The House Of Morgan: An American Banking Dynasty and the Rise of Modern Finance is an overly long and at times an overly short history of the Morgan banks. Chernow uses the history of the family and its banks to illustrate the history of U.S. and global finance from the 1800s to the late 1980’s. Chernow introduces characters, usually partners in the three Morgan institutions, but then just as quickly dispenses with them. It is the story of power and the concentration of power. From business to banks, to governments, back to the banks, and finally back to government again. Never willingly and always at the expense of the smaller banks, companies, and individuals. I guess this shouldn’t be surprising. But there are dozens of times where the government cause the very troubles it was trying to prevent. And also times were the government was trying to protect Morgan (and other banks) from itself. In the Morgan world the partners seemed blind to criticism of their concentrated economic might. Yet at them same time, those critics seemed provincial and short sighted. Central bankers from Britain, Germany, Italy, Japan and finally the United States played a role in stabilizing the economy. They don’t do a very good job. In the early 1930s you can easily make the argument the Governments and Central Banks caused the great depression and in the 2000s they caused the great recession.
Chernow wrote an interesting book, but I thought it would have been much better if he limited its scope and keep his own opinions out of. A good editor would have done both.
Excerpts From My Kindle
Such an arrangement worked to the advantage of established banks and kept clients in an abject, dependent position. But it was a stylized competition, a world of sheathed rapiers, not a cartel, as it often seemed. The elegance of the surface often blinded critics to the vicious underlying relations among the banks. – location 694-696
As we shall see repeatedly, the House of Morgan always favored government planning over private competition, but private planning over either. – location 1326-1327
The disdain for Harding was more than personal, for the White House and the House of Morgan represented quite different factions of the Republican party. By instinct and self-interest, the Morgan bank was liberal and internationalist on global financial issues. It advocated U.S. leadership, close consultation with the Allies, and vigorous lending abroad. On foreign policy issues it felt some kinship with Wilsonian Democrats. With England handicapped in its resumption of foreign lending, J. P. Morgan and Company wanted the United States to inherit British leadership and initiate the rebuilding of Europe. The Harding brand of Republicanism, by contrast, was provincial, protectionist, and wearily contemptuous of European conflicts. These Republicans regarded foreign loans as ways to manipulate foreigners or as wasted welfare payments better spent inside America. Throughout Morgan history, the bank would be strongly drawn to internationalist leaders, not necessarily Republican. – location 4757-4764
The tendency to switch loyalties to foreign clients and acquire a strong interest in their survival would have profound consequences for the House of Morgan. For by the mid-1920s, Lamont had recruited three new clients: Japan, Germany, and Italy whose course would sharply clash with Americas. It was strictly by chance that the bank became involved with three future enemies. But over time, these business conquests would create an extraordinary situation in which the true-blue banker of the Allies ended up in the precarious position of banker to the future Axis powers. – location 4937-4941
From the marble Morgan halls emerged $6 billion in securities under-writings between 1919 and 1933far more than from any other bank. A third were railroad bonds, another third foreign bonds, and the last third corporate bonds. Like the growing government accounts, the domestic roster was matchless: U.S. Steel, General Electric, General Motors, Du Pont, AT&T, IT&T, Montgomery Ward, Kennecott Copper, American Can, Con Edison, and the New York Central. By managing securities issues for these companies and assigning syndicate places to other banks, the House of Morgan defined the pyramid of Wall Street power. – location 5343-5348
Along with Lamont and Russell Leffingwell, Morrow gave the House of Morgan its patina of culture, its reputation as a home to bankers who wrote essays, gave speeches, joined foreign policy councils, and served on foundation boards. He belonged to a 1920s cult that believed in the wisdom of businessmen as managers of Americas political affairs. – location 5940-5942
Everybody at J. P. Morgan told the story about Morrows riding the train. When the conductor asked for his ticket, Dwight couldn’t find it and with his hands restlessly searched every pocket. The ticket, it seems, was clenched between his teeth. I bet you thought I didn’t know it was there, Morrow said to the conductor. Actually, I was just chewing off the date. Once, while taking a bath, he called out to his valet for soap that lathered better; the problem turned out to be not the soap but that he was still wearing his pajamas. – location 5948-5952
George Whitney later remarked that we never retailed while I was in our office, but that’s where the trouble started, and the New Deal was smart enough to realize that if they could cut the security business up in pieces, they would take this power away and they did.89 – location 7727-7729
Then in 1934, a young Utah banker, Marriner Stoddard Eccles, advised the Roosevelt administration on revisions to the Federal Reserve Act. Eccles wanted to emasculate the New York Fed and shift power to the Federal Reserve Board in Washington so as to purge the influence of Wall Street bankers from the system. Leffingwell was especially incensed at this move because he blamed the 1929 crash on the Washington boards interference with the New York Fed, which had wanted to raise interest rates and arrest speculation. George Harrison tried to marshal enough – location 7835-7839
If Morgans had chosen investment banking and released 90 percent of its staff, it would have been impossible to rebuild the House of Morgan if Glass-Steagall were rescinded. At four o’clock on the afternoon of September 5, 1935, the eve of Jack Morgans sixty-eighth birthday, the House of Morgan was officially divided. – location 7914-7917
In the Inco-ESB takeover, it was Morgan Stanley, the flagship of Wall Street, that first unfurled the Jolly Roger, and it would sail it through increasingly troubled seas. – location 12193-12195
The Glass-Steagall Act had attempted to insulate commercial banks from risk by separating them from securities work. Instead, it had confined them to a dying business and starved them of profits that might have kept them sane and healthy. By 1984, bank failures were running at a post-Depression – location 13288-13290