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Northern Securities At the beginning of XX century citizens of America considered Wall Street, instead of the White house responsible for the country, and the leaders of the nation were the financial geniuses such as J. P. Morgan, instead of changing temporary owners of the White House. The ruling class always supported Morgan in dispute. The situation in the country was very difficult. The middle of XIX century was marked by boom of railway construction in America.
Actually the market was supervised by two people: Cornelius Vanderbilt, the person who died in 1877 being the richest American of that time, and his main contender Jay Guild, the director of Erie Railroad Co. In struggle with each other and other competitors Guild and Vanderbilt used all accessible means "from exchange frauds to armed attacks. They say, these two men kept real gangster armies which plundered trains of the competitor, blew up bridges etc. Their influence was so great, that authorities did not try to find justice for them at all.
They looked at the fact that this care was undertaken by John Pierpont Morgan with great pleasure. As a great adventurer John Pierpont Morgan created" The Federal Reserve System of the USA. During three decades John Pierpont Morgan was the face of the American capitalism. The ugly face. His sight induced horror.
His nose caused disgust. "The Deformed unhealthy mass of the huge sizes reminding a bulb - Morgans nose was described so by Edward State, the most famous photographer of that time. The chronic inflammation of skin (rosacea) was passed in Morgans family from generation to generation, but John Pierpont was the unluckiest one. He avoided photographers, and those who nevertheless managed to make his photo, were forced to retouch photos to hide the defect of the face. However millions Americans were afraid not only of the Morgans face, but of the scales of his influence. People were perplexed, how one person managed to supervise the whole nation. Within the last decade of the XIX century and the first ten years of last century Morgan was, probably, the most influential person in America.
In the whole country capitalists, making bargains, searched for his blessings. One Morgans word might have opened the doors to success or slam them forever. Officials openly criticized him, but in informal conditions fawned upon him. Two presidents of the USA were compelled to address to Morgan for the help when the federal government appeared on the verge of bankruptcy. J. P.
Morgan had unprecedented influence due to the couple of circumstances: ingenious ability to operate the money and to the chaos in the countrys financial system which vainly tried to get out of the crisis that had overflowed it before the Civil war. Gold and silver remained then the unique means of payment which had not lost trust. However because of constant deficiency of these metals in the market the national economy could not achieve good pace of work anyway. Private banks issued paper banknotes which were in the turnover exercising the rights of money until the next credibility gap forced people to exchange them for coins. The government of the USA has even made the situation more complicated during the Civil war, having issued the own money named "greenbacks" because of the inks color, and having declared it lawful payment means. However, despite of this chaos, Morgan dared to enter the game.
The gifted child from the provided family, he finished school in Switzerland, and in has entered the university in Germany. There the one of the professors in mathematics, having estimated propensity of the young man to this science, offered Morgan to become his assistant after finishing the study. However Morgan has decided to apply the talent in other sphere and returned to America to become the broker in the commodity exchange. War increased the prices up to the unheard-of level, and Morgan came into a fortune in these conditions. After the war he became the financier and in 1871 was united with Philadelphia firm Drexel, having created Drexel, Morgan & Company with the central office on crossing of the Wall and Broad streets in New York. In 70 and 80 th years of XIX century Morgan devoted himself to the reform of the railway industry which approached to the critical moment of its history.
During many years state authorities and the federal government privatized the ground areas and during the war supplied railways with money in the form of loans and grants ostensibly for acceleration of ways construction, but in many respects for the sake of bribes and "kickbacks." After the war demand for transportations has fallen, and the advanced network of railways appeared to be unclaimed. In 1873, in height of the financial panic, in the share market there was a collapse and many railways became bankrupts. Morgan apprehended the crisis as an opportunity to make money. Having conducted on his yacht and in the New York estate a series of negotiations with owners of railways, he could reconcile the companies which were at enmity and held price wars.
In the result the most powerful railway monopolies which obviously did not promote growth of Morgans popularity in the society were formed: the overwhelming majority of Americans were only the users of railways, not their shareholders. People hated Morgan as never before. Authorities reacted by the acceptance of the anti exclusive laws directed first of all against agreements which John Pierpont concluded with railway magnates. But even politics had to recognize, that sometimes it was impossible to do without Morgan services. In 1893 the financial markets of America were planet-struck, that provoked the longest economic depression of that time. About 15 thousand of companies ceased to exist, 600 banks appeared insolvent, and almost 30 % of the countrys railways became bankrupts.
The Ministry of Finance delivered gold to the market in tons. Dollars were exchanged for gold by foreign investors very actively. After a time the reserves in storehouses of the ministry remained only for some days. President Grover Cleveland, as well as the majority of other politicians, treated Morgan with hostility and at did not wish to see him in the capitalist society. But he had no choice. Morgan was the only person in America, who had sufficient resources to lower the demand for gold.
Cleveland has invited Morgan to the White house and asked him for the help. Morgan didnt reject the presidents request. Together with group of investors he offered to pay by gold the new release of the state bonds. This bargain would not only have filled the losses of treasury, but also would have served as a signal to the financial markets about the ending of the crisis.
Then financiers expected to sell bonds with the greatest possible benefit. The bargain turned out to be extremely successful. Demand for gold decreased, and the government managed to keep trust. Morgan with interest returned the invested money, but refused to specify, how much he earned, even to investigatory committee of the Congress.
He was ready to tell about the details of the agreement with the government: it was the public problem. But he was not going to tell what happened with bonds after he had got them. "I am not going to inform anyone what I have done with my papers, - said he. Banker Morgan became the creditor of the largest American railway companies. According to the historians, at the slightest delay with the payment Morgan called the manager of the company and informed: Now your company belongs to my clients. His client was Morgan himself.
In the result railway wars in the USA began to fade, and John Morgan began to supervise practically all railway companies in the northwest of the USA. Firstly, as well as to Rockefeller, authorities had quite loyal attitude towards Morgan, even asked him for help. For example, he managed to stop the strike of miners in Pennsylvania in 1902. However in the same 1902 everything changed.
His inflexibility only strengthened the suspicions. In the beginning of the year Morgan declared about the intention to create Northern Securities Company which officially would own the railway companies in northwest of USA belonging to Morgans people. Unexpectedly for Morgan the state opposed. Theodore Roosevelt, referring to Sherman law accepted in 1890, gave the order to the Minister of Justice to start litigation about the liquidation of the just opened company. He instituted legal proceeding accusation of infringement of the anti exclusive legislation which infringed the interests of just created by the magnate railway holding called Northern Securities Corporation.
Theodore Roosevelt saw the unnaturalness of this situation. He believed that the future of the country depends on the coexistence of rich and poor in small American small towns where on the Main-street and in the church classes meet with each other once a week. Is there a chance for the poor man to believe in the best future of his son in conditions of inequality? America will keep the surprising efficiency only in the case that the majority of its inhabitants, from pilgrims up to last emigrants from the East Europe and Asia keep this belief. Otherwise the national boiler will not sustain a social pressure. Leading America through storm waters of an enormous social inequality, it was necessary to set aside the artificiality and to think of tactics.
Without active support even of the part of the society it was impossible to expect for correction of that evil which was created with the uncontrolled private capital which was limited in the greed and self-interest. The main thing that T. Roosevelt asserted was to not allow superrich men to create covering not always appropriate for laws and not allowing the citizen to judge the main processes in the country. "The most important condition of the definition of the approach to huge industrial corporations, - asserted T. Roosevelt, - is the availability of knowledge about the facts of these corporations - publicity.
The Presidents words beat the ground: The nation should accept the responsibility for supervision over activity of corporations and regulation of their activity." As the active role of the state was the new phenomenon, and the majority of representatives of business saw infringement in any regulation of natural life bases the large conflict was inevitable. T. Roosevelt hoped to get the help from the left party of political spectrum. Liberals should support the White House as the leader of fight against monopolies.
And herewith, as historian Edmund Morris, wrote public pessimism did not see a gleam in tyranny of riches." In the evening February, 18, 1902 J. P. Morgan received visitors in the big house in the Madison-avenue when he was informed about T. Roosevelt's decision to apply the anti exclusive legislation against one of his companies - " Northern Securities" Having returned to visitors, Morgan complained that the person of such social origin as Roosevelt behaved not gentlemanlike. The president was obliged to consult to him.
Gentlemen always could agree. Quietly it was possible to dismiss the company if it prevents something. Morgan undertook the utmost to prevent a panic on the stock exchange. To weaken the impact he began to buy up shares. Morgan was enraged and went to Washington to talk to the president confidentially.
Puzzled Morgan managed to get a meeting with Minister of Justice Flandreau Nocks and reproached the government that he had not been notified beforehand about the preparing decision so that he may have corrected the situation. He said: If he did anything wrong, the president should just have send his official to him and they would solve the problems. The President refused: I dont want to solve the current issue; I want to finish with it once and for all. Newspapers called Theodore Roosevelt David with a cudgel" that began fighting with corporations.
February, 21, 1902 J. P. Morgan with the seven nearest partners arrived to Washington. The president met them with deliberate politeness. Roosevelt felt, that a certain Rubicon was passed. There was a right-of-way between him and these most influential in the country people.
The threat rallied them, his new opponents - they stood shoulder to shoulder. They were ready for much to keep the domination in the country. Morgan didnt believe that this young president was going to dictate him the conditions of activity in his (Morgans) America. He was active in Episcopal Church.
He collected masterpieces of art and ancient manuscripts. It was the person of wide views. Roosevelt was a puzzle for Morgan. The president did not ask him for anything, and that surprised. Next day, February, 22 believing, that the president overacted, Morgan, began to organize a twosome meeting. But Roosevelt did not let to go Minister of Justice Nocks.
Morgan started the following cigar, he boiled with emotions. Roosevelt said about Morgan straight after the meeting: "It is the best illustration of the Wall-street intellectual process. Morgan could not restrain looking at me as on the competing organization, intending to encroach on his riches, opposing his interests ." The important question, who was the owner in the house, was solving. Morgan sincerely inquired, why the federal administration had not asked him to correct undesirable places in the statute of the new trust.
The president answered: "We wanted to avoid it." Morgan: "If we have done anything incorrectly, send your person to mine, and they will adjust everything." Roosevelt: "We shall not do that." Morgan: Are you going to undertake attack of steel trust and other my companies? Roosevelt: " Not yet, up to that moment we find out, that they do something that we count wrong ." Morgan simply could not think about the federal government of USA differently than about the competing company. In these conditions Roosevelt showed the character. He was the first president of industrial America, the first after Lincoln when industrial barons were established in the new country, that was unlike agrarian democracy of Washington and Jefferson.
It was Theodore Roosevelt who changed a huge stream of the industrial and political power of "the gilt century." He has given new force to a democratic wave. By the denying of blind, literal following of Morgans requirements and company Roosevelt showed the maturity of the political management. Full absence of the governmental control resulted in amazing growth of corporations, - wrote Roosevelt - In no other country there was such absolute power of those who has big money. The government is practically powerlessly.
Among all forms of tyranny the tyranny of barefaced riches, tyranny of plutocracy is the least attractive and the most vulgar ." Morgans lawyers begged for favor: the head of the house should avoid public interrogation. Morgan, from their point of view, personified national advantage. It was useless. The instruction signed in March, 10 by Minister of Justice Nocks obliged J. P. Morgan and J.
Hill to be in court. In summer 1902 Roosevelt said in Philadelphia: It is incorrect to tell people, that we do not have sufficient authority for the sanction of a similar problem - control above the huge industrial companies of today. We have necessary authority, and we shall find the true way." The president believed that he would be able to wake the nation from a stupor, from hibernation, from passive recognition of injustice in life in 1903 - 1904. He would act as the leader of the nation...
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Research essay sample on J P Morgan Theodore Roosevelt
