The Great Pierpont Morgan (22 page)

To this remark there is a postscript to be added. A year or two later the two men met on shipboard. Said Carnegie, “I made one mistake, Pierpont, when I sold out to you.”

“What was that?” asked Morgan.

“I should have asked you a hundred million more than I did.”

“Well,” said Morgan, “you would have got it if you had.”

9

Matters now proceeded at a rapid pace. The heads of one big company after another were called into conference and the terms worked out for its acquisition.

There were, of course, difficulties. John W. Gates proved to be one of them, though he had been present at the four-man conference at which the basic plan had been worked out. All the stockholders of the various constituent companies were going to be paid at a high rate in stock of the new company; but Gates, representing American Steel & Wire, demanded what seemed an altogether impossible sum. According to Gary's subsequent account of the negotiation, Gates held out through hour after hour of fruitless bargaining in a room at 23 Wall Street. Morgan was not present at this session, but was sitting outside, at his desk in the front office; and as the afternoon wore on, he sent word in to Gary that he wanted to go home. Gary asked him please not to, and he remained. Finally Gary slipped out of the conference, went out to Morgan, and suggested that presently he should come into the conference room and issue an ultimatum. Whereupon in due course Morgan entered the room and said sternly, “Gentlemen, I am going to leave this building in ten minutes. If by that time you have not accepted our offer, the matter will be closed. We will build our own plant.” And he left the room.

Said Gates, uncertainly, to a colleague, “Well, William, I don't know whether the old man means that or not.” Gary assured him that Morgan did mean it. “Then I guess we will have to give up,” concluded Gates.

Morgan was sent for and was told that his proposition had been accepted. “Now let's go home,” said he, and—according to Gary's description—went uptown “as happily as a boy going home from a football game.”

The Rockefellers were difficult too. It had been decided that the new supercorporation should acquire also the Lake Superior Consolidated Iron Mines, which controlled the largest deposits of ore in the great Mesabi Range; this concern was owned by John D. Rockefeller. Carnegie had leased these properties from Rockefeller—but with Carnegie out of the picture, would not ownership of them be safer? Gary felt
sure of this. Morgan at first was doubtful. “We have got all we can attend to,” said he. Gary insisted, outlining his reasons in full, and Morgan was impressed.

“How are we going to get them?” he asked finally.

“You are to talk to Mr. Rockefeller,” said Gary.

“I would not think of it,” said Morgan.

“Why?”

“I don't like him.”

“Mr. Morgan,” argued Gary, “when a business proposition of so great importance to the Steel Corporation is involved, would you let a personal prejudice interfere with your success?”

“I don't know,” said Morgan.

But the next morning—according to Gary's account—he met his right-hand man excitedly, throwing up his arms in exultation as he cried, “I have done it!”

“Done what?”

“I have seen Rockefeller.”

“How did he treat you?”

“All right.”

“Did you get the ore lands?”

“No. I just told him that we ought to have them, and asked him if he would not make a proposition.”

Rockefeller had proved very coy. When Morgan had asked to see him, he had replied that he was quite out of business but would be glad to have a purely personal chat with Morgan at 4 West Fifty-fourth Street, his home. When Morgan got there and began to talk business, Rockefeller told him that the man to see on business matters was his son. But not long afterward the son—young John D. Rockefeller, Jr., then only twenty-seven years old—showed up at 23 Wall Street accompanied by Henry H. Rogers, one of the head men of Standard Oil.

When they came in, Morgan was deep in talk with his partner Charles Steele and seemed entirely oblivious of their arrival. When the conversation was completed and Steele left the room, Rogers introduced young Rockefeller.

Said Morgan in a stern voice, “Well—what's your price?”

Rockefeller mustered courage to say firmly, “Mr. Morgan, I think there must be some mistake. I did not come here to sell. I understood you wished to buy.”

For a moment Morgan glared. Then, as usual when his brusqueness was boldly met, he thawed, and the negotiations began in a more friendly vein.

There was disagreement over the price to be paid for the mines; Frick had to be called in as intermediary; and the price which was finally set seemed to Gary beyond all reason. A few days earlier it had been Gary who had insisted on the purchase of the mines; now, when the issue had become merely one of price and not of dealing with a man he didn't like, it was Morgan who was insistent. “Judge Gary,” said he, “in a business proposition as great as this would you let a matter of five million dollars stand in the way of success?” And he accepted the Rockefeller price. Clearly the amount of capital stock which the new concern would have to issue to take care of all these payments would be enormous. But he would rather drive ahead than haggle.

And so there appeared in the newspapers of March 3, 1901—less than three months after the Simmons-Smith dinner—a large advertisement announcing that under the laws of New Jersey there had been organized the United States Steel Corporation, which would acquire not only the outstanding stocks and bonds of the Carnegie Company but also the preferred and common stocks of Federal Steel, National Steel, National Tube, American Steel & Wire, American Tin Plate, American Steel Hoop, and American Sheet Steel. To these, a little later, were added the Lake Superior Consolidated Iron Mines and the American Bridge Company. This new concern would embrace under a single management and control roughly three-fifths of the steel business of the entire country; and its total capitalization would reach—at par value—the altogether astonishing, altogether unprecedented figure of $1,402,846,817—nearly a billion and a half dollars!

10

At the news there arose a great outcry of wonder and dismay—with the dismay at first predominating. Some newspaper editors expressed the fear that such concentration of power in Wall Street would lead the public to welcome socialism as the lesser of two evils. The Philadelphia
Evening Telegraph
, for instance, said that if a “grasping and unrelenting monopoly” should be the outcome of the current trend,
it might provoke “one of the greatest social and political upheavals that has been witnessed in recent history.” President Hadley of Yale said in a speech in Boston that unless trusts were regulated by a really effective public sentiment, there would be “an emperor in Washington within twenty-five years.” The London
Chronicle
was especially sharp in its comment. “It is little less than a menace to the commerce of the civilized world,” said the
Chronicle
; “it sets the seal to the triumph of the millionaire.”

William Jennings Bryan's
Commoner
struck a note of unexpected humor as it commented, “‘America is good enough for me,' remarked J. Pierpont Morgan a few days ago. Whenever he doesn't like it, he can give it back to us.” And as usual Finley Peter Dunne's “Mr. Dooley” put into the mouth of an Irish saloon-keeper sentiments which suggested what millions of people were vaguely feeling:

Pierpont Morgan calls in wan iv his office boys, th' prisidint iv a national bank, an' says he, “James,” he says, “take some change out iv th' damper an' r-run out an' buy Europe f'r me,” he says. “I intind to re-organize it an' put it on a paying basis,” he says. “Call up the Czar an' th' Pope an' th' Sultan an' th' Impror Willum, an' tell thim we won't need their savices afther nex' week,” he says. “Give thim a year's salary in advance. An', James,” he says, “ye betther put that r-red headed bookkeeper near th' dure in charge iv th' continent. He doesn't seem to be doin' much,” he says.

Assuredly the new corporation represented a very large gesture of faith. For not only did it issue its own stock on a lavish basis to the owners of the constituent companies in order to induce them to come in, but almost all of these constituent companies had already issued their own stock equally lavishly to the owners of still smaller concerns. According to the Bureau of Corporations, the Steel Corporation's investment in tangible property alone, as indicated by historical analysis, was $676 millions; the value of all property, tangible and intangible, as indicated by market prices of securities of constituent concerns, was $793 millions; and yet the total capitalization amounted to $1,402 millions. Even making
due allowance for the integration, increased efficiency, and increased bargaining power which such an enormous corporation supposedly could command, how on earth could it expect to pay dividends upon such a mass of securities? And, for that matter, would the investing public be able to digest such a great issue of stock? Large numbers of the stockholders of the constituent companies, finding themselves the startled possessors of Steel Corporation stock in amounts beyond their wildest dreams, would hasten to cash in on at least part of the bonanza: could the market absorb their sales?

These latter questions were soon answered. James R. Keene was engaged by the Morgan syndicate to make a market in Steel Corporation stock; and so actively did this skilled operator keep the market churning, and so mightily did the chance to invest in the biggest company on earth appeal to buyers' imaginations, that the preferred stock, starting on the Stock Exchange at a price of 82¾, soon went to 101⅞, while the common stock, starting at 38, rose to 55—amid a burst of speculative enthusiasm which astonished the elders of Wall Street.

A great many of the chief beneficiaries of the mighty prices paid for the stock of the constituent companies were Pittsburgh steel men, and now Pittsburgh witnessed a carnival of spending such as it had never known before. According to Herbert N. Casson, one of the sudden millionaires in Pittsburgh “ordered a special brand of half-dollar cigars made in Cuba, each with his name and coat of arms on the wrapper”; another “had his wife's portrait painted by every obtainable foreign and American artist”; the city became “a Klondike for artists, book agents, curio dealers, and merchants who had expensive gewgaws for sale. A young [Carnegie] partner would say: “See that painting? Cost me $22,000; but I could get $28,000 for it. Have a cigar. Fine brand. Seventy-five cents apiece wholesale.'”

The Morgan syndicate, for that matter, did very well indeed; here, too, Mr. Dill's device for the manufacture of millionaires worked beautifully. The syndicate had been paid for its services in launching the new combination with a big block of stock, amounting to nearly 1,300,000 shares. When this stock had been “distributed”—sold on the Exchange during the speculative excitement—the syndicate's profit, including
the managers' fee, came to $57,515,000, plus some preferred stock and the right to participate in a subsequent U. S. Steel Retirement Syndicate, which increased the total to $60,-000,000 or more. The House of Morgan's share in these profits—its fee for managing the syndicate—came to $11,503,000, again plus stock and participation in the new syndicate; this enabled the firm, at the close of the year 1902, to transfer to profit and loss the sum of exactly $12,000,000. It had been an enormous and highly risky operation, completed with rich success.

11

Morgan himself remained in New York for a month after the great announcement. By that time he felt assured that all was well. The reliable Gary was going to be chairman of the board of the Steel Corporation; Schwab was going to be president; Bacon, head of the finance committee. He felt he could trust them all; Gates he vetoed even for membership in the board of directors. Whatever the future might hold for the new corporation, it was off to a very favorable start. On April 4, well satisfied, he sailed for Europe on the
Teutonic
, accompanied by his sister, Mrs. Burns.

Wherever he went, now, crowds gaped at him. He slipped aboard the
Teutonic
by the second cabin gangway to outwit the reporters and photographers; when he reached Euston Station in London there was another small army of them and another great crowd of the general public. He forced his way through them, hating their curiosity and their interference with his privacy. He could not learn to stomach the staring and crowding and reportorial inquisitiveness that must now be the lot of one of the mightiest personages in the world. It was said that certain English brokers were taking out insurance policies on his life, paying premiums at the rate of £30 on the £1000 for three months to protect their American investments if he should die while overseas. And why not? Was there not much truth in what John Brisben Walker had written in the
Cosmopolitan
(which was then a magazine containing much serious political discussion) for April: that “the world, on the 3rd day of March, 1901, ceased to be ruled by … so-called statesmen,” and that now “the world's real rulers” were “those who control the concentrated portion of the
money supply”? Perhaps; but Pierpont Morgan was tired, and he wanted to settle down quietly in his great house at Prince's Gate and enjoy the beautiful things that the dealers would bring him to see.

And so he did. Within a very few days he had bought Gainsborough's famous portrait of the Duchess of Devonshire.

X

POMP AND CIRCUMSTANCE

1

It is doubtful if any citizen of the United States ever led—or ever will lead, for that matter—a life more regal than that of Pierpont Morgan during the early years of the twentieth century, when he was in his sixties and seventies. Not that he led all comers in wealth; for although he made, on the average, several million dollars a year, nevertheless, if it had been possible to compile each year an accurate rank-list of American incomes in order of size, probably Morgan's would usually have stood well below the top. Nor did he lead in lavishness, for there have been plenty of more extravagant spenders and certainly innumerable flashier ones; Morgan, a publicity hater, never spent for mere show. Nor was he preeminent in the world of fashion, for he went his way with contemptuous indifference to the glitter of social pretension. What set him apart from all others was a combination of large wealth, large spending, social assurance, international social experience, love of grandeur, and restrained taste.