John Pierpont Morgan (1837 – 1931) is one of the more controversial figures in the history of America and the world of finance. Described as a sui generis, a colossus (McCallum, p. 2), "the organizer" (Miller, 2003), "banker of last resort" (Andrews, 1999), and "the man of the hour" (Corey, p. 348), John Pierpont Morgan has also been called a "robber baron" (Andrews, 1999). Thus, it is evident that J. P. Morgan was a man who was as much praised for his actions in saving the American economy during the 1895 and 1907 crises, as he was criticized and derided for what was seen as his calculated control of the financial world and American business. Viewed from the lens of financial history, however, there can be little doubt that no person, either before or since, has left "upon the great art of money getting so important an influence." (Flynn, p. 452) Indeed, Morgan"s acumen in finance and business is clearly illustrated by the fact that the U.S. government had to set up a whole array of government institutions, from the Federal Reserve to the Securities and Exchange Commission and the Department of Transportation, to carry out the market stabilizing functions that Morgan had once assumed (Andrews, 1999). But perhaps, the biggest testimony to Morgan"s financial astuteness and power lies in the role he assumed as defacto central banker in 1907. For, there can be little doubt that J. P. Morgan single-handedly rescued the American economic system from falling into disarray. The key to understanding how one man could possibly act as the defacto central banker for as democratic, large and influential a country like the United States, lies in not so much analyzing the actual event, but in J. P. Morgan"s personal history. For, only such an approach could possible explain how he possessed the financial power to avert the collapse of one of the richest banking systems in the world. John Pierpont Morgan was born in Hartford, Connecticut on April 17, 1837. The son of a rich commodity broker, Morgan was exposed to the world of finance and business from an early age (1000 Management Giants, 1999). Interestingly, call it sheer coincidence or the hand of destiny, the day of Morgan"s birth saw all the banks in New York suspending specie (currency) payment, with banks in Hartford following suit the next day. Thus, as Flynn (p. 462) points out, the future money king came into the world amid the din of crashing banks. Environmental influences may have played a role in instilling in the young Morgan an early interest in business. However, it appears that Morgan also had a natural interest in and gift for figures. For, even as a child, he is reputed to have kept a meticulous account detailing the receipt and expenditure of his allowance (1000 Management Giants, 1999). Further, this early interest was no fluke since he repeatedly proved his prowess with figures in both school and college. So much so, that his high school teacher is reported to have called him a prodigy after witnessing Morgan"s ability to mentally solve problems in cubic root and decimals. But perhaps the greater compliment to Morgan"s mathematical ability came when the University of Gottingen offered the graduate student Morgan, a professor"s chair in mathematics (Flynn, p. 454, 464). Fortunately for the business world, and unfortunately for the mathematical one, Morgan refused. Morgan entered the business of finance in 1857 as an accountant in the New York based Duncan, Sherman and Company. Morgan"s first job, as well as the work he did with his father"s international firm, gave him a unique perspective on specie standardization necessity for credit and commerce (obits.com). It is also interesting to note that Morgan began his career in a year of panic, just as he began his life amidst the din of crashing banks. But, perhaps this was a fortuitous start since, as Geisst (p. 89) observes, the panic of 1857 proved to be a fertile training ground for many future financiers. In Morgan"s case, this was probably true since he later demonstrated that he knew the value of financial stability and solidity. Besides the valuable learnings of the initial years, the civil war that followed must also have taught Morgan a great deal in terms of identifying business opportunities in downturns, the effect of war on monetary policy and credit, and most important, the role of courage, confidence, and faith in taking business decisions. In fact, this probably accounts for one of Morgan"s most famous sayings, "Remember, my son, that any man who is a bear on the future of this country will go broke." (McCallum, p. 2) Morgan proved his abilities in business very early. For, it is apparent that he quickly learnt the financial ropes to become an increasingly influential member of the firm, Dabney, Morgan & Company (1864-1871), before moving on to become a partner in Drexel, Morgan & Co. In fact, it was the latter firm that grew to be recognized as one of the world"s most powerful financial institutions, both before and after it came to be known as J. P. Morgan & Co. in 1895 (Netstate, 2005). The reputation of J. P. Morgan & Co. was primarily earned in the decade 1879-89 when the House of Morgan consolidated its financial power and developed the institutionalized mechanism for the control of investment resources and of industry. Indeed, this is evident in the fact that by 1889, J.P. Morgan had secured control of many important railroads by virtue of his use of new forms and functions of finance such as the formation of trusts, acquisitions and mergers. In fact, this is when "Morganization," or the control of finance over industry, and consequently, the centralization of industry and finance, was first established (Corey, p. 131-2). Morgan"s interest in consolidating the railroads, however, was not just for profit reasons. He was genuinely interested in achieving stabilization in the interests of the American economy. Therefore, he improved railroad properties and services, increased safety and efficiency, and decreased costs to operators, shippers, and the traveling public (Destler, p. 39; Moody, p. 134; Wagenknecht, p. 56). Morgan achieved this through providing the railways with enormous amounts of capital, which they needed for investment. More important, he put a stop to all price wars, thereby prevented likely bankruptcies, ensuring in the process that the capital was put to good use (Andrews, 1999). Much like his interests in the railways, Morgan also invested in consolidating other core sector businesses such as steel and power. For instance, he funded Thomas Edison in setting up the Edison General Electric Company. He later acquired and merged Thomas Houston Electrical with Edison to form General Electric in 1892, to emerge as the controlling force in the power industry (Geisst, p. 115) Similarly, by 1901, he had created U.S. Steel, North America"s first billion dollar company (McCallum, p. 2). Morgan achieved this through merging his Federal Steel Company with Andrew Carnegie"s Carnegie Steel Company (obits.com). After the merger, he then proceeded to offer the public the largest to date stock offering of $1.4 billion (Geisst, p. 115-6). However, much like the railways, Morgan"s principal reason for taking an interest in the steel industry was his goal of achieving a stable American economy through stabilization and prevention of violent fluctuations, which the steel industry in particular was subject to. This, Morgan felt, was a critical task because such fluctuations invariably resulted in creating periods of inflation and depression for many other industries, which were dependent on steel (Weinberg, p. 148). The key to Morgan"s success in amassing wealth and financial control lay in his ability to mobilize funds, overseas and at home, for the various trusts he controlled. In the absence of a central bank, these trusts quickly gained in clout as financiers and bankers aided and contributed to the consolidation of many smaller, innovative companies by merging them into industrial giants (Geisst, p. 124). Therefore, it is hardly surprising that J.P. Morgan & Co., First National, and National City Bank, a trio dominated by Morgan, held a total of 341 directorships in 112 companies with aggregate capital resources (in money of the day) of between $ 22-25 million in 1912 (Andrews, 1999; Wagenknecht, p.50). Thus, Morgan"s path to success explains the colossal power he possessed in the financial and business circles of America. So much so, that even the U.S. government turned to him for help on several occasions. One such occasion was in 1985, when the U.S. Treasury was facing a rapidly melting gold reserve. Morgan responded promptly by organizing a syndicate, which supplied the U.S. government with $62 million dollars in gold. This timely action shored up the reserves to a safe limit of $100 million and probably saved the dollar (McCallum, p. 2; Wagenknecht, p. 55). This action, plus the indisputable power of his holdings, makes it evident that by 1907, J. P. Morgan was seen as the first among equals in American finance and industry. Therefore, it is hardly surprising that Wall Street, banks, trusts, and the government turned to him when banks began failing in 1907. There were several factors that precipitated the 1907 banking crisis. The chief of these was the rampant speculation that took place between 1905 and 1906 in the background of a prosperous economy, easy credit, and low interest rates (Moody, p. 134-6). To make matters worse, businesspersons such as F. A. Heinze and C. W. Morse regularly used the shares and resources of banks they owned to buy shares in other banks, or finance their more speculative undertakings (Cahill, 1998; Corey; p. 339-40; Moody, p. 138-141). The unchecked and unregulated American financial system of that era did not help matters any, giving speculators free rein to speculate in rail, copper, and indeed, any issue which Wall Street threw their way, no matter how unsound (Corey, p. 339; Moody, p. 135-6). The first signs of warning of an overheated economy and a bubble actually came in 1906 when Wall Street demand loans and merchant"s discounts began commanding the highest rate in more than 30 years. In fact, in September 1906, New York banks reported a deficit in reserves, leading to the U.S. Treasury depositing government surplus funds in banks (Noyes, p. 357). The action of the U.S. Treasury, however, only resulted in a brief respite. For, in March 1907, prices crashed on the New York Stock Exchange with reports of slackening production and earnings. The situation was further aggravated when large financiers were forced to liquidate their "indigestible securities" (Corey, p. 340) by a liquidity crisis (Moody, p. 142; Cahill, 1998). This second mini-crisis was once again averted due to the intervention of the U.S. Treasury, high money rates drawing gold from Europe, and funds returning to New York post the end of the crop season (Moody, p. 143). These stop gap measures, however, did not address the real issue, namely, speculation and unregulated financing of businesses. Thus, in October 1907, when the shares of United Copper collapsed due to Heinze"s attempts to corner them, it led to the collapse of a prominent brokerage firm run by his brother, the Heinze controlled Butte (Montana) Savings Bank and the Mercantile National Bank (Corey, p. 340-1; Moody, p. 144). The New York Clearing House Committee agreed to bail out Mercantile to restore depositor confidence. However, the action failed to do so, owing to a ripple effect that occurred once the committee publicized its findings on Heinze and Morse"s speculative activities. This ripple effect led to a run on several banks and trusts such as the Knickerbocker Trust associated with Heinze and Morse (Corey, p. 340; Cahill, 1998). From this point, the panic spread to the rest of the country owing to a loss of confidence in the economy and the American system. In addition, the accompanying credit and liquidity squeeze only deepened the crisis. The collapse of the Heinz and Morse controlled empire and the subsequent run on banks led to financial forces coming together rather automatically under Morgan"s leadership. Even the U.S. government looked to Morgan to solve the problem, with Secretary of the Treasury, George Cortelyou, rushing to New York to confer with Morgan and his associate financiers. In the absence of a central banking institution, Morgan had no choice but to step in and do what he could in an improvised and dictatorial style. In fact, Morgan was the only man in a position who could do so. For, J. P. Morgan & Co. was in sound condition, having learnt the importance of maintaining a high degree of liquidity from previous experiences (Corey, p. 341-2). In any case, Morgan was known for his conservatism and aversion to speculation (Destler, p. 53; Wagenknecht, p. 56). Therefore, if anyone could be trusted to see America safely through its latest crisis, it was J. P. Morgan. Morgan rose to the occasion admirably. While banks crashed and investors panicked, Morgan mobilized the available money in the banking system and trusts, along with the $25 million handed over by the Treasury, to distribute to the banks and other financial institutions. In addition, J. P. Morgan & Co. announced that it would anticipate all interest and dividend payments payable through the firm (Corey, p. 343-44; Geisst, p. 119). Morgan also stepped in at every crucial juncture of the crisis. For instance, Morgan organized a pool of $ 3 million to prevent the Trust Company of America failing. Similarly, when the New York Stock Exchange showed signs of a financial collapse under the weight of all the margin selling that the trusts and banks were forced into, Morgan bailed out the institution by quickly mobilizing a $25 million pledge of funds (Geisst, p. 119-120). Morgan"s role in the bank crisis of 1907 led to the press hailing him as America"s savior and "man of the hour." (Geisst, p. 120; Corey, p. 348). Unfortunately, however, criticism soon followed with accusations ranging from his having engineered the crisis for profiteering purposes to being a robber baron. This led to the Federal government setting up the Pujo commission in 1912 to investigate Morgan"s suspected violations of anti-trust laws. The experience, in fact, is said to have broken Morgan who thereafter chose to retire. Morgan died in Rome on August 31, 1931. When he died, he left behind a legacy in investment banking and finance that is revered till today. The debates on Morgan"s motives may go on. But there is one fact that cannot be contested. And, that is, that he single-handedly saved America from one of its worst financial crises.