The Great Pierpont Morgan (28 page)

In the latter part of Mitchell's statement there may have been a certain amount of wishful thinking combined with diplomatic suasion. The issue was one with which Morgan seldom had to deal, and certainly many of the corporations in which he had influence—such as the Steel Corporation—were hostile to the last degree. But at any rate he had shown himself, in this bitter coal controversy, far more conciliatory than the stiff-necked operators.

8

From this time on there was a sort of armed truce between President Roosevelt and Morgan. To the Republican campaign fund of 1904, when Roosevelt was up for election, Morgan and his partners contributed $100,000, and toward the New York State campaign fund in that same year an additional, last-minute $50,000 (given at Harriman's special request); but although, as the campaign approached, Roosevelt had prudently become more discreet in his references to business, it may be guessed that Morgan made these contributions less out of enthusiasm for the President than out of a sense that a Republican Administration was best for business even if led by a man of unfortunate tendencies. And years later, testifying before the Clapp Committee investigating campaign expenditures, Roosevelt asserted that he had not known of the Morgan contributions at the time, and had been surprised to hear of them later. “I knew that Mr. Morgan had felt very much aggrieved over the bringing of the Northern Securities suit, and I understood, though I cannot say that I knew it—I understood that he had expressed himself in very strong terms over the action which I took during the anthracite coal strike; and I had not known—I had supposed he was hostile to me—I had not known that he had contributed to my campaign fund.”

During 1905 and 1906 Roosevelt, safely secured in the
White House by a landslide victory at the polls, resumed his forays against business excesses. He fought energetically, and successfully, for the passage of the Hepburn Bill, which would widen the powers of the Interstate Commerce Commission over the railroads and give it authority to fix maximum rates; and in the course of this battle he said a great many severe things about big business men. And when, on January 27, 1907, Roosevelt and his arch-enemy Senator Foraker both spoke at a Gridiron Club dinner in Washington, and Roosevelt in the course of a bitter attack upon Foraker again denounced the forces of wealth, some reporters thought that as he did so he looked directly at Morgan, who was present at the dinner, sitting next to H. H. Rogers of Standard Oil. But Morgan's friends later insisted that Roosevelt could have had no such intention; that if he was looking at anybody, he was looking at Rogers; and that anyhow the President was too nearsighted to distinguish faces at such a distance. Only six weeks later the banker visited the White House to urge Roosevelt to receive a committee of railroad presidents, and the meeting of the two men was apparently amiable. And the following autumn, at the climax of the Panic of 1907, Roosevelt (as we shall see) accepted the implicit advice of Morgan's emissaries in approving the purchase of the Tennessee Coal & Iron Company by the Steel Corporation. There was never an open break between the two men. Nevertheless the relations between them were not easy.

For although Roosevelt was held in leash by the necessity of holding together the conservative Republican party with its superconservative financial backers, the truth was that when he spoke—or more rarely acted—to keep the growth of the power of big business within bounds, he represented a very large body of increasingly influential American opinion. And the further truth was that Morgan was building up a sphere of influence, financial and industrial, so very much more formidable than that of any other individual or group in the business world, that no one could speak of keeping the power of big business within bounds without thinking of him. The two men had become symbols—Roosevelt, of the authority of the government; Morgan, of the authority of private business. Roosevelt had dared to challenge Morgan's
authority, and henceforth Morgan must never forget that what had happened once could happen again.

9

Another set of difficulties confronted Morgan in these years of his mature power—economic difficulties. He faced the limitations of the methods with which he had chosen to reorganize the railroads and amalgamate industrial corporations.

When Morgan reorganized a railroad, as we have seen, he had to make his plan palatable to the creditors and stockholders of the road while reducing its fixed debt. This meant issuing stock lavishly. When he pulled together a group of corporations to make a supercorporation like United States Steel, again he had to make the arrangement palatable to the owners of the constituent companies. And this too meant issuing stock lavishly. The result was that, in terms of stock, both the reorganized railroads and the newly organized supercorporations were overcapitalized; such quantities of shares in them had been issued that only if these concerns achieved high success could they pay adequate dividends. And sometimes they could not achieve it.

In the case of the Steel Corporation, the results were good—but only after some periods of anxiety. During the “rich men's panic” of 1903—a time when there were so many “undigested securities” on the market that all values fell on the exchanges—dividends on the common stock had to be interrupted and their price fell all the way to 8¾. How Morgan felt when this happened he hinted long afterward, at the Pujo inquiry of 1912, when Samuel Untermyer asked him whether, when he launched the Steel Corporation in 1901 and made J. P. Morgan & Co. its depository, he had thought this would be a good stroke of business. Morgan answered that at that time he had not known whether it was going to be good business or not.

“It proved pretty good?” asked Untermyer.

“It did,” replied Morgan; “very good indeed, sir.”

“You did not think you were taking many chances on its being good business when you took it up, then?” pursued Untermyer.

“No,” said Morgan, “but I began to have doubts when the stock went to eight dollars a share afterwards.”

“Your doubt did not interfere with your buying heavily?”

“No; I bought all I could.…”

“You were getting the advantage of other people's doubts at that time?”

“Nobody ever sold it at my suggestion, sir.”

“No; I did not mean to assume that,” said Untermyer, realizing that he had touched Morgan's sense of fiduciary responsibility.

“I know,” said Morgan.

“My question does not imply that,” said Untermyer in further reassurance.

“I know,” said Morgan again.

“It only implies your confidence in the company at that time.”

“I always had it, sir.”

Slowly the Steel Corporation pulled out of the doldrums; for not only had the amalgamation permitted some economies in production, but also the steel industry was still young enough to be capable of great growth. When the International Harvester Company of New Jersey was incorporated under the Morgan aegis in 1902—pulling together the McCormick Harvesting Machine Co., the Deering Co., and three other rival concerns, and thus assembling into one enterprise some eighty per cent of the harvester trade—it was a full success, acquiring as it did a partial monopoly of a young and lusty industry. But the International Mercantile Marine, that combination of shipping companies, British and American, for which Morgan had cherished such high hopes when he brought it together in that same year 1902, proved a grievous disappointment. There was such a dismally small public demand for its securities that in 1906, after the life of the stock-distributing syndicate had been twice extended, the Morgan firm had to report to the syndicate participants that “the prices at which the Company's securities ruled in the market have been so low that we have not felt justified in attempting to dispose of those held for the account of the Syndicate”; the participants had to pay up their subscriptions in full and receive in return I.M.M. bonds and stock of
limited value. And the company itself, beset by tribulations such as the
Titanic
tragedy, did not prosper.

10

But the most dismaying of Morgan's ventures, in its results, was his attempt to expand the New York, New Haven & Hartford Railroad into a great integrated New England system. How sadly this plan of his was destined to miscarry he did not live to know; only after his death did the drama reach its climax.

Morgan had a sentiment for the New Haven road, as an old Hartford boy whose grandfather had invested in one of the little lines out of which it was pieced together. When in 1892 he became a member of its board of directors, he began to try to build it into a real system; and when President McLeod of the Reading invaded its territory in 1893 he fought back lethally, as we have seen. A decade later, in 1903, President Charles S. Mellen of the Northern Pacific was induced to take over the management of the New Haven, and with Morgan's active and continuing encouragement Mellen embarked upon a still more ambitious—and costly—plan of expansion.

Some steamship lines which plied on Long Island Sound, carrying passengers and freight from New York to Fall River and other points, appeared to menace the New Haven Shore Line by offering low rates which undercut those of the railroad. Very well, those steamship lines must be bought by the New Haven or put out of business. Another menace was the rapid growth of interurban trolley lines, which were then the very latest thing in transportation; people—and goods too—could travel imposing distances by transferring from one to another of these careening, cross-country electric car lines. Very well, the New Haven must buy up all the competing trolley lines. There were other railroads in New England which, if acquired by the New Haven, might extend it into a great all-New England system. Very well, the New Haven must buy control of the Boston & Maine and bring other lines into alliance. Some New York men had acquired franchises for two little lines which it was thought might carry commuters from the New York suburbs as far as the Bronx
terminal of the New York subway, thus competing with the New Haven's suburban service. Very well, these projects must be bought up and the New Haven must build such a suburban line of its own.

For every one of these ventures a persuasive argument could be advanced. But together they cost so much money as to strain the resources of the New Haven very severely. Too many men had decided that when Morgan set his heart on a project his men would pay through the nose for something he wanted; too many men got the bright idea that in the complicated purchase deals which were put through they could grab some boodle for their own pockets. As Morgan confidently moved issue after issue of stocks and bonds to pay for the expansion, the total capitalization of the railroad climbed from 93 millions in the middle of 1903 all the way to 417 millions in the middle of 1913. Such aggressive purchasing in New England by the “foreigners” of the New Haven management provoked legal and political opposition, led by the Boston lawyer Louis D. Brandeis, and this both delayed the fruition of the plans and weakened public confidence in the New Haven. Brandeis contended that it was trying to bite off more than it could chew, and he was right. Disaster followed in due course. In 1913, shortly after Morgan's death, affairs had come to such a pass that Mellen was forced out of the presidency of the road by Morgan's own firm; presently the New Haven passed its dividend; it never recovered its former standing. But that was not all. In two investigations the Interstate Commerce Commission disclosed gross scandals in the management of the line.

The investigations—like many others conducted by government commissions or congressional committees to this day—were one-sided; some men who were eager to testify were not permitted to take the stand. But certain facts that were brought out seemed too damaging to be explained away. It was disclosed, for example, that one director, in whose name the New Haven had for a time carried its Boston & Maine holdings of stock, had profited by $2,700,000 without spending a dollar of his own money; that newspapermen and a Harvard professor had been paid for respectful treatment of the New Haven in their dispatches and lectures; and that over a million dollars of the money expended on the new
suburban line—the New York, Westchester & Boston—had apparently been paid out in political graft and could not be accounted for, some of the books which might have thrown light on these payments having been foresightedly burned. The history of the New Haven expansion made a very shabby story indeed.

Mellen regarded Morgan as his boss. In 1911 he told Clarence W. Barron of the Boston
News Bureau
, “I wear the Morgan collar, but I am proud of it.” In 1912 he was quoted in a magazine article as saying, “If Mr. Morgan were to order me tomorrow to China or Siberia in his interests, I would pack up and go.”

And in the hue and cry that took place after Morgan's death, Mellen claimed, not too creditably, that in this whole campaign of expansion he had been following Morgan's lead and acceding to his wishes. When asked in the investigation whether he had been “Morgan's man,” he answered, “I have been called by the newspapers his office boy.” When asked how important the rest of the directors were as compared with Morgan, he said that there were other strong men on the New Haven board, but that he “could not recall anything where Mr. Morgan was determined, emphatic, insistent … where he did not have his way.” To Barron he said in October 1913, “I took orders from J. P. Morgan, Sr. I did as I was told, and when Morgan, Sr., who always sat at my left hand in the meetings of the board, desired the approval of his directors, he got it, and don't you think he didn't! When he wanted their negative vote, he got that just as quick!” In another part of his examination by the I.C.C. in 1914 Mellen, who prided himself on his picturesque language, declared that the record of the New Haven, without Morgan, would have been “as tame and uneventful, as devoid of interest and incident, as would the record of a herd of cows deprived of the association of a bull.”