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J.P. Morgan


J. P. Morgan was born in 1837 into a Hartford, Connecticut, banking family; he was educated on both sides of the Atlantic and, after completing his schooling in Germany, took up a position in the New York investment house of Duncan, Sherman. Morgan entered his new occupation in 1857 as the global economy took a sudden downturn. The recession threatened to bankrupt his employer, and Morgan learned from this experience the importance of avoiding speculation and seeking investment opportunities offering certain returns.

In 1861, Morgan struck out on his own and created a new bank, J. P. Morgan and Company, to coordinate the sale of stocks and bonds. Morgan’s father acted as his London agent, giving Morgan access to the growing cadre of British investors who wanted to buy into American railroads.


Morgan merged with the Philadelphia-based investment bank of Drexel to strengthen his hand, bringing him into direct contact with the well-established Baltimore & Ohio and Pennsylvania railroads. Morgan’s railroad portfolio grew in 1877 when William Vanderbilt decided to sell his family’s holdings in the New York Central Railroad after the death of his father, Cornelius “Commodore” Vanderbilt. Drexel, Morgan handled the sale of these securities, which took several years and resulted in J. P. Morgan becoming a director of the New York Central.

Morgan attempted to rebuff several disquieting trends in the railroad industry to preserve his investments. Speculators like Jay Gould, who was more interested in short-term profits than long-term economic well-being, threatened the profitability of the industry by lowering rates in order to attract business to poor lines like the Erie. Overbuilding, and the resulting duplication of services, similarly damaged profitability. In an effort to reduce what he perceived as ruinous competition, Morgan invited leading railroaders to a meeting on his yacht in 1885 and convinced them to end the rate wars by threatening to block their access to investment capital.

Morgan’s power over American railroading extended west in the 1880s when he arranged the financing for the Great Northern and the Northern Pacific lines, two rival transcontinentals across the northern tier of the United States. His involvement enabled him to restrict competition and hence to maintain profitability, though in this case, he ran afoul of the Sherman Anti-Trust Act when, in 1904, the Supreme Court ruled against him. The Northern Securities Company, established to hold the Great Northern, the Northern Pacific, and the Chicago, Burlington, and Quincy railroads, was declared illegal and forced to divest itself of the Burlington line. Morgan also influenced the reorganization of lines in the south, financing the new Southern Railroad. Partly through his influence, the railroads of the United States almost uniformly adopted the standard gauge, facilitating interchange from the lines of one company to another. 

Morgan’s influence was so great that he was often accused of exerting a hidden control over the American financial system. It is clear that he did help end financial panics by allowing some trusts to fold and helping others. His power over the railroad industry was also criticized, as for example when he convinced the New Haven line to invest in a competitor which then went bankrupt. As a mobilizer of capital and an organizer of railroads, however, he had no peer in the nineteenth century.

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