THE HOUSE THAT BECAME A BANK

Table of Contents

JOHN PIERPONT MORGAN

Morgan, a banker's son who absorbed the vocabulary of capital, bonds, syndicates, collateral, trust, from his father Junius's transatlantic merchant house, but who added to that inheritance a near-obsessive belief that unregulated competition was a disease to be cured through consolidation. By the 1890s, no major railroad, reorganization or industrial merger in America happened without his involvement.

In 1893, with no central bank to defend a collapsing gold reserve, the U.S. Treasury turned to Morgan personally, and he organized a syndicate that supplied 65 million dollars in gold in exchange for bonds, single-handedly arresting a national financial crisis. Gold supplied, zero existing central banks, one private banker filling that role.

Morgan's signature move became so distinctive it earned its own verb. "Morganization" meant buying up warring, overbuilt, price-slashing competitors, usually railroads at first, later steel and folding them into a single, efficiently managed structure with interlocking boards and, often, a Morgan partner in the room. General Electric emerged from the same instinct, formed in 1892 by merging Edison General Electric with its chief rival. Across rail, steel, and power, the pattern repeated, chaos in, order out, and a Morgan man on the board to keep it that way.

At seventy, Morgan summoned New York's leading bankers to his private library and effectively refused to let them leave until they pledged capital to rescue the collapsing trusts, personally reviewing the failing institutions' books overnight.

1907 was Morgan's finest hour and, in a sense, his last necessary one. Congress watched a private banker stabilize the entire American economy and drew an uncomfortable conclusion, that such kind of power should never again rest with one unelected man, however capable.

365 men who changed the world.

Kamikun John, Author 366 days of wisdom.