The Great Pierpont Morgan (33 page)

From banking it spread into insurance. For a time George W. Perkins had been both a Morgan partner and a vice-president of the New York Life Insurance Company; and in 1909
something else happened. Since 1905, when a series of scandals had rocked the insurance business, the ownership of another big company, the Equitable, had been in the hands of Thomas Fortune Ryan, who had set up, to supervise the concern, a board of three trustees which included Grover Cleveland and was calculated to put the management above suspicion. Later, Ryan had sold part of his stock interest in the Equitable to E. H. Harriman. At the end of 1909 Morgan bought Ryan's remaining interest; he also acquired the part which had gone to Harriman. (The doughty railroad emperor had died in the summer of 1909; a fortnight before the end, in a reconciliatory mood, he had invited Morgan to come to Arden and sit by his bed for a friendly talk.) Now in sure control of the Equitable, Morgan offered a quarter interest in his investment to Baker, and another to Stillman, if at any time they should care to buy these fractions; this they did after his death, but for the time being they were content that he should hold their shares. This was satisfactory to him; he wanted to put the Equitable, which was a huge purchaser of securities, into “safe hands”; and what safer than his own?

During the Pujo Committee's investigation in 1912, Samuel Untermyer, the committee counsel, questioned Morgan relentlessly about the purchase from Ryan. He had been struck by the fact that Morgan had paid a price which, at the usual dividend rate, would yield him only a small fraction of one per cent on his investment. Why had he been willing to pay so much, Untermyer wanted to know; and why had he wanted to buy control of the Equitable company anyhow?

“Because I thought it was a desirable thing for the situation to do that,” said Morgan.

“But that is very general, Mr. Morgan, when you speak of ‘the situation.' Was not the stock safe enough in Mr. Ryan's hands?”

“I suppose it was,” answered Morgan, unwilling to suggest that Ryan might otherwise have disposed of the shares to people whom he distrusted. “I thought it was greatly improved by being in the hands of myself and these two gentlemen [Baker and Stillman], provided I asked them to do so.”

Untermyer persisted with his questions, and in due course Morgan remarked that he had thought the purchase was “good business.” The colloquy went on:

UNTERMYER
. Where is the good business, then, in buying a security that only pays one-ninth of one per cent?

MORGAN
. Because I thought it was better there than it was where it was. That is all.

UNTERMYER
. Was anything the matter with it in the hands of Mr. Ryan?

MORGAN
. Nothing.

UNTERMYER
. In what respect would it be better where it is than with him?

MORGAN
. That is the way it struck me.

And a little later:

UNTERMYER
. Did Mr. Ryan offer this stock to you?

MORGAN
. I asked him to sell it to me.…

UNTERMYER
. What did he say when you told him you would like to have it, and you thought you ought to have it?

MORGAN
. He hesitated about it, and finally sold it.

At last, under persistent hammering, Morgan was a little more specific. He explained that Ryan had not been in good health, and that when a man died and his stock went into his estate, it might get divided up into small lots and you could not tell what would become of it. But he insisted that “the only reason I did it, on which I am willing to stand up before the community, is that I thought it was the thing to do.”

“This is a little nebulous, is it not?” asked Untermyer.

“You may call it so,” replied Morgan, “but I do not look at it in that light.”

3

So widely had the threads of the Morgan influence—and of the Morgan-Baker-Stillman influence—reached, that when the Pujo Committee made its report, at the conclusion of its hearings in 1912–13, and proclaimed its discovery of the existence of the “money trust” which it had decided in the first place to discover, it was able to produce some staggering statistics. It found that if you lumped together the Morgan partners and the directors of the First National and National City banks and the Bankers Trust Company and the Guaranty Trust Company, you had a group of men who between them held—

25 directorships in 12 public utility corporations; making, in all, 341 directorships in 112 corporations with aggregate resources or capitalization of over 22 billion dollars. And of these 341 directorships, the members of the firm of J. P. Morgan & Co. held no less than 72.

Said the Pujo Committee, toward the close of its report: “The acts of this inner group … have … been more destructive of competition than anything accomplished by the trusts, for they strike at the very vitals of potential competition in every industry that is under their protection, a condition which if permitted to continue will render impossible all attempts to restore normal competitive conditions in the industrial world.”

That the Morgan firm actually exercised any controlling authority by means of these directorships, Morgan himself stoutly denied when he was called before the committee. He even went so far as to deny that voting trusts exercised such authority. When, for example, Untermyer asked him whether he, as a member of the voting trust which year after year chose the directors of the Southern Railway, was not in effect dealing with himself when the firm of J. P. Morgan agreed with the officials of the Southern Railway on the prices at which its securities should be issued to the public, he would not yield an inch. “I do not think so,” said he. “We do not deal with ourselves.”

“Let us see if you do not,” persisted Untermyer. “… The voting trustees name the board, do they not?”

MORGAN
. But when you have elected the board, then the board is independent of the voting trustees.

UNTERMYER
. That is only until the next election?

MORGAN
. It is during that time they act independently.

UNTERMYER
. You think, therefore, that where you name a board of directors who remain in existence only a year and you have the power to name another board next year, that this board so named is in an independent position to deal with your banking house, as would a board named by the stockholders themselves?

MORGAN
. I think it would be better.

UNTERMYER
. You think it is a great deal better?

MORGAN
. Yes, sir.

UNTERMYER
. More independent?

MORGAN
. Better.

UNTERMYER
. Will you tell us why?

MORGAN
. Simply because we select the best people we can find for the positions.

Questioned as to his alleged control of banks, he insisted likewise that the presence of Morgan partners on the boards of other banking institutions did not mean control. They were usually in a minority, and in a few banks; “there is no question of control,” said he, “unless you have got a majority of the directors … in all banks.” Often he shifted his ground in the debate with Untermyer as the zest of verbal battle seized hold of him, but the trend of his argument was plain: that the degree of influence which men exercised depended, in the long run, not upon charts and diagrams of “control,” but upon their personal stature, and that in banking this was pre-eminently true.

He was, of course, heavily overstating a valid point. The House of Morgan exercised a strong and in some matters a determining influence, not only in the councils of many banks, but as we have already seen, in the affairs of many railroads and industrial corporations. This does not mean that the statistical compilations of the Pujo Committee bore much more resemblance to the living actuality than the “red network” diagrams subsequently drawn up by determined radical-baiters. Corporations often welcomed leading bankers on their directorates for the prestige value of their names, or for their astute advice, or for possible future assistance in financing; and the bankers in turn often used such directorships chiefly as listening posts. Where the relationship was more definitely supervisory than this, the supervision was usually very limited, as I have already noted. Yet that there was a reality behind the Pujo diagrams was scarcely deniable. A handful of strongly placed men with many plums at their disposal, and with similar points of view on many things, enjoyed working together, enjoyed putting friends into positions of authority (directorships and committee memberships in reorganized companies, for instance), and gradually began to regard most of the banks and a large number of important corporations as the natural instruments of their group. The high repute of these men in the financial community, their ability, their mutual
trust, and their extending acquaintance with one another produced an association of interest that was much too informal to be labeled a “money trust,” but that nevertheless was a nucleus of indefinable yet substantial power over a considerable sector of the national economy.

From this association of interest Pierpont Morgan himself, who had done so much to create it—and also to raise its ethical standards—was in his last years by degrees withdrawing. But at least part of his overpowering position in it was becoming institutionalized as his partners took over, though none of them would ever wield such commanding personal force as he had possessed.

4

To Morgan himself the last years brought many discouragements. The concept of social justice which had been making steady headway since the turn of the century had brought with it a popular distrust of great wealth and great economic power which dismayed him. The muckraking journalists and novelists, from Ida M. Tarbell with her history of the Standard Oil Company, and Lincoln Steffens with his
Shame of the Cities
, to Upton Sinclair with his portrayal of the horrors of the packing houses in
The Jungle
, had dramatized the sins of big business and the egregious influence of money on political life. Politicians of a new sort, from reform mayors like “Golden Rule” Jones of Toledo and Tom Johnson of Cleveland to reform governors and senators like Robert La Follette of Wisconsin and Hiram Johnson of California, had learned to turn to practical administrative and legislative use the public indignation which Theodore Roosevelt had whipped up; and every one of these men had his group of eager young disciples, determined to scotch the “interests.” Such varied events as the anthracite coal strike of 1902, the insurance scandals of 1905, the Ballinger disclosures of 1910, and the Triangle fire of 1911 had each in its own way documented to the public satisfaction the irresponsibility of greed. More and more laws to regulate business were being written into the statute books. So marked was the steady change in the political climate in which big business had to operate that after the very conservative Taft succeeded the belligerent Roosevelt in the White House in 1909, the number of prosecutions of large companies for restraint
of trade not only did not diminish, but increased sharply. By 1912 Roosevelt's Bull Moose Progressives and the disciples of Woodrow Wilson's New Freedom were vying for the chance to take over the country from the Taft Republicans, with Wilson winning; and the Pujo investigation, shortly after Wilson's election, was but one of many signs that the era of untrammeled authority for the men who ran big business was over, because the public at large no longer trusted them.

Morgan could not understand the change. When, in 1911, the federal government brought suit against his own child, the Steel Corporation, under the anti-trust laws (a suit which the corporation later won), the news was a body blow. “Well, it has come to this!” he exclaimed sadly to Satterlee, and sat long brooding over this public affront. He was distressed, too, over the failure of the officials of New York City to appropriate money for a new building in which the Metropolitan Museum might house his vast collections, which he proposed to give or leave to it. Had he not saved the city's credit in 1907? Had he not always been a loyal citizen? It made matters no easier to reflect that such apparent official ingratitude was due to the fact that it was now politically safer to rebuff him than to co-operate with him. In April 1912, when the ship
Titanic
, pride of his International Mercantile Marine, sank with great loss of life, he was appalled to hear that some people were charging that a Morgan-directed policy of economy was responsible for the disaster. When he was called down to Washington in the fall of 1912 to testify before the Clapp Committee on his campaign contributions of earlier years, and then to face the Pujo Committee with its money-trust allegations, his depression deepened. He had done what he thought was right; had things indeed come to this?

Shortly after his sessions with the Pujo Committee he was off once more abroad, to Europe and then to Egypt, very tired and nervous. Just before his departure Colonel George Harvey of
Harper's Weekly
, who had for a time been a vehement backer of Woodrow Wilson, came to see Morgan in the Library, and in the course of their talk quoted the lines, “Who never to himself hath said, ‘This is my own, my native land.'” Morgan sat still for a full half-minute, his eyes far away, and then said slowly to Harvey, “When you see Mr. Wilson, tell him from me that if there should ever come a time when he
thinks any influence or resources that I have can be used for my country, they are wholly at his disposal.” He was thinking, perhaps, of his gold purchase for Grover Cleveland in 1895, and wondering whether ever again his government would call upon him for anything except to answer implied charges of interference with the public interest.