John Pierpont Morgan: Economic Savior and Banking Revolutionist

The late 1800s. America is on the brink of becoming the world's most advanced industrial superpower. 1869. This year marks the completion of the Transcontinental Railroad, a transportation system fully revolutionizing America's cross-coast access and transforming industrial business. The year is 1873. Railroad overproduction and the lack of use collapses the American economy, closing the New York Stock Exchange for 10 devastating days as American businesses suffered bankruptcy, sending citizens into a nationwide panic. 1893. The United States has plunged into a depression as a result of the run on the treasury. Bankers fear the Populist Party's civil rights movement. Later, panic again struck the nation for six weeks. The year, 1907. These key events not only aided in the shaping of modern America, but were influenced by one great national leader. John Pierpont Morgan. Economic savior and banking revolutionist. During the mid-19th to early 20th centuries, John Pierpont Morgan became an economic pioneer by introducing new banking strategies and methods, in addition to financially aiding the government during times of crisis. His impact on the economy is still seen today throughout the lasting existence of his company, J.P. Morgan Chase, which currently contains more assets than any other U.S. bank. During the height of the Gilded following the Industrial Revolution, commerce and industry was at an all-time high. Emerging businesses lured unknowledgeable investors, trying to capitalize on the innumerable opportunities made possible by the booming railroad. As a result, chaos emerged. J.P. Morgan soon realized that the unstructured economy desperately needed a form of stability. During this time, companies were stuck in a cycle of boom and bust. This was detrimental to the economy, and Morgan tried to avoid it by forming mergers, hoping to limit rivalry and competition between companies. He also saw the need to regulate the monetary value throughout the nation, and realized America needed a centralized bank. Morgan tried to fill that place himself. However, just one man, he struggled to do so. He tried to have a supply of cash for the banks to fall back on. He would pool money with other bankers during recessions, so the banks could stay open, even if most clients were looking to withdraw their accounts. Morgan showed the people and the government that a strong gold backing was needed. These actions led to the creation of the Federal Reserve. Now, we have a centralized bank that regulates monetary production throughout the nation. This limits inflation and recessions, and has a strong gold backing. He helped create a financial structure that we're basically still living with. I mean, he didn't set up the Fed, but his actions did show people how much we needed an agency that would be able to exert and have influence to monitor the economy. Morgan is accredited with merging Edison Electric and Thomas Houston Company to create General Electric, a multinational conglomerate operating through power and water, oil and gas, energy management, aviation, healthcare, transportation, and has been ranked as one of America's most profitable firms. He also created U.S. Steel by merging Carnegie Steel with Federal Steel. Morgan was also very concerned with foreign investors, arguing that the economy would be gravely threatened if anything but a gold standard was used. When J. Cook & Company, a bank that had invested in the Northern Pacific Railroad, went bankrupt, the economy began to steadily decline. People stopped investing in rail companies due to their economic instability. Soon, the New York Stock Exchange was forced to close for 10 days. As banks demanded compensation for their loans, people sold their stocks at extremely low prices. As the chain of events continued to unfold, the companies lost capital and were forced to fire a multitude of employees. Thus, the panic of 1873 began. President Ulysses S. Grant was unable to help the banks with their financial strains, as there was no national bank. Morgan then heroically stepped in, loaning money to banking firms and persuading British investors to put money into the United States. A reoccurring conflict seen throughout history is that of the hostility between the affluent and the undistinguished man. This was reinvented in the new age of monopolies and railroads, as the investors and bankers were at odds with the farmers and the average man. They now fought over gold and silver standards. Foreign investors saw the dollar as weak, and began pulling their funds out of the United States, exchanging paper for gold. The run on the treasury began. Now the fear of few induced fear in all. Investors, both international and domestic, pulled their funds. At the beginning of 1895, the treasury, at a comfortable $100 million, collapsed rapidly, and only after a month, held little over $45 million. Morgan saw this as a threat to his firm, and headed down to Washington, requesting an audience with President Grover Cleveland. Due to his infamous reputation as the robber king of robber barons, the president was reluctant to accept help from the face of Wall Street, fearing it would look as if the government depended on big business, and the president would be perceived as a puppet. However, Cleveland knew Morgan was their only hope to saving the treasury, and evading economic failure. Morgan knew the treasury was down to an inconceivable $9 million. He saved the treasury by giving the government $60 million in exchange for the private selling of gold bonds to a syndicate. It has been said that what goes up must come down. This is exactly what happened in 1907, when America experienced a downfall. It was triggered by a failed speculation, followed by the bankruptcy of two brokerage firms. Although the panic lasted only six weeks, the effects were infinite. The municipal government of New York teetered on the edge of bankruptcy, as money became scarce and the Dow Jones fell 37%. Brokerages were forced to close their doors, along with the failures of 17 trust companies and 25 banks. As the economy continued its downward spiral of debt, Morgan devised a plan to aid the government. He, along with a select few of his peers, raised funds to relieve the nation's credit debt and help failing companies. He was able to accomplish this act in just a few weeks by using his personal influence. J.P. Morgan and Anthony Drexel, a banker of Philadelphia, established a partnership creating Drexel Morgan & Company. This corporation soon stood out as the nation's leading private bank in both domestic and foreign affairs. His banking firm quickly became associated with the railroad industry. As Morgan began to specialize in aiding financially troubled railroads, his method to solving their economic problems was decreasing their expenses, restructuring their debts, and placing their stock in trusts so that they could be managed by experts. This process was deemed Morganization, and it is why they believe today that Morgan himself played an integral role in developing much of the railroads in the United States. One of Morgan's major victories was the rescue of the ANS, which is commonly referred to as the Railroad War. It occurred when Jay Gold and James Fiske set out to gain control of the company. Taking swift action, Morgan, a natural leader, stepped in to loan money as well as lease the organization to another railroad company, keeping it safe and out of the hands of Gold and Fiske. As a result, he was given the position of vice president of the company. An 1873 New York Times article claimed that the rescue made Mr. Morgan universally regarded as an able financer. Today, J.P. Morgan Chase & Company is a leading global financial services firm and one of the largest banking institutions in the United States. With history dating back over 200 years, it has grown to become internationally acknowledged, with banks in over 60 countries. J.P. Morgan Chase & Company employs 26,000 qualified professionals and possesses over $2.4 trillion in assets. Although the United States has passed the era of speculation and monopolies, the impact of Morgan's work and ideals is still seen today. Morgan acted as the unofficial federal reserve and showed the importance of having a form of economic structure by serving as a backbone to the economy when the government was unable to resolve fiscal issues. Just months after his death, a national bank was formed, providing an organized economy that has lasted for over a century. The government no longer has to rely on one powerful man, rather a centralized bank known as the Federal Reserve. During the mid-19th to early 20th centuries, John Pierpont Morgan became an economic pioneer by introducing new banking strategies and methods, in addition to financially aiding the government during times of crisis. His impact on the economy is still seen today throughout the lasting existence of his company, J.P. Morgan Chase. John Pierpont Morgan, Economic Savior and Banking Revolutionist