John Pierpont Morgan (1837-1913) was a prominent American banker and businessman. He is considered the first modern banker due to his deep influence on American and global banking. He created JP Morgan Bank, which later became the first financial entity in the United States by assets. Beyond the financial sector, Morgan played a decisive role during the 1907 banking panic in the United States.
Morgan was born in Connecticut in 1837, the son of businessman Junlus Spencer Morgan. After completing his university studies, he moved to New York, where he gained experience in finance at George Peabody & Co. In 1871, after a merger with Anthony Drexel, his bank became the main financier of the federal government of the United States. As the head of such a powerful and influential banking entity, many referred to Morgan as “the master of money”.
One of his most decisive interventions took place during the 1893 panic. With the federal government’s gold depleted and the American economy faltering, Morgan pushed for the purchase of 200 million in Treasury bonds. That intervention provided a lifeline for the struggling U.S. government.
In 1907, another financial panic shook the United States. The New York Stock Exchange plummeted 51% and the panic spread beyond the markets and affected much of society. In response to the delicate situation, Morgan chose to meet with prominent business and banking leaders to prevent the collapse of the economy. His injections of money prevented the North American economy from collapsing.
Competition Matters
As a banker and businessman, John Pierpont Morgan was a fervent defender of free competition. In the 19th century, one of the most dynamic sectors in the American economy was railroads. The competition between railway companies was fierce, and everyone was seeking a monopoly.
The millionaire and businessman Carnegie sought to lower prices at all costs. To do this, Carnegie intended to build a new railway in the state of Pennsylvania. By lowering costs, Carnegie could reduce prices and beat the competition.
However, a price war between railroad companies would not be limited to the sector. The effects on the national economy could be devastating. At this point, and aware of the risks, Morgan decided to intervene.
Thanks to his prestige and influence, he managed to gather the most important railway entrepreneurs on his yacht. After a complex meeting, Morgan managed to convince the entrepreneurs that they should avoid a price war. The key to a flourishing and solid economy was to respect the principles of competition.
Criticism and Legacy of John Pierpont Morgan
In 1912, the year before his death, the bank that John Pierpont Morgan presided over was a solid financial pillar of the U.S. government. Proof of this was that two-thirds of the American government’s financing depended on JP Morgan.
But Morgan went beyond the banking business to finance various industries, including steel, mining, and shipping. However, his business practices were often criticized for their monopolistic tendencies and close ties with the government. Despite these criticisms, his legacy as one of the most influential bankers in history remains intact.
