressed anti-slavery views in at least one school paper, although he doesn’t appear to have been as passionate about the issue as the other two.
JP had the best of everything money could buy when he was a child, although his family’s wealth couldn’t protect him from the childhood illnesses that were so common in the nineteenth century. He was frequently absent from school while fighting some fairly serious health problems. When he was fifteen his parents sent him to the Azores for a few months, thinking the island climate would be good for his health.
His parents were living in London by the time he was ready to leave the Azores, so he sailed straight to Britain to rejoin his family. He celebrated his sixteenth birthday on the ship. Junius Morgan was so well respected among bankers on both sides of the Atlantic that he was able to arrange a tour of the Bank of England as part of JP’s first sight-seeing trip around the city. JP wrote about the experience in his diary: “I held £1,000,000 my hand.”
Loans and investments from well-heeled Englishmen were very important to the growth of the American economy in the mid nineteenth century, so Junius was not the only American financier doing business in London. As he demonstrated his abilities he attracted the attention of other expatriate businessmen. One of them, a self-made millionaire named George Peabody, offered Morgan a partnership in his firm.
Peabody had grown up in a poor household and dropped out of school at age eleven to go to work in a general store. By the time he persuaded Morgan to join his firm in 1854 he was the preeminent American banker in Britain. Junius bought a minority position in his company; the firm continued to be called “Peabody and Company.”
The year he formed his partnership with Peabody Junius sent JP across the Channel to a fancy Swiss boarding school on Lake Geneva to polish up his French and study advanced mathematics. He was to stop in Paris for some sight-seeing on way. The United States Ambassador to England, former Congressman James Buchanan, asked the seventeen year old to deliver some papers for him in Paris. In a letter to his grandfather JP was able to boast of being a “Bearer of Government Dispatches on a foreign tour.”
The contrast between JP Morgan most other great captains of industry is pretty easy to see. Vanderbilt, Carnegie, and Rockefeller were all busy trying to make a living by age seventeen. Morgan was playing with large bank notes and socializing with ambassadors.
As for James Buchanan, his name would continue to play a major role in American history long after his death. By the time the Pennsylvania Democrat was elected President of the United States in 1856 two different couples, in different parts of the country, had named sons after him, and the two boys would both grow up to be major players in the nation’s economic development. Both would play significant roles in the lives of Junius and JP Morgan.
At school in Switzerland young Morgan made friends with other rich youngsters, flirted with pretty girls, and bought fur coats as gifts for his mother. In 1856 his father, satisfied that his French skills were adequate, sent him to an elite school in Germany to polish his German. JP and a school chum rented a house and hired a servant to take care of the place.
In mid-1857, satisfied with his son’s language skills, Junius arranged for JP to get some practical training in the banking business. He arranged for an un-paid internship at the New York firm of Duncan, Sherman, and Company. The absence of a paycheck was not a problem for Junius Morgan’s son; he continued to live very well while he served his apprenticeship.
In September of 1859, satisfied that JP had learned the business, Junius directed him to turn in his resignation. The partners wrote JP a warmly worded letter praising him for his efforts and abilities and thanking him for his two years of service.
When James Buchanan won his ’56 Presidential race he didn’t get Junius Morgan’s vote. Morgan voted for John C. Fremont, the first man ever nominated for President by the new Republican Party. Morgan, a pro-slavery Democrat, would serve only a single term, during which hostilities between Southern slave owners and Northern abolitionists would approach the boiling point.
Junius and JP Morgan had similar political beliefs; both opposed the institution of slavery in a weak and theoretical way, but both were horrified at the thought that the business world might be disrupted by a civil war. By 1860 the nation was on the verge of war and Junius was condemning President Buchanan as “pitiable,” an “imbecile,” and “entirely incapable.”
It’s interesting to note that Junius predicted, quite accurately, that a Civil War would bring the end of slavery, yet the supposed opponent of slavery didn’t want to see the war take place. His business interests came first.
In 1860, with the nation on the verge of war, the senior Morgan sent his son on a tour of their business interests in the Southern states. Shortly before JP’s departure Democrats blocked Ohio Congressman John Sherman (future author of the Sherman Anti-Trust Act, and brother of future Union war hero William Tecumseh Sherman) from being elected Speaker of the House.
Sherman’s crime, in the eyes of Democrats, was some comments he made on “all the shame, poverty, ignorance, tyranny and imbecility of the South,” which he blamed on the institution of slavery. Today most people don’t know that the antebellum South was as poor and backward as it was. In actual fact the contrast between slave and free states in those days was the difference between a modern society and a third world country.
Alexis d’ Toqueville and Frederick Law Olmsted both wrote about the contrast between the industry and prosperity of the North and the “lazy poverty” of the South in books that are still available to modern readers. The very large revenues produced by Southern cotton exports went to only a tiny minority of Southern whites, and rich whites in the South tended to dissipate their fortunes in ways that would have drawn social condemnation if practiced in the North, where “industry and thrift” were cherished cultural values.
JP Morgan’s Southern tour ended in May of 1860. JP spent the spring and summer of ’61 working for Peabody and Company in New York. While he was there got involved in a business deal that attracted some criticism.
The US government was spending a lot of money arming its troops for the war, and a businessman named Arthur Eastman offered to upgrade some five thousand obsolete rifles in a government warehouse to current Army standards. The ordinance chief in charge of the guns refused his offer, but agreed to sell him the old guns for $17,500. Meanwhile another businessman negotiated with Union General John C. Fremont (who had run for President in ’56) for the purchase of five thousand reconditioned rifles at a total price of $110,000.
Eastman and his partner didn’t have the money to buy the rifles and pay for the upgrades, so they asked Morgan to finance the deal, which he did for a $5,000 fee. The deal was perfectly legal, but it did demonstrate that Morgan and his associates were not particularly patriotic, and that they put their own financial interests ahead of the war effort.
It also shows a contrast between Morgan’s attitude and that of self-made men like Andrew Carnegie. While Carnegie was neglecting his more profitable businesses to keep the trains of the Pennsylvania Railroad running on time, as a contribution to the war effort, Morgan and his partners were taking advantage of bureaucratic incompetence to make a quick financial score.
In 1862 formed a New York company that worked closely with Peabody and Company matching up British investors with investment opportunities in the US.
Next week’s post will examine the interactions of the Morgans, Carnegie, and the Vanderbilts in the post-war United States.
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