Morgan: American Financier (1999) by Jean Strouse

J.P. Morgan was not the wealthiest of the great early industrialists. That title went to John D. Rockefeller, Sr. Nor was the story of his rise to prominence in the business world the most improbable or remarkable. The young Charles Schwab Jr. would claim that prize, in my opinion. Finally, he did not leave the most lasting and influential legacy through grand-scale philanthropy. Andrew Carnegie was clearly the winner in that regard. Yet, Jean Strouse’s wonderful biography “Morgan: Financier” makes one thing perfectly evident: J.P. Morgan was the single most powerful private citizen in America – perhaps the world – in the late nineteenth and early twentieth centuries.

The scion of a powerful Connecticut banking family, J. Pierpont Morgan was the most uncommon of business specimens: a privileged and sheltered young man who grew up to advance the family business beyond the loftiest expectations of his industrious forbearers. During the course of his lifetime, the center of global finance shifted from London to New York and the United States emerged as the greatest industrial power on earth. While America’s prodigious natural endowments and the industrious spirit of the nation were fundamental to those events, J.P. Morgan and his banking empire, the so-called House of Morgan, filled the critical role of financial steward that oversaw and managed that tremendous growth.

During the course of his fabulous career, J.P. Morgan played many roles critical to US economic development: investment banker, venture capitalist, management consultant, central banker, and labor dispute mediator. In his efforts to establish business harmony and eliminate mutually ruinous competition among railroads, Morgan frequently orchestrated massive corporate reorganizations, popularly known as “Morganizations,” of usually bankrupt lines. Debt would be rescheduled, the capital structure would be shifted from debt to equity, and new management would be brought in, leading to renewed investor confidence and rising stock prices of the Morganized line. Morgan’s influence over capital also thrust him into an occasional political role, the most notable example being his role in mediating the anthracite coal strike of 1902 that averted an impending national calamity. Finally, and most importantly, Morgan served as the de-facto chairman of the Federal Reserve before that essential institution existed. In 1895 and again in 1907, Morgan leapt into the breach of a major financial panic and prevented a total collapse of the nation’s economy by personally serving as the lender of last resort. Strouse chronicles these activities in a manner and style that is both fascinating and satisfying to the corporate finance amateur and Wall Street maven alike.

On balance, Strouse delivers an objective account of Morgan’s personal and professional life, but it certainly skews toward the favorable. Morgan’s role in responding to the great panic of 1907 is particularly interesting as a means to gauge the opinions of the author about her subject. She is unabashed in her support and paints all Morgan’s actions in the most admirable light, ascribing only patriotic and selfless motivations to his activities over the course of the two-week event. That Morgan may have benefited in anyway from the destruction of the trust banks (that some argued took away business from him) or that US Steel may have scooped up Tennessee Iron & Coal at a premium (as the Stanley Commission of 1911 later claimed) are dismissed out of hand by Strouse. The charge that the whole panic was intentionally set by Morgan to destroy the trust banks but got out of their control is described as pure paranoia and entirely groundless.

Nevertheless, Strouse doesn’t shy away from pointing out Morgan’s personal shortcomings, such as the hypocrisy of his outward devotion to the Episcopal Church and his well-known philandering. In all, “Morgan: Financier” is a remarkable work on a remarkable life