the world of private banking

THE ANGLO-AmERIcAN HOUSES IN tHE NINEtEENtH CENtURy 121
in terms of the risks and associated rewards, of investments in the securities of
American railroads, he was the most consistent advocate of capital transfers from
England to the United States in the 1840s and 1850s.
But Peabody’s run of good fortune ran out in the late 1850s. He was caught
short in the Panic of 1857, and his firm had to appeal to the Bank of England
for a timely rescue package. That crisis dampened his enthusiasm and led to his
withdrawal from the partnership in the mid 1860s. Although outside the scope of
our primary interests at this conference, it should, nonetheless, be noted in passing
that, during his lifetime, Peabody was renowned in both England and the United
States as an extremely generous philanthropist. He established a standard for
charitable giving that other wealthy Americans like Andrew Carnegie and William
Rockefeller emulated half a century later.
In 1854, Junius Morgan, another native of Massachusetts who had prospered
as a merchant in New York City and Hartford, Connecticut, moved to London
and joined Peabody as a junior partner. Morgan soon assumed responsibility for
the day-to-day management of the busy office. When Peabody retired in 1864,
Morgan became the principal owner. Meanwhile, in 1857, the elder Morgan had
sent his son John Pierpont, then aged 20, back to the United States to serve as
a clerk in Duncan, Sherman & Co., a firm located in New York City that had a
longstanding agency agreement with Peabody. 13 A few years later, the younger
Morgan started his own firm. Father and son were not, as it happens, members
of a jointly-owned enterprise, but they continued to cooperate on a long series of
business transactions over many years. In 1871, J.P. Morgan joined forces with the
Drexel family of Philadelphia to create Drexel, Morgan & Co. The Drexels had
surplus capital; Morgan provided the managerial skills and the vital link to foreign
investors through his father and other cooperative European agents.
The Morgans were well positioned to take advantage of the enormous expansion
in the US securities market in the post-Civil War era. They helped raise millions
for the federal government and the booming railroads. Their deep involvement
in this second market – the private corporate market – is one characteristic that
distinguishes the Morgans from the Rothschilds. The American railroads and
eventually many industrial enterprises grew to become extremely big businesses,
and their capital requirements were nearly insatiable. The Morgans had the
transatlantic ties to seek out European investors eager to supplement the limited
financial resources of American savers.
Within the borders of the United States alone, the Morgans probably exercised
more raw financial power than the Rothschilds ever exercised in any single nation
state in Europe. Because of the peculiarities of American political and financial
history in the first half of the nineteenth century, the United States was left with no
13
The literature on John Pierpont Morgan is vast. The best sources are V. Carosso,
The Morgans: Private International Bankers, 1854–1913 (Cambridge, Mass., 1987) and R.
Chernow, The House of Morgan: an American Banking Dynasty and the Rise of Modern
Finance (New York, 1990).