The Great Pierpont Morgan (6 page)

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The new association proved highly profitable. By 1873 Drexel, Morgan & Co. began to break into the field of distributing United States Government bond issues, a field which for some time had been monopolized by Jay Cooke's banking house in Philadelphia. Teaming up with Levi Morton's firm in New York, which was allied with the Rothschilds abroad, Morgan was given a chance to sell an issue of bonds along with Cooke. The sales went badly, the times being inauspicious, but it was something to be placed by the Treasury on a par with the notable financier of the Civil War; and when, a few months later, Cooke plunged into bankruptcy in the panic of 1873, Morgan found himself without an equal rival. For in those days there were far more wealthy investors in England and on the Continent than in the United States, and there was nothing more important to a distributor of government bonds than to have the means of selling them abroad. So a man who not only was already the dominant figure in the Drexel-Morgan firm, with the Drexel capital to aid him, but also had at his disposal the machinery of J. S. Morgan & Co. in London and Drexel, Harjes & Co. in Paris, and in alliance with Levi Morton could put into action also the
international salesmanship of the great Rothschild firm, found himself one of the key figures of American finance in the eyes of the United States Treasury, despite the fact that not yet did one American citizen in a thousand know his name.

On a little sheet of paper which he carried about with him in his wallet, Pierpont Morgan wrote down the “reserves” contributed by each partner to the business of Drexel, Morgan & Co. in the years 1871, 1873, 1874, and 1875—that is to say, the part of each member's share of the annual profits which he did not take out as personal income but put back into the business to add to its financial backlog. Usually each member took out half of his share and put back half; perhaps in 1871, since the firm was newly formed, he put back a larger proportion than half. At any rate, here are Pierpont Morgan's contributions to reserves in those years: for 1871—$727,649.21; for 1873—$202,253.03; for 1874—$324,-572.60; for 1875—$200,820.58. If Pierpont in those three latter years kept as personal income (not subject to any income tax) an amount equal to what he was contributing to reserves, clearly he was making out very handsomely indeed—especially as they were dismal years for business in general.

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He had his offices, now, in a sumptuous and strategically located building just erected by the Drexels at the corner of Broad and Wall streets—a six-story white marble building with a corner entrance and, high above it on the roof, a sort of hexagonal cupola. The splendor of these new quarters offered majestic evidence of his rise in the world; and they were to serve him throughout the rest of his active business life, for it was not until within two or three years of his death that the Drexel Building was removed to make way for the present much lower and solider building at 23 Wall Street.

Uptown, he and Fanny and the children occupied a brownstone house at 6 East Fortieth Street, just a few steps from Fifth Avenue, across which rose the embankment of the Croton Reservoir (on the site of the present Public Library). It was a unit in one of those rows of high-stooped brownstone houses which gave the residential districts of New York their prevailing air of somber monotony; but it was a
very proper house by the standards of the Rutherford B. Hayes period, with a plethora of Victorian furniture. In its elongated, high-ceilinged, heavily curtained drawing room there were amply upholstered chairs, a sofa with a fringe hanging down in front, and sundry small tables of maximum inutility and instability; there were fine rugs superimposed upon a flowered carpet; every horizontal surface—mantels, tables, shelves—carried its freight of ornaments and knick-knacks; and if Pierpont had not yet become a notable collector of art, at least there was hardly a foot of wall space not covered with pictures elaborately framed in gold, hanging one above the other.

And up in the Highlands of the Hudson—at Highland Falls, just south of West Point—the Morgans now had a country place, Cragston, which Pierpont had purchased by cable when he was abroad in 1871. It was one of the most comfortable estates in what was then a fashionable summer district. Some two miles south of the village of Highland Falls the entrance driveway of Cragston turned in from the main road that ran along the bluff high above the west shore of the Hudson; turned downhill toward the river, swung through woods, skirted a green meadow through which ran a little brook, and then twisted up the slope of a knoll just above the river bank. Here stood the house, a very ample, broad-eaved, gabled structure, a hundred feet long or thereabouts, three stories high, built of white clapboard; its front windows looked southward across a fine lawn toward the hills opposite Bear Mountain. (In 1948 the house had become a terrible blackened wreck; for after Morgan's death the place had been sold, had gone through various vicissitudes, and finally had been visited by fire. Three great brick chimneys still stood and the walls were partly intact, but the roof had mostly fallen in, charred wainscoting hung at crazy angles, and the stairs and floors were gone. Outside, the long grass of the one-time lawn—half overgrown now—was matted and unkempt. Even so, one's mind's eye could reconstruct the Cragston of old: a very commodious though unpretentious country house, surrounded by rolling acres of field and grove, with the river glittering below it; a place that would commend itself to a man who enjoyed exercising a substantial hospitality and appreciated the English county
tradition.) Here the growing Morgan family now spent a good part of the year.

Still Pierpont's health troubled him. He had frequent colds and headaches, and to his humiliation the recurring inflammation of the skin of his face began to settle in his nose; this was the beginning of the unending affliction of
acne rosacea
which was destined to disfigure him increasingly as time went on. But there were compensations. He was a rich man now, and life was beginning to expand. The Morgans went on frequent trips abroad, and now when they were in England they would find themselves either in Junius Morgan's fine city house at Prince's Gate, facing Hyde Park, or at his agreeable country estate, Dover House, at Roehampton in the western outskirts of London. In 1877 they spent almost a year abroad; in Egypt they chartered a steamer to go up the Nile and had their pictures taken in front of the ruins of Karnak in a group of eighteen—family, friends, doctor, maid, dragoman, waiter, and consular agent—Pierpont standing very straight and solid looking, with pith helmet, knickerbocker suit, wing collar, and a long walking stick.

When they were at Cragston, Pierpont liked to entertain guests a dozen at a time, sending them up the river to Highland Falls on the punctual steamer,
Mary Powell
, while he, who was usually too rushed for such a leisurely jaunt, would go up the Hudson by train and be met on the eastern shore by his tidy steam launch, the
Louisa
, which would ferry him across the river. At Cragston he would go for long walks with his mastiff Hero, when his recurring headaches were not too troublesome; sometimes he would go riding, or driving in the surrey; or he would take his guests to inspect the cattle that he was beginning to breed. On Sunday mornings he piled everybody into a big wagon like an omnibus, climbed up on the high front seat in his frock coat and straw hat, and drove them all to church, where he handed over the reins to the coachman; and of course hymn singing was obligatory every Sunday evening that he was there. He loved parties and expeditions, and ran them to the last detail; when you were with Pierpont Morgan, you found yourself doing just about what he had planned for you to do. On the evening of the Fourth of July, when he put on a majestic show of fireworks, the guests and neighbors would sit quietly on the
porch and gasp with satisfaction at the flares of brilliance against the night sky which arched above the black shapes of the hills across the river—but it was Pierpont who managed the whole exhibit.

He was beginning to think of breeding collies in addition to cattle, and wondering whether he might not acquire, in addition to the pair of smart horses which drew Fanny's carriage, a pair of really fast trotters. And might not the launch
Louisa
soon be superseded by a real steam yacht? The depression which followed the financial and industrial follies of the post-Civil War years was slow to depart, and it was a hungry time for a great number of Americans; but he was a coming man with an ample income, and it would be fun to use it amply.

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Still, however, he was essentially his father's son. Still his success was due primarily to his foreign connections. In a day when American railroads and American industry depended largely upon Europeans to provide them with capital, he was—in financial terms—a sort of colonial administrator: a representative in America of the financial might of Britain. But now this very fact was about to bring a new turn in his career.

In 1879 William H. Vanderbilt—son and heir of the terrific old Commodore—came to Pierpont for aid. The Vanderbilts, father and son, had brought together a number of small railroads to form the impressive New York Central system, which reached from New York all the way to Chicago, and of its shares the younger Vanderbilt now owned no less than eighty-seven per cent. He had begun to realize that this virtual one-man ownership, lucrative though it might be, had its embarrassing aspect. Vanderbilt was unpopular with the general public, and knew it. As he told a reporter later, “A public sentiment has been growing up opposed to the control of such a great property by a single man or a single family. It says we rule by might. We certainly have control of this property by right. But no matter, this public feeling exists.” Vanderbilt's unpopularity was very convenient for rival financiers who wanted to put over deals at his expense; to the public these men could represent themselves as St.
Georges battling a dragon. And it was handy too for legislators looking for things which could be taxed without arousing public outcry; they could slap a tax on the New York Central properties and argue that the money would come right out of the bottomless pockets of multimillionaire Vanderbilt, the almost sole owner.

A stolid man devoid of sensibility, William H. Vanderbilt had no gift for wooing the public. Indeed it was he who, three years later, when a reporter asked him whether a certain unprofitable train should not be run for the sake of the public whether it earned its way or not, replied irritably, with perfect logic but disastrous choice of language, “The public be damned! I am working for my stockholders. If the public want the train, why don't they support it?” Now, in 1879, he wanted to unload the onus of sole ownership.

The uneasy Vanderbilt went to consult Morgan because of Morgan's English connections. He told Morgan that he wanted to sell a considerable part of his interest in the road. But he wanted the sale to be conducted very privately, lest the word go round that Vanderbilt was unloading and that therefore either he or the Central must be in trouble. Could Morgan manage a private and unpublicized sale to English investors?

Morgan leaped at the chance; and working quietly, disposed of 150,000 shares of New York Central stock directly to overseas purchasers, at $120 per share, with an option to dispose of another 100,000 shares within the following year at the same price. (The total number of shares disposed of represented less than half of Vanderbilt's interest in the road, but reduced that interest so sharply that after the sale he was able to remark to a reporter, “It can no longer be said that I am the owner of New York Central.”)

Not until the operation was completed, in November 1879, did any announcement have to be made, so secretly had the negotiations been conducted. When the news broke, the financial-community was amazed. In the words of the
Commercial & Financial Chronicle
for November 29, 1879, “There has been one topic in Wall Street this week—the great New York Central & Hudson stock sale.”

It brought about a striking change in the status of Pierpont Morgan. Now, as holder of proxies for the English
purchasers, he sat on the New York Central's board as a wielder of great potential influence. For years past, on his visits to London, he had had to confront perplexed or angry Englishmen who had wanted to know why so many things went wrong with their investments in American securities. Why was America having such hard times? Why was the United States currency so unsound? Why were so many American railroads scandalously mismanaged? Why were men like Gould permitted to plunder right and left the properties in which honest Englishmen had invested? These had not been easy questions to answer, especially when put with that wounded superciliousness with which some gentlemen of London were wont to reprove a spokesman for the barbaric land across the seas. Morgan had tried to assure them that there was a prosperous future for American business, that the hard times in the United States were merely temporary, that the national currency would soon be put on a solid basis by the resumption of specie payments, and that the vendettas between railroad chieftains, and particularly their senseless habit of building parallel railroad lines in order to bring one another to terms, were passing phenomena of the youth of a great country. Now he had become the representative of these skeptical Englishmen on the New York Central board. They had been persuaded by his assurances. To himself he must admit that lawless feuds like the one in which he had found himself embroiled at Albany, ten years earlier, continued to sully the record of American railroading. Now, however, he was in a position to do something about this economic anarchy. Now he could be something more than a banker and international dealer in securities; he could help to produce some sort of order in the railroad business.

At the age of forty-two Pierpont Morgan moved out from his father's shadow and took his place, solidly on his own feet, as a regularizing and disciplining force in American industry.