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John P. Morgan

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One of the most influential American financiers of his time and railroad magnate, John Pierpont Morgan has paved the way for many of the major American companies still in existence today. In his lifetime, he had a vast influence in the construction of the railroad and came to the financial rescue of the U.S. government on several occasions. While he benefited generously from each financial fiasco, he ensured that not only would the government, corporations, and banks survive, but that they would flourish as well.


[edit] History

[edit] Birth and Early Years

John Pierpont Morgan was born into an affluent family on April 17, 1837, to Juniet Spencer Morgan and Juliet Pierpont Morgan. His father was a partner and financier in a successful firm called George Peabody & Co. in Hartford, Connecticut.[1]

Morgan studied at the English school in Boston and furthered his education at the University of Gottingen in Germany. His decision to become an accountant became a reality in 1857 and he started his career with a New York firm called Duncan, Sherman and Co. His career turned into a family affair as he went on to represent his father’s firm. He became directly responsible for his father’s finances as an agent in 1861. He spent some time as partner with the firm Dabney, Morgan and Co. between 1864 and 1871 and then furthered his career as partner for Drexel, Morgan and Co. This decision meant he would be working for a company responsible for a majority of the U.S. government’s finances.

Morgan’s father died in 1890 and left his son with a lot of connections in Europe. By this time, Morgan had proven himself as a financier. He developed an interest in purchasing railroad companies and businesses, such as the West Shore, Philadelphia and Reading, Richmond Terminal, the Eriel and the New England railroads. Most of these railroads were in dire straits after the end of the Civil War. The attention he received for such monumental purchases led to the coining of the term “Morganization.” With this he renamed the firm J.P. Morgan and Co. in 1895. The company subsequently became one of the most successful in the world, leading Morgan as one of the most successful financiers in history.[2]

[edit] J.P. Morgan and Co.

With the worldly experience and connections he had working with his father’s firm, Morgan easily adapted to the intensive financial industry in London during the 1870s. With his knowledge of the industry, he was able to invest in American companies and aid in their success. He began investing heavily in the building of the railroads. In 1885, the two largest railroads, the New York Central Railroad and the Pennsylvania Railroad, reached an agreement. Its affect was enormous. It meant the competition between the railroads was eased and they would be built more productively and for a unified cause. Morgan oversaw the success of the railroad by becoming director of the board for both. His direction is largely responsible for the success of both railroads.

His influence would not stop there. Soon Morgan was having his say in railroads all over the country. He got involved with railroads in Pennsylvania and Ohio between 1885 and 1888. His ambition did not falter when the railroads fell on hard, financial times in the early 1890s. Morgan led his fiscal and business knowledge to help them get back on track. Railroads, including the Southern Railroad, the Erie Railroad, and the Northern Pacific overcame the dismal times they faced. No longer were these railroads in competition with one another. Morgan’s success and influence over the railroads made him a powerful man. Under his control were 5,000 miles (8,047 km) worth of American railroads. He had accomplished all of this by 1902.[3]

[edit] U.S. Government Financial Woes

Morgan dug the U.S. government out of a financial hole several times in his lifetime. On one occasion in 1877, Morgan teamed up with August Belmont and the Rothschilds to provide $260 million in U.S. government bonds. When the government faced financial obscurity, Morgan bought $200 million worth of bonds from the U.S. in order to dig the government out. Many criticized the move, which led to a congressional hearing in 1912. Morgan escaped without further allegations.[4]

In the 1890s, a depression occurred that restricted the country’s finances. Morgan blanketed the fall of the U.S. government’s finances. He supplied them with the funds they lost when a gold reserve worth $62,000,000 became worthless. Despite many attempts, President Grover Cleveland was not able to remedy the huge lost. Morgan benefited a great deal from this move and many criticized him for taking advantage of the government in time of need. The total sum Morgan profited from was never revealed. This led the way for a series of consolidations.

The first was the merging of Edison General Electric and Thomson-Houston Electric Co. into what is now known as General Electric. Morgan also merged the Carnegie Steel Co. with several other steel companies. The result was the U.S. Steel Corp. The company was the first to gross a billion dollars in the history of the world.

Since Morgan was generating a lot of success by merging and purchasing large companies, he did not stop there. He later went on to purchase International Harvester Co. in 1902, as well as the International Merchant Marine.

The railroad competition appeared again in the early 1900s. James J. Hill and Edward H. Harriman were battling over the ownership of the railroads in the west of Mississippi and the top half of the country. Morgan made no secret about his support for Hill. The shares for Northern Pacific rose high and were invested in the Northern Securities Co. The demise of the company in 1904 led to the Sherman Antitrust Act.[5]

When the stock market prompted panic from the nation in 1907, a series of bankers under the direction of Morgan took the responsibility of government deposits. They determined which banks and companies were salvageable and provided them with the resources to recover. Morgan concentrated on lending his influence to banks and large corporations. His massive influence led to criticism from the federal government.[6]

Saving the banks and corporations from the crash is noted as one of Morgan’s greatest achievements. His financial savvy changed the future of government finances. It meant the fortunes of private companies would no longer have such a large impact on the public.

Aside from the high-paced financial circles that Morgan ran in, he was also an avid collector of art: paintings, sculptures, and other artistic mediums. His contributions to the Metropolitan Museum of Art in New York made it a museum to contend with.[7]

[edit] Death and Fortune

Morgan died in Rome on March 31, 1913. His estimated worth was $80 million, a fortune that would be equal to $1.2 billion by today’s standards. Morgan’s fortune lay not in the millions he possessed personally but in the billions he controlled. John Rockefeller made a comment similar to this when he said: “And to think he wasn’t even a rich man.”[8]

[edit] References

  1. JP Morgan biography: The most influential banker in history. Financial Inspiration Cafe, 2008-09-29.
  2. John Pierpont Morgan., 2008-09-29.
  3. John Pierpont Morgan., 2008-09-29.
  4. JP Morgan biography: The most influential banker in history. Financial Inspiration Cafe, 2008-09-29.
  5. Encyclopedia of World Biography on John Pierpont Morgan., 2008-09-29.
  6. John Pierpont Morgan., 2008-09-29.
  7. Encyclopedia of World Biography on John Pierpont Morgan., 2008-09-29.
  8. JP Morgan biography: The most influential banker in history. Financial Inspiration Cafe, 2008-09-29.