The House of Morgan

1. From Baltimore to London: The Genesis of a Banking Dynasty

It is necessarily part of the business of a banker to profess a conventional respectability which is more than human.

George Peabody's Humble Beginnings. The House of Morgan's origins trace back to George Peabody, a Baltimore merchant who established a merchant house in London in 1838. Peabody's early life was marked by poverty, which instilled in him a deep sense of frugality and a relentless work ethic. Despite his lack of formal education, Peabody's shrewd business acumen and unwavering commitment to honoring financial obligations laid the foundation for what would become a global banking empire.

Americanism in London. Peabody strategically flaunted his American identity in London, creating an "American atmosphere" in his firm and promoting American products. This approach helped him tap into the transatlantic money flow and mitigate British prejudice against American businesses. However, beneath this patriotic pride lurked a colonial mentality, a constant need to impress the British, and a desire to refute the notion that no American house in London could sustain its credit.

Junius Spencer Morgan's Inheritance. As Peabody approached retirement, he sought a successor to carry on his business. He found that heir in Junius Spencer Morgan, a Boston merchant with a family and experience in foreign trade. Morgan's partnership with Peabody marked a turning point, transplanting the American flag firmly into the heart of London's financial district and setting the stage for the rise of the House of Morgan.

2. Junius Morgan's Vision: Crafting a Legacy of Financial Power

You are altogether too rapid in disposing of your meals. You can have no health if you go on in this way.

Junius's Guiding Principles. Junius Morgan, who became Peabody's partner and eventual successor, instilled in his son, J. Pierpont Morgan, a set of conservative business principles that would shape the House of Morgan for generations. He emphasized caution, skepticism, and a disdain for price competition, advocating for a "slow & sure" approach to business. These principles, born from the panic of 1857, would become hallmarks of the Morgan philosophy.

Family and Business Intertwined. Junius saw the banking business as hereditary, grooming his son, Pierpont, to inherit the firm and carry on the family legacy. He provided Pierpont with a gentlemanly education, sending him to boarding school in Switzerland and university in Germany, to prepare him for global business. This emphasis on family and tradition would become a defining characteristic of the House of Morgan.

Building a Financial Empire. Junius aspired to emulate the Rothschilds and Barings, establishing the House of Morgan as a power in the City of London. His big chance came with the 1870 French loan, a bold move that catapulted him into the upper ranks of government financing. This loan, complete with carrier pigeons and secret dealings, demonstrated Junius's gambler's flair and solidified the Morgan name as a force in international finance.

3. J. Pierpont Morgan: The Baronial Age and the Rise of American Finance

Never under any circumstances do an action which could be called in question if known to the world.

Pierpont's Early Career. J. Pierpont Morgan, Jr., inherited his father's empire and transplanted it to New York, becoming a dominant force in American finance. He was a complex figure, both a homo economicus and a romantic, a moralist and a despot. His early career was marked by both reckless dealings and unexpected tenderness, as seen in the Hall Carbine Affair and his marriage to the tubercular Amelia Sturges.

The Baronial Age. Pierpont came of age during the Baronial Age, a time of rapid industrial expansion and chaotic competition. He saw himself as a force for order, settling disputes among companies and organizing trusts to tame competition. This led to increasing banker control over industry, with Pierpont becoming a "lord of creation" who shaped the American economy.

Moralism and Power. Pierpont's actions were driven by a mix of greed and idealism. He believed he knew how the economy should be ordered and used his power to enforce his vision. This moralistic zeal, combined with his control over vast amounts of capital, made him a controversial figure, both admired and feared.

4. The Gentleman Banker's Code: Ethics and Etiquette in High Finance

The banker no longer enjoys a monopoly on large pools of money.

A Set of Unwritten Rules. The House of Morgan operated according to a set of customs known as the Gentleman Banker's Code. This code emphasized discretion, exclusivity, and a disdain for open competition. Banks did not solicit business, open branches, or raid other firms' clients. Instead, they waited for clients to arrive with proper introductions, creating a private club atmosphere.

Government Links and International Power. The House of Morgan maintained close ties with governments, particularly in the United States, England, and France. Its actions were often endowed with broad significance in terms of foreign policy, and its partners functioned as financial ambassadors. This government connection gave the House of Morgan a unique character and raised questions about its national loyalties.

The End of an Era. The Gentleman Banker's Code, while promoting stability and trust, also bred popular suspicion and limited competition. As world finance matured and power became dispersed, the code would eventually break down, giving way to a more ruthless and competitive style of finance.

5. The Diplomatic Age: Morgans as Adjuncts of Government

Long, ambitions, but highly readable . . . Chernow highlights the degree to which the Morgan bank symbolized an era of Anglo-American hegemony and the growing shift of financial power from London to New York.

Private Bankers as Government Agents. The Diplomatic Age, spanning the two world wars, saw private bankers serving as adjuncts of government, performing covert missions and operating as co-equals of central banks. Morgan bankers became power brokers and unofficial representatives of governments at global conferences.

Financial Ambassadors. As confidants of kings, presidents, and popes, they operated under the close supervision of Washington or Whitehall in foreign dealings. To the outside world, they often seemed the visible face of government policy. At home, they remained "traditional banker" to companies that, if still loyal, decreasingly needed the patronage of a strong banker.

The End of an Era. Maintaining exclusive relations with clients, the Morgan partners enjoyed the luxury of a world that seems enviably graceful and unhurried by modern standards.

6. The Casino Age: Global Markets and the Erosion of Banker Control

This book’s thesis is that there will never be another bank as powerful, mysterious, or opulent as the old House of Morgan.

Loss of Control. In the postwar Casino Age, bankers have lost control over clients in the fierce, anonymous competition of global markets. Multinational corporations now tower over bankers and rival them in terms of capital and financial expertise. Institutional investors, such as insurance companies, mutual funds, and pension funds, present new countervailing sources of power.

New Niches. With companies and governments able to raise money in many currencies and countries, the power balance has tilted dramatically away from the bankers. This sounds paradoxical in an age dominated by daily news stories of flashy billion-dollar deals. Yet as the Morgan story shows, this new style of financial aggression is really a symptom of the bankers' weakness.

Jettisoning Traditions. As their old clients have been liberated, gentleman bankers have had to hustle for business and search for new niches. They have found these niches in a ruthless world of corporate takeovers that has rescued them but endangered the economy. In this bruising new age of finance, bankers have jettisoned traditions that had ruled Anglo-American finance since Victorian times.

7. The 1907 Panic: A Glimpse of Morgan's Power and Its Limits

This produced a generation of headstrong bankers who rolled up fabled fortunes, aroused terror in the populace, and finally prompted a political campaign to curb their hypertrophied influence.

A One-Man Central Bank. The 1907 panic, triggered by speculation and a lack of regulation, saw Pierpont Morgan stepping in to act as a one-man central bank. He rallied other bankers, directed funds, and restored confidence, averting a complete financial meltdown. This demonstrated the immense power wielded by Morgan, but also highlighted the dangers of relying on a single individual to stabilize the economy.

The Limits of Private Power. Despite his efforts, the 1907 panic exposed the limitations of Pierpont's power. He could only do so much to stem the tide of speculation and restore confidence. The panic ultimately led to calls for a more formal and regulated financial system, one that would not rely on the whims of a single banker.

The Genesis of the Federal Reserve. The 1907 panic, and the subsequent realization that private power was insufficient to manage the economy, ultimately led to the creation of the Federal Reserve System in 1913. This marked a shift away from the Baronial Age of private bankers and toward a new era of government oversight and regulation.

8. The Great War: A Crucible for the House of Morgan

When the streets of Paris are running with blood, I buy.

A Bonanza for Some, a Handicap for Others. The Civil War was the one major military conflict in which the Morgans were handicapped by political circumstances: it was a bonanza for German-Jewish bankers on Wall Street, who raised loans from the numerous Union sympathizers in Germany. In future, the Morgans’ political impulses would mesh perfectly with profitable opportunities.

The French Loan. Junius Morgan's big chance for a state financing came in 1870, when the Prussians crushed French troops at Sedan in September, seized the emperor, Napoleon III, and laid siege to Paris. After a republic was proclaimed, French officials retreated to Tours and set up a provisional government. Otto von Bismarck, the Prussian chancellor, tried to isolate the French diplomatically. When they approached London for financing, he conducted a propaganda campaign, blustering that a victorious Germany would make France repudiate its debt.

A Rare Opportunity. A rare opportunity opened up for an enterprising banker. This was one of the few times in the century that financially self-sufficient France needed to raise money abroad. Barings had floated Prussian loans and didn’t wish to upset delicate relations by dealing with France; the Rothschilds dismissed the French cause as hopeless. The City had lately been rocked by defaults in Mexico and Venezuela, and nobody was in a particularly venturesome mood for foreign loans. Enter Junius, who decided to float a syndicated issue for France of £10 million, or $50 million. The French hoped that by using an American banker, they might also be better positioned to purchase American arms.

9. The New Deal and Glass-Steagall: Dismantling the Empire

This book’s thesis is that there will never be another bank as powerful, mysterious, or opulent as the old House of Morgan.

The End of an Era. The Glass-Steagall Act of 1933, a cornerstone of Franklin D. Roosevelt's New Deal, shattered the old House of Morgan. This legislation erected a high wall between commercial banking (making loans and accepting deposits) and investment banking (issuing stocks and bonds).

A Difficult Choice. In 1935, J. P. Morgan and Company chose to remain a commercial bank and spun off Morgan Stanley, an investment house. Seeded with J. P. Morgan capital and personnel, Morgan Stanley for decades clearly exhibited common ancestry with its Morgan brother down the block.

A New Landscape. Glass-Steagall didn't bar J. P. Morgan from holding a minority stake in an overseas securities house, however. Until 1981, it kept a one-third interest in Morgan Grenfell. As our story will show, the three Morgan houses functioned as a de facto House of Morgan long after the New Deal ended and in the early 1970s even contemplated reunion. Today for the first time, the three houses lack formal links and are engaged in fierce rivalry. As deregulation in London and New York has dismantled old regulatory barriers, the three increasingly clash as they sell competing services.

10. World War II and Beyond: A New World Order for Finance

This book’s thesis is that there will never be another bank as powerful, mysterious, or opulent as the old House of Morgan.

A New World Order. The Second World War ushered in a new world order, with the United States emerging as the dominant economic and military power. The House of Morgan, while still influential, no longer held the same sway it had in previous eras.

The Rise of Government Power. The war also saw a significant increase in government power, with Washington taking a more active role in managing the economy and regulating financial markets. This further diminished the influence of private bankers, who now had to operate under closer government supervision.

A Changing Landscape. The postwar years saw the rise of new financial institutions and the globalization of markets. The House of Morgan, while adapting to these changes, could never fully recapture its former glory.

11. The Enduring Legacy: The Morgan Name in the Modern Era

Contrary to the usual law of perspective, the Morgans seem to grow larger as they recede in time.

A Lasting Impact. Despite the changes and challenges of the postwar era, the Morgan name continues to resonate in the world of finance. The three Morgan houses—J. P. Morgan and Company, Morgan Stanley, and Morgan Grenfell—remain prominent players in their respective fields, each carrying on the legacy of innovation, integrity, and financial power that began with George Peabody in London.

A Mirror to History. The story of the three Morgan banks is nothing less than the history of Anglo-American finance itself. For 150 years, they have stood at the center of every panic, boom, and crash on Wall Street or in the City. They have weathered wars and depressions, scandals and hearings, bomb blasts and attempted assassinations. No other financial dynasty in modern times has so steadily maintained its preeminence.

A Vanishing World. Its chronicle holds up a mirror in which we can study the changes in the style, ethics, and etiquette of high finance. So our story looks back at a banking world fast vanishing from sight—one of vast estates, art collections, and oceangoing yachts, of bankers who hobnobbed with heads of state and fancied themselves ersatz royalty. Contrary to the usual law of perspective, the Morgans seem to grow larger as they recede in time.

Last updated: February 5, 2025