the world of private banking
the world of private banking
the world of private banking
You also want an ePaper? Increase the reach of your titles
YUMPU automatically turns print PDFs into web optimized ePapers that Google loves.
THE ANGLO-AmERIcAN HOUSES IN tHE NINEtEENtH CENtURy 121<br />
in terms <strong>of</strong> <strong>the</strong> risks and associated rewards, <strong>of</strong> investments in <strong>the</strong> securities <strong>of</strong><br />
American railroads, he was <strong>the</strong> most consistent advocate <strong>of</strong> capital transfers from<br />
England to <strong>the</strong> United States in <strong>the</strong> 1840s and 1850s.<br />
But Peabody’s run <strong>of</strong> good fortune ran out in <strong>the</strong> late 1850s. He was caught<br />
short in <strong>the</strong> Panic <strong>of</strong> 1857, and his firm had to appeal to <strong>the</strong> Bank <strong>of</strong> England<br />
for a timely rescue package. That crisis dampened his enthusiasm and led to his<br />
withdrawal from <strong>the</strong> partnership in <strong>the</strong> mid 1860s. Although outside <strong>the</strong> scope <strong>of</strong><br />
our primary interests at this conference, it should, none<strong>the</strong>less, be noted in passing<br />
that, during his lifetime, Peabody was renowned in both England and <strong>the</strong> United<br />
States as an extremely generous philanthropist. He established a standard for<br />
charitable giving that o<strong>the</strong>r wealthy Americans like Andrew Carnegie and William<br />
Rockefeller emulated half a century later.<br />
In 1854, Junius Morgan, ano<strong>the</strong>r native <strong>of</strong> Massachusetts who had prospered<br />
as a merchant in New York City and Hartford, Connecticut, moved to London<br />
and joined Peabody as a junior partner. Morgan soon assumed responsibility for<br />
<strong>the</strong> day-to-day management <strong>of</strong> <strong>the</strong> busy <strong>of</strong>fice. When Peabody retired in 1864,<br />
Morgan became <strong>the</strong> principal owner. Meanwhile, in 1857, <strong>the</strong> elder Morgan had<br />
sent his son John Pierpont, <strong>the</strong>n aged 20, back to <strong>the</strong> United States to serve as<br />
a clerk in Duncan, Sherman & Co., a firm located in New York City that had a<br />
longstanding agency agreement with Peabody. 13 A few years later, <strong>the</strong> younger<br />
Morgan started his own firm. Fa<strong>the</strong>r and son were not, as it happens, members<br />
<strong>of</strong> a jointly-owned enterprise, but <strong>the</strong>y continued to cooperate on a long series <strong>of</strong><br />
business transactions over many years. In 1871, J.P. Morgan joined forces with <strong>the</strong><br />
Drexel family <strong>of</strong> Philadelphia to create Drexel, Morgan & Co. The Drexels had<br />
surplus capital; Morgan provided <strong>the</strong> managerial skills and <strong>the</strong> vital link to foreign<br />
investors through his fa<strong>the</strong>r and o<strong>the</strong>r cooperative European agents.<br />
The Morgans were well positioned to take advantage <strong>of</strong> <strong>the</strong> enormous expansion<br />
in <strong>the</strong> US securities market in <strong>the</strong> post-Civil War era. They helped raise millions<br />
for <strong>the</strong> federal government and <strong>the</strong> booming railroads. Their deep involvement<br />
in this second market – <strong>the</strong> <strong>private</strong> corporate market – is one characteristic that<br />
distinguishes <strong>the</strong> Morgans from <strong>the</strong> Rothschilds. The American railroads and<br />
eventually many industrial enterprises grew to become extremely big businesses,<br />
and <strong>the</strong>ir capital requirements were nearly insatiable. The Morgans had <strong>the</strong><br />
transatlantic ties to seek out European investors eager to supplement <strong>the</strong> limited<br />
financial resources <strong>of</strong> American savers.<br />
Within <strong>the</strong> borders <strong>of</strong> <strong>the</strong> United States alone, <strong>the</strong> Morgans probably exercised<br />
more raw financial power than <strong>the</strong> Rothschilds ever exercised in any single nation<br />
state in Europe. Because <strong>of</strong> <strong>the</strong> peculiarities <strong>of</strong> American political and financial<br />
history in <strong>the</strong> first half <strong>of</strong> <strong>the</strong> nineteenth century, <strong>the</strong> United States was left with no<br />
13<br />
The literature on John Pierpont Morgan is vast. The best sources are V. Carosso,<br />
The Morgans: Private International Bankers, 1854–1913 (Cambridge, Mass., 1987) and R.<br />
Chernow, The House <strong>of</strong> Morgan: an American Banking Dynasty and <strong>the</strong> Rise <strong>of</strong> Modern<br />
Finance (New York, 1990).