The Great Pierpont Morgan (31 page)

“
What?
” said Morgan, turning sharply.

Thomas repeated his statement. He didn't see how the Exchange could be kept open till the regular closing time of three o'clock.

“‘It must not close one minute before that hour today!'” said Morgan, “emphasizing each word by keeping time with his right hand, the middle finger of it pointing straight at Mr. Thomas.” And at once he sent for the presidents of all the
national banks in the neighborhood. Some of Cortelyou's federal funds were available. From these and other sources he raised within a few minutes the twenty-five million dollars to be lent on the Exchange. And the Exchange did not have to be closed that day.

But how long could such rescue operations continue to be carried out? The next morning, Friday, at six o'clock, Secretary Cortelyou and George W. Perkins were sitting on the edge of Cortelyou's bed at the Hotel Manhattan and turning over the facts of the crisis as these had developed to date; and according to Perkins' subsequent testimony there seemed to be “not a ray of hope in the situation.” But Perkins went on to see Stillman, who had been enlisting the help of John D. Rockefeller, and gathered that Rockefeller's aid could still be counted on. Once more, as the day went on, there was a total shortage of cash on the Stock Exchange; once more Morgan had to call upon the bank presidents to meet with him and take up a subscription. This time the meeting was held, not at 23 Wall Street, but at the office of the Clearing House; it produced, not the fifteen millions that Morgan had considered vitally necessary, but thirteen—which might or might not be enough to save the day.

As things turned out, it
was
enough. Just. As Perkins later testified, “If twenty millions had been needed that day, the Stock Exchange and a hundred or more firms would have gone up, it was just that close. It was touch and go.” But the Exchange stayed open.

“Anyone who saw Mr. Morgan going from the Clearing House back to his office that day will never forget the picture,” writes Satterlee. “With his coat unbuttoned and flying open, a piece of white paper clutched tightly in his right hand, he walked fast down Nassau Street. His flat-topped black derby hat was set firmly down on his head. Between his teeth he held a paper cigar holder in which was one of his long cigars, half smoked. His eyes were fixed straight ahead. He swung his arms as he walked and took no notice of anyone. He did not seem to see the throngs in the street, so intent was his mind on the thing that he was doing.… The thing that made his progress different from that of all the other people on the street was that he did not dodge, or walk in and out, or slacken his pace. He simply barged along, as if he had been the only man
going down Nassau Street hill past the Sub-treasury. He was the embodiment of power and purpose. Not more than two minutes after he disappeared into his office, the cheering on the floor of the Stock Exchange could be heard out in Broad Street.”

8

Night after night there were conferences at the Morgan Library. On Thursday evening the presidents of the banks and of the trust companies gathered in the lofty East Room, planning the disposition of financial forces for the morrow, while Morgan sat in the West Room at his little card table, smoking a cigar and playing solitaire. On Friday the scene was repeated. One of the main subjects of discussion Thursday evening was whether a scheme could be worked out for supplementing the meager supply of cash in the financial markets of the nation. Would Clearing House certificates serve the necessary purpose? Or was there some sounder method? The bankers would work out a scheme, and one of them would cross the marble hallway to the West Room and tell Morgan about it, and he would listen, and say briefly, “No, that won't work,” and continue with his cards until they arrived at a solution which his instinct and experience told him was practicable.

The setting was a strange one for the discussion of a currency problem. The West Room of the Morgan Library was walled with red silk damask, patterned with the arms of the Chigi family of Rome. On the walls hung splendid Florentine masterpieces of the fifteenth and sixteenth centuries. Upon the bookshelves stood a bust by Michelangelo and a rock-crystal bowl said to have been mounted for Queen Christina of Sweden. The mantelpiece and the gilded ceiling had been made for great Italian houses. Morgan sat in a red plush armchair by the fire in this great room, with a Madonna and Child by Pinturicchio looking down over his shoulder, and Fra Filippo Lippi's altarpiece of St. Lawrence and Saints Cosmo and Damian facing him from the opposite wall. There was a card table before him; and here—while elsewhere in the Library the other financiers who had become his lieutenants in the struggle against the panic labored at the making of battle plans—he concentrated on the cards before him,
slowly puffing his black cigar as he carefully placed the five of clubs on the two, and the eight on the five, and the jack on the eight.

A delegate from the East Room would enter the room and present a new scheme. “No,” Morgan would say shortly; and the delegate would retire again, and the game of solitaire would continue under the watchful eyes of the Madonnas and the great ladies of Florence, until at last the conclusion which Morgan could accept had been reached and the immediate objective in his battle gained.
*

9

At last the week came to an end. The Trust Company of America had not failed; the Stock Exchange had not closed; the decision had been made to put into circulation Clearing House certificates; and it looked as if the worst might be over. The newspapers talked, with laudable if synthetic optimism, as if the panic were a thing of the past. Theodore Roosevelt, who had so often berated “malefactors of wealth” that half the men in Wall Street believed him to be personally to blame for what had happened, gave out a confident statement in which he praised “those influential and splendid business men … who have acted with such wisdom and public spirit.” Clergymen of all faiths were asked by a committee of bankers to make reassuring statements to their congregations, following the line that Morgan himself had set in a brief interview earlier in the week: “If people will keep their money in the banks, everything will be all right.” And Morgan himself, whose cold had fortunately moderated, went off to Highland Falls by train Saturday afternoon—sleeping most of the way there—and got a few hours of rest.

Yes, the worst seemed to be over. But the crisis continued. Still there were runs on banks and trust companies; still there had to be night session after night session at the Library. And there were two moments of acute danger.

The first came when officials of the City of New York approached Morgan to report that the city needed thirty million dollars at once, to pay off some short-term obliga
tions that were coming due; that in the disordered state of the money market, there was no way of borrowing thirty million after the normal fashion; and that therefore they must imperatively have an emergency loan lest the city go bankrupt. Morgan took two days to consider the matter, and then acted with his customary boldness. On the afternoon of Tuesday, October 29, the mayor of New York and other city officials came to the Library; and Morgan, sitting at his desk in the West Room, wrote out by hand, in his flowing script, a commitment to buy thirty million dollars' worth of six per cent New York City bonds. How on earth his firm could sell those bonds no one at the moment could be sure. But if conditions improved, of course they could; the rate of interest would be attractive to anyone who had any money to spare. Morgan simply took a chance on the coming of more orderly conditions in the markets of the nation, and thereby not only saved the credit of the City of New York, but advertised his own confidence as no words, however eloquent, could have advertised it.

The second crisis was even more severe. It came to a head on the following Saturday and Sunday—the 2nd and 3rd of November.

10

This second crisis—the final one of the acute stage of the panic—has been the subject of sharper controversy than any other. I shall try to explain it as simply as possible, but it was undeniably complicated.

It came about from the fact that a prominent firm of brokers, called Moore & Schley, was in danger of collapse. This firm had borrowed a lot of money on time loans which would presently fall due, and it was short of cash with which to meet them. Now it happened that the head of this firm, one Grant B. Schley, was also a member of a syndicate of wealthy men who owned, between them, a large majority of the stock of one of the lesser steel companies, known as Tennessee Coal & Iron. They had bought this Tennessee Coal & Iron stock through the firm of Moore & Schley—had bought it with money largely borrowed through Moore & Schley, which accordingly held a great many of the Tennessee Coal & Iron stock certificates as collateral against these loans. Moore &
Schley had in turn been borrowing money from various banks for the financing of its various operations, and had used some of these Tennessee Coal & Iron certificates as collateral to secure the loans to it from the banks. And now some of the banks were getting restive; for Tennessee Coal & Iron stock, whatever its normal value might be, was a very inactive security; the last recorded price for it had been well over 100, but if a block of it were suddenly thrown on the market during panic times, it might wait long for a purchaser, and then fetch no more than 60 or even 50 or less. Meanwhile Moore & Schley desperately needed cash. So somebody—probably Colonel Oliver Payne, who along with Grant B. Schley was a member of the syndicate which owned this Tennessee stock—had a brainstorm.

The Tennessee Coal & Iron Company, he reflected, was a competitor in the steel business—though a small one—of the United States Steel Corporation. There had been some previous talk of the possibility of the Steel Corporation's buying control of Tennessee, though Morgan, when the proposition had been put up to him, had turned it down flatly, saying that the price of the Tennessee shares was too high. But perhaps the Steel Corporation would not be wholly uninterested now. And if the Steel Corporation should buy control of Tennessee Coal & Iron by exchanging its bonds for Tennessee stock, the results would be wonderful. Steel Corporation bonds were practically as good as cash. They could be substituted for the Tennessee stock as collateral in the banks. The credit of Moore & Schley would at once be restored. And, what was more, the rescue of Moore & Schley would have been accomplished without tying up cash for any long period, at a time when every penny of cash was needed elsewhere. Those Steel Corporation bonds would turn the trick.

The crisis in the affairs of Moore & Schley, and the fear that it might set off a chain reaction of brokerage failures, had already been a matter of anxious discussion for twenty-four hours when on Saturday morning, November 2, Morgan was visited at the Library by Lewis Cass Ledyard, who was attorney for Colonel Payne. Ledyard explained this ingenious scheme to Morgan, who at once embraced it and set about putting it into effect.

That it was a peculiar scheme there is no denying. For one thing, none of those Tennessee shares was actually owned by Moore & Schley; and it would seem possible that the plan which Ledyard proposed had been originally devised less for the relief of Moore & Schley than for the comfort of the wealthy men who belonged to the Tennessee Coal & Iron syndicate. This plan, if carried out, would restore Moore & Schley, to be sure; but it would also be a direct boon to those men. And except for Schley himself, they were mostly men who needed no relief at all in this crisis. Also it has been argued subsequently, with some plausibility, that the plan offered the United States Steel Corporation a wonderful chance to swallow up a lively competitor, while wrapping itself in the cloak of public spirit. To be sure, Gary testified before a congressional committee that the Steel Corporation did
not
want Tennessee Coal & Iron, and that he himself consented to the purchase during the panic only because Morgan, with his immense influence, insisted that the deal must go through in order that Moore & Schley might be saved and a new outbreak of disasters in the stock market might be prevented. But how much weight to give to this testimony of Gary's it is not easy to say. One has to balance the word of an interested party against the theories of men who could not know what was going on in Gary's—or Morgan's—mind; and one has to consider, too, the confused atmosphere of those days of uncertainty, the difficulty of getting detailed information quickly, and the difficulty of weighing the exact effect of any action proposed.

My own inclination is to believe that Morgan—when Ledyard told him that Moore & Schley were almost over the edge of the dam, and that if they went, other firms would go with them, and that this Tennessee scheme would save the day—said to himself: “This is our chance. There may be some other way of saving Moore & Schley, but this one will work anyhow. It can be put through quickly—and time is short. Besides—who knows?—it may turn out to be a good stroke of business in the long run for the Steel Corporation. Gary will consent to it if I tell him to. Let's go ahead.”

The people immediately involved in this plan were no strangers to him. Schley was George F. Baker's brother-in-law.
Ledyard was one of his own kind, the sort of man he instinctively trusted; it was Ledyard whom he later chose to draw his will. He felt he didn't have to inquire further.

And once having grasped the idea—whatever its origin—he drove ahead with it relentlessly, summoning Gary and the finance committee of the Steel Corporation and sweeping them into acceptance of the plan.

11

On that evening—Saturday, November 2—the battle against the panic came to its climax in another memorable session at the marble Library. Morgan had conceived a plan. The trust companies were still having trouble; in the West Room he assembled their presidents once more. In the East Room were the heads of the national banks and other assorted financiers. He himself, with Gary and a few other men, had withdrawn for the occasion into the librarian's office, a small room opposite the Library entrance. During the evening his plan developed: he would undertake to see that the Steel Corporation bought Tennessee Coal & Iron (meanwhile obligating his own firm, temporarily, for the twenty-five millions or so that this would require)—thus saving Moore & Schley and removing the immediate pressure of danger from the stock market—
if
the trust companies would raise among themselves a further fund of twenty-five million dollars to meet their own emergencies.