American Financier

0 Comments | Insight on the News, June 28, 1999 | by John Andrews

Was J.P. Morgan the archetypical `robber baron'? Biographer Jean Strouse thinks not in her sympathetic portrait of the American titan.

Let me tell you about the very rich" wrote F. Scott Fitzgerald. "They are different from you and me." In the case of John Pierpont Morgan, eponymous founder of the Wall Street banking house, very different.

Cursed throughout his adult life by a blazingly ugly nose (the result of rhinophyma, an excess of sebaceous tissue) and famously inarticulate, he was not an obvious candidate for fame and fortune. But by the time of his death in Rome in 1913, at the age of 75, he was the object of both adulation and scorn, courted by kings, harried by politicians, loved by a succession of mistresses.

Among the "robber barons" -- men such as Andrew Carnegie and John D. Rockefeller -- who created industrial America in the three decades before World War I, Morgan arguably takes pride of place: He was the financial genius that bailed out not just the nation's railways but also its treasury. In a phrase, he was the "banker of last resort" for a country destined to overtake Britain as the world's preeminent economy, as Morgan's banker father, Junius, presciently asserted.

But does Morgan deserve the "robber" epithet? Did he deliberately, as one historian claims, precipitate the financial panic of 1901 so he could gain control of cheapened assets? In her huge, beautifully crafted biography, Morgan: American Financier (Random House, 796 pp), Jean Strouse thinks not. Where muckrakers saw a man bent on exploiting his fellows through cartels and monopolies, she sees a man of honor, genuinely convinced that corporate collusion is better for society than competition that leads to collective suicide.

Perhaps so, at least in the turbulent years at the turn of the century. The country's competing railroads, for example, needed enormous amounts of capital -- all of which would have been wasted in a rate-cutting race to bankruptcy had Morgan not organized the companies into rate-agreeing trusts (so called because industrial companies combined to place their shares with a controlling committee of trustees).

Was the same true of steel, electricity and shipping industries? The congressional committee that interrogated Morgan in the year before his death found that J.P. Morgan & Co., First National and National City Bank -- a trio dominated by Morgan -- held a total of 341 directorships in 112 companies with aggregate capital resources (in money of the day) of $25 billion, a concentration of private wealth, the writer notes, "that staggered the national imagination" That, of course, is precisely why Morgan had fallen foul of successive antitrust inquiries. A republic founded on the notion of individual liberty could never be comfortable with what amounted to a form of commercial dictatorship, however well-intentioned in theory and benign in practice.

Thus Theodore Roosevelt, though he sympathized with Morgan, nonetheless saw the need to assert government regulation over what he termed the 19th century's "riot of individualistic materialism." The president, describing the rise of individual and corporate wealth, accurately commented: "In no other country in the world was such power held by the men who had gained these fortunes" Somehow, for the protection of "the common man" that power had to be restrained.

And restrained it was. There is now a whole array of government institutions, from the Federal Reserve to the Securities and Exchange Commission and the Department of Transportation, to carry out the market-stabilizing functions that Morgan once had assumed. Even the most benign monopoly will not be tolerated. When Microsoft, constantly innovating and constantly cutting its prices, argues that the consumer has benefited from its dominance, the powerful retort is that less dominance and more competition would have brought greater innovation and still lower prices. Even Bill Gates, richer in real terms than Morgan ever was, must respect today's antitrust code.

But it would be a mistake to see this book simply as a treatise on American industrial history. Morgan's life embraced the dynamism of emerging America and the civilized, sometimes decadent, maturity of Europe -- and Morgan enjoyed both to the full. Perhaps that is why the writer, who surely has uncovered more material than any previous biographer, became an ardent admirer.

In contrast to the puritanical immigrant Carnegie, Morgan was an East Coast aristocrat educated on two continents and fluent in three languages. Each year was divided between the United States and Europe (with Pierpont on one side of the Atlantic and his wife, Fanny, on the other). There were Morgan houses in France and England, cruises down the Nile (Morgan loved Egypt) and grand shopping expeditions for painting and sculpture, with price rarely an object (Morgan went on to accumulate one of the great art collections of his era).

And always there were women: his sickly first wife, Amelia, whom he nursed de-votedly until her death; the unhappy Fanny; and the exotic Belle Da Costa Greene, who advised him on rare books. (Morgan invented a Portuguese ancestor to conceal Belle's Negro blood, but unlike other attractive women in his life, she probably was not his lover.)