The Great Pierpont Morgan (25 page)

His gestures were abrupt. In the office he would snatch up a piece of paper as if pouncing on it with a claw; he would glance at it and either lay it down or crumple it up so suddenly that one who did not know him would have thought him angry. Yet to people who did not catch him off guard, or who did not seem to him to be trying to take advantage of him, he was truly courteous; it is characteristic that while almost everybody who has written about him has applied to him the word “brusque,” people who worked with him daily emphasize the graciousness of his manners and say that everybody in the Morgan organization worshiped him.

He was given to sudden acts of good will. There was, for example, the time when a reception was being held at the Metropolitan Museum, with ladies and gentlemen in evening dress filing up in a long line to meet the president of the museum. In the line was a young woman in plain attire with a baby in her arms; and some of those about Morgan, overtaken by the contemptible sense of the proprieties which afflicts small-minded people, wondered whether she should not be asked to step out of line. Not so Morgan; he greeted her affably and then, as she went on, whispered to Robert W. De Forest, who stood beside him: “Quick—get that baby's name, so that I can make it a life fellow of the museum.”

“That will cost you a thousand dollars,” said De Forest.

“So much the better,” said Morgan. Nor did he forget. The woman proved to be the wife of a new museum attendant; at the next meeting of the museum board, her baby was formally elected a life fellow, and Morgan footed the bill.

There are many other stories of friendly acts: of his lending a million dollars to a wealthy friend who had had great losses during the grim days of 1893, and, when the friend asked what collateral he would want, saying, “You may need your
collateral with the banks—I am lending you the money on your business record and on what I know your character to be”; of his getting word of the business failure of a man who had been a companion of his earliest years in New York, and at once writing to him, “Why didn't you let me know?”; of his taking great pains to concoct a job for an elderly lady which would give her a sense that she was earning her way.

In his life of Henry P. Davison, Thomas W. Lamont tells of an incident that happened on the very first day when he reported for work as a partner—January 2, 1911. The Carnegie Trust Company in New York was in trouble, and by a process of contagion, runs had started on two other small banks in poor neighborhoods in uptown Manhattan. Representatives of these two banks came to see Lamont and another Morgan partner, William H. Porter, to see if the House of Morgan could be persuaded to stand behind the banks in their emergency. An examination of the last balance sheets of the banks indicated that this would be risky, and the young partners were inclined to say no; but Porter called up Morgan, who was at his Library, to get his advice. Whereupon—according to Lamont—Morgan, learning that the two banks had some thirty thousand depositors and that they were mostly poor Eastsiders, said, somewhat to Porter's amazement: “Well, some way
must
be found, to help those poor people. We mustn't let them lose all they have in the world. Suppose that, at worst, we were to guarantee the payment of these deposits in full. You say the total is only six million dollars? That means that the firm can't lose more than six million dollars, doesn't it?” The firm thereupon backed the two banks, and—partly because of the fact that its great prestige restored confidence in them—escaped with a limited loss which according to Lamont amounted in the end to about $190,000.

That anecdote has always roused in me considerable skepticism. I have found it hard to believe that in the banking world anybody would think or talk in those terms; and I still think that in reporting the dialogue Lamont sentimentalized the language used. Yet whatever words Morgan actually chose, the incident did happen. And it was characteristic. No competition was involved. Nobody could be trying to get the
better of Morgan. And under such circumstances he could astonish people with his openhandedness.

8

He could also surprise them by his readiness to pay heavy tribute to the principle of fiduciary responsibility. There was one year in which the House of Morgan ran at a loss; the reason was that in 1905 Morgan had purchased, as agent for the Erie Railroad without commission, a controlling interest in a small railroad line known as the Cincinnati, Hamilton & Dayton, and then had discovered—after he had turned over the stock to the Erie—that the figures which had been shown him, and on the basis of which he had made the purchase, did not show the true financial condition of the line, which was actually in very bad straits. As one partner later said, “It was incredible to him that anyone would show him false figures.” Thereupon he at once bought back the line from the Erie at the same price that the Erie had paid for it—about twelve million dollars—and put it into receivership, at what proved to be a virtually total loss to J. P. Morgan & Co.—a loss of so many million dollars that it translated a year of lucrative business into a year of deficit. Morgan would not let it be said that his firm did not stand back of whatever responsibilities it had undertaken on behalf of other institutions, even if its only fault was that it had allowed itself to be deceived.

He had a way of saying to partners entering his firm that he wanted its business done “up here” (raising his hand high in air) “not down there” (dropping his hand near the floor). It was as if an old king were instructing his young princes in the moral responsibilities attending the royal function. For kingly Morgan was—in the range of his possessions, in the splendor of his journeyings, in the bigness of his plans, in the weight of his presence. And kingly he was too in his limitations. His royal manner of living and of traveling insulated him from the great mass of men and women; and though he might by an impulsive act of kindness make connection with them, most of the time they were to him creatures apart. Legislation designed to give them a greater share in the fruits of the national economy seemed to him unsound—an affront
to the thrift and sagacity upon which national prosperity must be founded. He believed it was the lot of such improvident or inexpert or unlucky people to go their way unaided except by private charity—charity to which he would be one of the first to contribute.

When Morgan thought of industry, he thought of it not in terms of the thousands of workers whose sweat made its production possible, nor even in terms of the engineering advances which contributed to its efficiency, so much as of the investors whose money supported it, and of the officers and directors whose duty it was to protect and enrich the investors. For these officers and directors his standards were both stern and aristocratic: they had better be honest, and it was preferable that they be gentlemen. He would have liked to see the United States run by gentlemen. That these gentlemen, too, might be insulated from their fellow men, and might like to run things in whatever way proved most comfortable for themselves, and might have swollen ideas of their proper share of the fruits of industry, did not apparently occur to him; if you had suggested such an idea to him he would probably have replied promptly that certainly the politicians liked to run things to
their
own advantage. In short, though he was unswervingly loyal to the United States and believed in its government, his ideas were kingly, like his conduct of life; the idea of democracy evaded him.

In a society sufficiently equalitarian to hate to see great luxury existing side by side with great poverty, such a way of life as Morgan's is out of place. Even in his own lifetime it was out of place. But after his special kingly fashion, he played his part in the grand manner.

XI

THE LIMITS OF TRIUMPH

1

Triumph invites challenge; and Pierpont Morgan's pre-eminence, heightened by his success in launching the biggest corporation the world had ever known, was to be put to a series of tests. The first challenge arrived promptly—and inopportunely.

It was on March 3, 1901, that the newspapers carried the first announcement of the formation of the Steel Corporation. On April 4, convinced that the corporation was off to a promising start, Morgan had sailed for Europe, going first to London, then to Paris, and then to Aix-les-Bains in the hills of southeastern France. It was on Saturday, May 4, that his holiday ease was broken by the arrival from New York of a cablegram of disquieting import.

The message told of a swift surprise attack upon him in a sector where he had felt secure. Morgan the peacemaker, who had come to believe that the only way to maintain peace among the American railroads was to see that they were held in “safe hands,” had almost lost control of the Northern Pacific Railroad in a raid without warning by a man whom he considered unsafe.

The raider was Edward H. Harriman, a shrewd little man with sharp bespectacled eyes and a drooping mustache, a stockbroker turned railroad manager. Harriman had crossed swords with Morgan in earlier years; back in 1887, as I have already recounted in Chapter VI, he had taken control of the Dubuque & Sioux City Railroad in Iowa by a trick that Morgan regarded as crafty. Some years later, when Jacob Schiff of the New York banking firm of Kuhn, Loeb & Company had been trying to reorganize the Union Pacific Railroad, and had found that somebody—he didn't know who—was trying to upset his reorganization plan, Schiff had suspected Morgan
and had called him up. Morgan had replied that he himself was not interested in the Union Pacific, but that he knew who was throwing the monkey wrenches into Schiff's plans. “It's that little fellow Harriman,” said Morgan. “You want to look out for him.” Schiff had thereupon conferred with Harriman, and had made with him a treaty of peace by which Harriman would have a part in the new Union Pacific management. So well did Harriman play his cards and so able did he prove himself at practical railroad management that presently he was not only running the whole Union Pacific Railroad, with Schiff as his firm backer and ally, but was brilliantly transforming a run-down property into an efficient, up-to-date, and highly profitable one. The little man with the spectacles was a genius, equally adept at rebuilding a railroad across the Rocky Mountains and at conducting a foray on the New York Stock Exchange. He was also a man of Napoleonic ambition, ready to challenge Morgan's pervasive influence. His moment for attack came in the spring of 1901.

To understand what happened you must realize that Harriman's Union Pacific reached no farther east than Omaha, and had no access to Chicago. And also that the rival Northern Pacific, which was controlled by Morgan and James J. Hill, reached no farther east than St. Paul and Duluth, and likewise had no access to Chicago. The managements of both the Union Pacific and the Northern Pacific cast longing eyes upon a third road which not only had access to Chicago—and to St. Louis as well—but also was the most important road in the Iowa region; this was the Chicago, Burlington & Quincy, known for short sometimes as the C. B. & Q. and sometimes as the Burlington. Both the Union Pacific and the Northern Pacific wanted to buy control of the. Burlington for the sake of the useful connections it would give them. And in March 1901 the Morgan-Hill group, representing the Northern Pacific, got it—purchased a large majority of the Burlington stock and thus achieved what looked like a secure grasp. Apparently Harriman had lost his chance for the Burlington.

But Harriman would not accept defeat. What he thereupon did, with the aid of ample credit from Schiff and other bankers, was astonishing. He tried to buy, not the Burlington, but
the
Northern Pacific itself
, his rivals' own line, right out of their grip.

Morgan and Hill and their friends owned considerably less than half of the stock of the Northern Pacific. In ordinary cases such a minority holding was sufficient to guarantee control of a large corporation. But in this case it gave Harriman his opportunity. Acting through Schiff, he began to buy Northern Pacific stock heavily right on the open market, through the Stock Exchange. The moment was auspicious for such a maneuver, for the launching of the Steel Corporation had set off a furious stockmarket boom, speculative pools were active, and stocks were gyrating; Harriman rightly reasoned that if his heavy purchases caused the price of Northern Pacific to rise, people would simply assume that speculators were responsible. Harriman bought and bought and bought. The price of Northern Pacific climbed. Yet for many days nobody seemed to realize what was happening.

At the end of April old James J. Hill, who was out in Seattle, decided that the rise in Northern Pacific shares must be investigated, and set out for New York by special train. On Friday, May 3, he arrived in New York, went to see Schiff, and learned to his amazement that Harriman and Schiff had already succeeded—or almost succeeded—in buying control of the road. He at once reported the situation to Morgan's partners, who were thunderstruck.

In Morgan's absence, Robert Bacon was in charge at 23 Wall Street. (Coster, the great authority on railroad finances, had died a few months earlier.) Bacon and his colleagues had been caught sound asleep at the switch. They were aware that the Harriman group were buying, and thought this was being done with a view to gaining representation on the Northern Pacific board of directors, but they had no idea of the scale of the operation. It seemed incredible, but it was true.

As a matter of fact, Harriman had not yet quite succeeded in getting a sure majority. In the Northern Pacific, both the common and the preferred stock had the right to vote. Of a total of 750,000 shares of preferred, Harriman had got hold of 420,000—well over half. But of the 800,000 shares of common, he had thus far acquired only a little over 370,000—not quite half. Of the two classes of stock combined, that gave
him a little over fifty per cent—790,000 out of 1,550,000. But in a pinch the common stock might be more valuable, since the preferred was subject to retirement; and of the common he still lacked a majority, though he was mighty close to achieving it.