The Gilded Age is a staple of middle and high school social studies classes in the United States. Students learn about the great robber barons who commanded American industry. The rapid transformation of the economy from a rural agrarian landscape to factories, foundries, and railroads signaled the shift in American life. The captains of industry who instigated this transformation amassed financial and political fortunes that could give Bill Gates, Jeff Bezos, and other billionaires a run for their equity. We hear of men like John D. Rockefeller, Andrew Carnegie, and Cornelius Vanderbilt when thinking of that Gilded Age, but one personality evolved with the economy and was a critical component of the U.S. economic engine. From humble roots in England, the House of Morgan grew into a global financial institution that bankrolled industries and foreign governments. One name was synonymous with banking in the Gilded Age; he was John Pierpont Morgan.
Ron Chernow’s book ‘The House of Morgan‘ explores far beyond the biography of J.P. Morgan and his legacy. Rather, in true Chernow fashion, the book runs a fine comb over the rise, dominance, splintering, and restructuring of the most influential corporate financial company in the 19th and 20th centuries. Examining the role of the House of Morgan in American finance is akin to researching the role of Jonas Salk and the development of the polio vaccine; it’s impossible to discuss it without them. What Chernow illustrates is how pivotal the House of Morgan became in the banking world and how that power transferred between generation. Coupled with the family history, Chernow examines the company, J.P Morgan & Co., and how throughout various times in history was at the center of economic growth, government crisis intervention, controversy and scandal, and the diversification of high finance.
Chernow’s narrative follows a round-robin pattern focusing on the multiple offices and personalities connected to the House of Morgan over period of 120 years. Imbedded in this structure is the rise and fall of what he called the ‘Gentleman Banker’s Code’. Throughout the 19th century, banks were private institutions and we do mean PRIVATE. The House of Morgan never advertised its services, publicly listed client names, or dealt with the rabble of early Wall Street. A bank like that wouldn’t likely survive in today’s fast finance world powered by vast digital databases. But the House of Morgan was a product of its time; the bank served institutions and business and not the public at large. Chernow’s in-depth research reveals how the Morgan enterprise amassed its fortune through acquisition, controlling interest, and issuing bonds and loans to corporations and governments. Each branch in North America, England, and France conducted business in slightly different fashions, but the all followed the Banker’s Code.
Obviously J.P. Morgan dominates the early narrative–his face is on the book cover. The Morgan name began with his father Junius Spencer Morgan who started J.S Morgan & Co. with George Peabody, his business partner. Through intensive training, J.P. rises as a powerful figure who takes the company beyond what his father could have dreamt. Renamed J.P. Morgan & Co. in 1895, the bank quickly became the focal point for corporate finance. Captains of industry came to respect Morgan’s financial acumen because it produced results. His method of consolidating fractured businesses and controlling interest was trademarked as ‘Morganization’. It became a synonym for the House of Morgan’s novel future practice of mergers and acquisitions.
The story of Morgan isn’t only limited to Wall Street. Morgan branches in England such as Morgan Grenfell illustrate the dichotomy between the American and European methods of banking. While the Bank of England and Morgan Grenfell formed an integral component of the state economy, J.P. Morgan & Co. maintained an independent streak, occasionally interceding on behalf of the U.S. federal government. The relationship is not always a happy one as Chernow recites. The Progressive period aimed to reduce poverty and controlled the unrestrained capitalism of the robber barons. Morgan was a prominent target which became a trend that followed the company for years. They appeared in court cases, Congressional hearings, and were the subject of numerous federal investigations ranging from illegal price fixing to underwriting loans to belligerent foreign nations. The Glass-Steagall Act forced the bank to re-evaluate its business model now that they were prevented from intermingling commercial and investment banking. The result was the spin-off of multiple Morgan entities that later evolved into the modern offices we know today: Morgan Guaranty, JP Morgan Chase, and Morgan Stanley.
The House of Morgan didn’t survive by the Morgans alone. An army of junior and senior partners came and went through the 23 Wall Street office bringing with them their education and prejudices. Figures like Tom Lamont, Russell Leffingwell, and George Whitney, were instrumental in expanding Morgan’s reach into new territory according to Chernow. The stresses of such a job however were evident in Chernow’s writing: they all died young from heart attacks, strokes, overexertion, and alcoholism. Racial and ethnic prejudices were not absent either as an unspoken code prevented Jewish, black, Hispanic, and other non-white hires, unless they served lunch in the private dining halls. Chernow wastes no paper in examining the darker side of the dominant banking business.
The immensity of Chernow’s work speaks as a testament to the changes that impacted the House of Morgan. Chernow’s analysis illustrates the remarkable shift in policy and public connection that discarded the old Gentleman Banker’s Code and was replaced with younger proteges working harder and faster. Gone was the smoked filled, leather armchair partners room where deals were finished over brandy and cigars. In the 1970s and 1980s when information technology altered Wall Street, the various Morgan entities adapted to the times, but its historical provenance never faded. ‘The House of Morgan‘ is a bold history that highlights the best and worst of American finance, but doesn’t deny or revise its legacy. Chernow’s trademark intensive research doesn’t ignore scandal or the trivial and is truly an enthralling read for those who know the name of Morgan.