26 JULY 1968, Page 19

Bloody Morgan


'What was needed now was money to buy the carbines from the Government for $17,500 so that they could be altered slightly and sold back to the Government for $110,000. But where was the money to come from?

Stevens went to see J. Pierpont Morgan . .

Well, of course: who else? Morgan, who knew what the deal was about, took his own large cut: he demanded interest at seven per cent, plus an 'extra commission' of $5,400—on a loan of $20,000. All in all, it was sharp prac- tice, made possible by the Civil War and the want of weapons that was crippling the Army of the Potomac. Morgan made a greater killing two years later, when he cornered the market in gold bullion. But what he made in the catch- as-catch-can economy of the 1860s was nothing to the rewards of the 'orderly markets'—that is to say, cartels—that he did so much to estab- lish. When he died in 1912, Pierpont Morgan left $68 million, and this must by far understate his real wealth: he spent an estimated $100 million on works of art alone.

He dominates Mr Hoyt's book, which traces the Morgan family from Miles Morgan (born in 1616, younger son of a Llandaff harness- monger: emigrated to Massachusetts, 1636) to the present day. About their early history there Is little to say that is both new and instructive; but Mr Hoyt's method is justified when he comes to Pierpont Morgan's father, Junius. In the first half of the nineteenth century the Morgans were already rich (real estate, stage- coach and steamer lines, insurance). Junius could take both money and connections with him when he went to London to join George Peabody in the bank which is now Morgan Grenfell. The London business taught the Morgans banking methods which they brought most profitably to New York.

For in an age of robber barons, Pierpont Morgan perceived that a surer way to make money was through the unspectacular opera- tions of what we should now call merchant banking. He handled (for a commission) the bond issues of the United States government. He acquired his great commercial interests (railways by the dozen, shipping lines, First National City Bank and Guaranty Trust. United States Steel) by coming in as broker and finan- cier. Interlocking shareholdings and nominee directorships gave him personal power that ex- tended throughout American industry and across the Atlantic. In 1902 his shipping merger (six major lines headed by the White Star) pro- voked the sale in London of 'licences to remain on earth: one penny: signed J. Pierpont Morgan.'

Such a concentration of power could be de- fended as the alternative to anarchy. In 1907 Pierpont Morgan was the only man who could save the tottering credit of the New York banks from collapse; and save it he did. But this only pointed the need for control to be exercised, not by one rich self-appointed saviour, but by the elected government, and within five years the Federal Reserve Act established just this.

In the end, the Morgans' power was more resented than the robber barons'. In 1912 Jack Morgan, Pierpont's successor, was twice wouncbd by a would-be assassin: eight years later a bomb was exploded at the bank, and twenty people were killed—none of them, as it happened, Morgans. Anti-trust laws grew stricter; and finally the banking and broking businesses were perforce separated. (They can now be traced in the Morgan Guaranty Trust and in Morgan Stanley.) Socially such power proved intolerable: economically it served its turn and was then discarded. The world's most effective capitalist economy has the most strin- gent curbs on monopoly : that is no coincidence; but it is ironic that the House of Morgan should have done so much to bring it about.