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J. P. Morgan the man who bailed out the US

11 Dec

In 1895, at the depths of the Panic of 1893, the Federal Treasury was nearly out of gold. President Grover Cleveland accepted Morgan’s offer to join with the Rothschilds and supply the U.S. Treasury with 3.5 million ounces of gold to restore the treasury surplus in exchange for a 30-year bond issue. The episode saved the Treasury[ but hurt Cleveland with the agrarian wing of the Democratic Party and became an issue in the election of 1896, when banks came under a withering attack from William Jennings Bryan. Morgan and Wall Street bankers donated heavily to Republican William McKinley, who was elected in 1896 and reelected in 1900.

The Panic of 1907 was a financial crisis that almost crippled the American economy. Major New York banks were on the verge of bankruptcy and there was no mechanism to rescue them until Morgan stepped in personally and took charge, resolving the crisis.Treasury Secretary George B. Cortelyou earmarked $35 million of federal money to quell the storm but had no easy way to use it. Morgan now took personal charge, meeting with the nation’s leading financiers in his New York mansion; he forced them to devise a plan to meet the crisis. James Stillman, president of the National City Bank, also played a central role. Morgan organized a team of bank and trust executives which redirected money between banks, secured further international lines of credit, and bought plummeting stocks of healthy corporations. A delicate political issue arose regarding the brokerage firm of Moore and Schley, which was deeply involved in a speculative pool in the stock of the Tennessee Coal, Iron and Railroad Company. Moore and Schley had pledged over $6 million of the Tennessee Coal and Iron (TCI) stock for loans among the Wall Street banks. The banks had called the loans, and the firm could not pay. If Moore and Schley should fail, a hundred more failures would follow and then all Wall Street might go to pieces. Morgan decided they had to save Moore and Schley. TCI was one of the chief competitors of U.S. Steel and it owned valuable iron and coal deposits. Morgan controlled U.S. Steel and he decided it had to buy the TCI stock from Moore and Schley. Judge Gary, head of U.S. Steel, agreed, but was concerned there would be antitrust implications that could cause grave trouble for U.S. Steel, which was already dominant in the steel industry. Morgan sent Gary to see President Theodore Roosevelt, who promised legal immunity for the deal. U.S. Steel thereupon paid $30 million for the TCI stock and Moore and Schley was saved. The announcement had an immediate effect; by November 7, 1907, the panic was over. Vowing to never let it happen again, and realizing that in a future crisis there was not likely to be another Morgan, banking and political leaders, led by Senator Nelson Aldrich devised a plan that became the Federal Reserve System in 1913.[The crisis underscored the need for a powerful mechanism, and Morgan supported the move to create the Federal Reserve System.JP Morgan

Now here is a little something that you might recognize in our last election

While conservatives in the Progressive Era hailed Morgan for his civic responsibility, his strengthening of the national economy, and his devotion to the arts and religion, the left wing viewed him as one of the central figures in the system it rejected. Morgan redefined conservatism in terms of financial prowess coupled with strong commitments to religion and high culture.

Enemies of banking attacked Morgan for the terms of his loan of gold to the federal government in the 1895 crisis and for the financial resolution of the Panic of 1907.

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Posted by on December 11, 2012 in history, politics

 

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