Being J.P. Morgan

Jean Strouse's book, Morgan, American Financier, has caused me to take another look at the great financier J.P. Morgan. All of the reading that I have done on him before betrayed him as a rather ruthless greedy power possessed banker. But while reading those accounts I always wondered about the other side of his story. After all, he seems to have single-handedly built industrial America and changed the global financial power structure from London to New York a century ago. He was also a greater financier of Thomas Edison, a great private art collector, and president of the Metropolitan Museum, financing many excavations in Egypt.

As a banker, some thought that his power was too centralized—namely in him-- and the many stories told about him, as he did not often speak of himself, were not accurate. The difference between J.P. Morgan and the current CEO is that he seemed to really have a love for his country; his work wasn't merely about money and power alone. "Though cast as the high priest of modern capitalism, Morgan did not really believe in free markets," Strouse writes. "All of his adult life he tried to stabilize the emerging U.S. economy, to discipline speculative profiteers and bring the market's destructive forces under control."

Morgan was accused of perciptating the crash of 1901 and announcing that "I owe the public nothing." But Strouse tells another story. She writes that this line is "largely fiction" and that what ensued was not as the story reveals. In a hostile attempt to take over a railroad that Morgan controlled, some of his rivals "secretly" bought stock in Northern Pacific while he was abroad. His partners were then instructed by Morgan to buy the stock left. This caused speculators to short the market to make a killing as the prices came down. But the prices never came down because no one was selling. NP prices rose astronomically from "$146 to $1,000 a share." Speculators dumped their other stocks in order to raise money to meet these prices. Strouse writes that this brought on the crash of 1901.

But Morgan does something quite responsible. "Morgan knowing that the crisis could ruin thousands of people and unhinge the U.S. economy, arranged by cable for his partners and raiders to postpone receipt of stock they had bought, and to sell enough shares of $150 to allow the shorts to cover. He then went to London and stopped a nascent panic there by offering roughly the same terms-not the actions of a man who thinks he owes the public nothing."

The problem today seems to be that Wall Street bankers like to play the game but do not wish to be personally responsible for their actions; many also seem to have no core sense of ethics, neither do they sincerely care about the public and their VAR models that are detrimental to our financial system itself. Some Wall Street banks are now posting profits based on these models and guess what? We will probably be right back here again, as there has been no change in the system itself. I could probably make a profit if given billions upon billions too. But guess what? As a person who wins the lottery, I'll probably need another bailout too. Even Morgan, thought of as "the high priest of modern capitalism," would not believe in such speculative models. Morgan was a conservative and, by this account, ethical banker.