by Lewis Corey


From chapter V: Finance: Peabody and Morgan

But this progress was interrupted by alternate periods of prosperity and depression in industry and trade, culminating in the panic of 1857 which almost wrecked Peabody & Co. It was worse than 1837: the distress in all manufacturing towns was “absolutely sickening.” Again unregulated industrial development, over-building of railroads, frenzied speculation in Western lands and financial mismanagement reaped the whirlwind of business disaster. Peabody’s American representatives, Duncan, Sherman & Co., were barely saved from bankruptcy. The crisis severely affected British industry and finance, and particularly the American houses there whose representatives in the United States could not remit. Peabody & Co. were pressed for funds, their acceptances amounting to £2,300,000 at a time when money could be secured only through the Bank of England. Junius Morgan (who in 1853 had become a partner in Peabody & Co.) negotiated with the bank for a [49] loan of £800,000 and was crushed by the answer: the Bank would make the loan providing Peabody & Co. agreed to cease business in London after 1858. But George Peabody was a fighter; he dared the Bank to cause his failure, mobilized powerful British support, received the loan and survived the crisis. Peabody practically retired after this, Junius Morgan becoming dominant in the firm. 48-9.


The American Civil War

[58] Profiteers swooped upon the government (in the North and in the South). Systematic custom frauds prevailed, which Secretary Chase reported had “been successfully carried on for a series of years.” A legion of traders in government patronage sprang up who, by corrupt political influence, secured contracts which they sold to manufacturers at a large profit: the manufacturers raised their prices accordingly, and a trifle more. Fraud tainted much of the money paid by the government on contracts and the balance was tainted by excessive profits. The committee of the House of Representatives in 1862 reported large frauds in the purchase of ordnance and stores, Treasury and War Department employees, contractors, politicians and bankers conspiring to swindle the government. “Profits from the sales of arms to the government have been enormous,” said the investigating committee, “and realized by a system of brokerage as unprincipled and dishonest, as [59] unfriendly to the success of the nation, as the plottings of actual treason.” Neither the investigation nor ousting of the Secretary of War improved matters much, leading one Representative in 1863 to say: After the lapse of two years we find the same system of extortion, frauds and peculation prevailing.” The cry went up: “Corruption will ruin us!”

The investigating committee reported frauds in 104 cases and refused payment of $17,000,000 out of $50,000,000 on contracts. J. Pierpont Morgan appeared in a case as financing the sale to the government of the government’s own arms at an extortionate profit. The facts are in the Congressional Reports, “Case No.97. J. Pierpont Morgan. Claim for payment of ordnance stores… Referred by special direction of the Secretary of War… Claimed, $58,175.”

In 1852 certain unserviceable ordnance stores were condemned by inspecting officers of the army, among them a batch of Hall’s carbines, which were thereafter sold from time to time at prices ranging from $1 to $2 apiece. Upon the outbreak of the war an adventurer, Arthur Eastman, negotiated for the purchase of these carbines. After haggling over price and terms the War Department issued instructions to sell Eastman 5,000 carbines at $3.50, “to be paid for at once.” The prospective buyer, having no money of his own, tried to buy the carbines 1,000 at a time payable in ninety days, and was refused. Eastman was unable to raise the necessary money until a corrupt speculator, Simon Stevens, agreed to make a loan of $20,000 in return for a lien on the carbines (which Eastman had not purchased and which were still government property) and an agreement to sell them to Stevens at $12,50 apiece. All Eastman offered in this transaction was a letter from the War Department which magically produced a profit of $20,000. It was not Stevens’ money which Eastman received, but a draft issued by J. Pierpont Morgan & Co, which was sold by Eastman to Ketchum, Son & Co. who, according to Morris Ketchum’s testimony, expected “to get their money out of Mr. Morgan when [60] he gets it.” (Ketchum refused to tell the investigating committee what his profit was on the deal, that “being my private business which the government has no right to inquiry into.”

Although desperately in need of arms the government was not using any of the Hall carbines, condemned as unfit and dangerous for military use. Simon Stevens offered the carbines for sale in a telegram to General J. C. Frémont, saying “I have 5,000 carbines for sale,” which was untrue, no purchase having been made and the carbines being still government property stored in a business arsenal. Frémont, needing arms badly and “in business as gentle as a girl and confiding as a woman” accepted Stevens’ offer, the price being $22. The day after the receipt of Frémont’s telegraphic acceptance Arthur Eastman bought the 5,000 carbines at 3.50 apiece from the War department, payment of $17,486 being made by J. Pierpont Morgan. When the “sale” was made to General Frémont “the arms were still the property of the government,” reported the investigating committee, “the proposal being to sell the government its own arms… The government not only sold, in one day, for $17,486 arms which it had agreed the day before to repurchase for $109,912, but virtually furnished the money to pay itself the $17,486 which it received.” Moreover, the arms were more dangerous to the Union troops than to the Confederates.

The conspirators shipped 2,500 carbines. Apparently apprehensive, they did not ship the other carbines until payment of $55,550 for the first batch had been received by J. Pierpont Morgan – that is, forty days after the “sale,” although General Frémont had urged “hurry.” Their apprehensions were justified Payment for the second batch of carbines was refused and Morgan’s bill for $58,175 turned over to the Secretary of War who referred it to the committee investigating government contracts. After severely castigating the participants in the transaction, the committee allowed $9,678 on Morgan’s [61] claim, plus brokerage of $1,330. The claim for payment, Morgan insisted, was justified because his House had “made advances in good faith to Mr. Stevens on the security of his agreement with General Frémont.” This claim of “good faith” was dismissed by the committee since Morgan “declined to disclose the terms” upon which the advances were made to Stevens. 58-61.



From chapter VII: Speculating in Gold 

He [Morgan] speculated considerably during the Civil War. Speculation was general and feverish, although condemned by press and pulpit in terms of morality and disloyalty to the Union. But war breeds speculation, thriving on the nation’s needs, the upset in economic equilibrium and the changing level of prices. [65] Almost everything assumes a speculative character, including life itself. “This riotous speculation in army contracts, oil wells, stocks and gold,” according to a contemporary observer, “naturally fostered reckless extravagance, on the principle of ‘easy come, easy go,’ accompanied by display of diamonds, equipages, stately mansions, purple and fine linen.”

Gold was the speculative favourite, owing to the large range in its price movements. Objectively a rise in the price of gold was unavoidable, paper money forcing up the price, aggravated by the increased demand for gold for purposes of foreign trade and for the payment of customs duties and the interest on government bonds (which was payable in gold). But the price of gold was also manipulated and consciously forced up. Speculative dealings exceeded legitimate business purchases, the mercantile community and foreign bankers buying beyond their actual needs, while the public speculated as much in gold as in securities. Unscrupulous speculators bribed employees in the Department of War and in the Executive Mansion itself to secure advance information on military events, and often originated or magnified rumours for speculative purposes. The price of gold was intimately affected by military events, since continuation of the war meant more issues of paper money and more need of gold, with consequent higher prices. Confederate victory, therefore, meant an upward movement in the price of gold, Union victory movement downward, The struggle between bulls and bears in gold was identified with the agonizing military struggle. Clearly the upward movement in the price of gold, originally determined by objective economic conditions, was forced still higher by the unscrupulous manipulations of men intent on making money regardless of consequences to the Union–men whom Jay Cooke called “evil geniuses.” Gold speculation was discouraged by the New York Stock Exchange, where it was considered the “patriotic and gentlemanly thing” to sell gold. The confirmed speculators thereupon met in the Coal Hole, a “dark, repulsive basement.” 64-5.


[66] Most of the dealers in foreign exchange speculated heavily in gold, the fluctuations yielding immense profits. Morgan, owing to his foreign affiliations, was in an excellent position to exploit the situation. In one spectacular coup forcing up the price of gold, Morgan and an accomplice reaped a profit of $160,000—”which was big business in those days.” Morgan too was a bull on gold; but we don’t know whether, in garnering the profits, he sang “Hooray! Hooray! I’ll live and die for Dixie!” Probably not, considering his habitual and temperamental reserve.


[67] Early in 1863 gold was selling at 163. A series of Union victories produced considerable price declines. The Gettysburg victory sent the price down five points in one day, and the capture of Vicksburg down another five points. 

[…] [Corey tells the story of how Morgan with an associate bought gold secretly and shipped half of it outside the country to create scarcity and force up the price. Corey says the cornered the gold.]

[69] The speculators were bulls on gold and bears on the Union. 


Henry Ward Beecher

“Henry Ward Beecher, himself the recipient of $20,000 a year and whose church had been organised as a profit-making enterprise by real-estate speculators, sermonized against labor amid the applause of Plymouth’s congregation: ‘Is the great working class oppressed? Yes, undoubtedly it is. God has intended the great to be great and the little to be little… The trade union, originated under the [124] European system, destroys liberty… I do not say that a dollar a day is enough to support a workingman. But it is enough to support a man! Not enough to support a man and five children if a man insist on smoking and drinking beer…. But the man who cannot live on bread and water is not fit to live’” Corey 123-4.

The specie resumption after the civil war 123-6.


Chapter XV: Railroad demoralization

“The buccaneer practices of Jay Gould and Jim Fisk provided J.P. Morgan’s first opportunity to participate directly in railroad affairs; […] Morgan (up to 1879) had scarcely departed from the old-style investment bankers’ limited function of selling stock and bonds. In 1879 the House of Morgan emerged as a railroad power by means of a transaction involving William H. Vanderbilt and the sale of New York Central [railway] stock in England – a transaction determined by Morgan’[s] international affiliations and linked up with important aspects of the movement centralizing industry and finance” 139.

Upon the death of Cornelius Vanderbilt, William had inherited NY central system – very efficient but hated because built on corruption and ruthlessness.

“Enmity against the NY Central was all the sharper because of the large dividends paid on stock 40 per cent of which was water” 139.

William owned 87% of the stock of NYC and was accused of being a monopolist. He made a deal with Morgan to sell some of the stock in England. [$25 million]. As a condition of sale Morgan wanted to be on the Board of Directors of NYC. 141.

Morgan bought the stock at £120 and sold in England at $130 realizing a profit of $3 million. Morgan were agents of NYC in London, Morgan himself became part of the board of directors. 141.

At the same time NYC connected to Wabash and Pacific and Southwestern Railroad lines (financed by Jay Gould) and to Pennsylvania (funded by Drexel). Morgan, Gould and Drexel were part of the syndicate that sold Vanderbilt’s shares, but Morgan ruled it.

Morgan had to face “demoralization” of the railroads.

“American railroads up to 1880 were largely built with public money. Federal, State and municipal governments contributed $700,000,000 for railroad construction and grants of 155,000,000 acres of public lands – an empire of 242,000 square miles, larger than France and four time the size of New England. About 40 per cent of the legitimate construction costs were paid by public money. If profits on the sales of land received from the government are added, the whole cost was borne by the people in the shape of government aid. This undoubtedly facilitated railroad construction, but it also encouraged speculation and plunder. For government aid was accompanied by complete independence of the railroads from government control, on the theory of private competitive business enterprise” 143.

Plundering usually started with securing government aid by bribery […] Most of the railroad promoters were flagrant speculators with little money [144] of their own, money being raised by selling bonds to the public, often at heavy discounts, disastrously piling up fixed charges. Promoters appropriated most of the stock as bonus, cash subscription from stock seldom exceeding 30 per cent of the railroad’s construction costs and frequently almost nothing. Land grants were another source of speculative profit for promoters and directors. Still another means of making illegitimate profit was construction of the railroad, usually undertaken by promoters and directors organized in a separate construction company charging enormously high prices. […] Every mile of Western railroads cost 35 per cent to 50 per cent more than legitimate construction costs. 143-4

Demoralisation made railway investment unsafe and unprofitable. The buccaneers (Jay Gould and Jim Fisk] plundered investors as much as they plundered business and the public. In spite of most railroad bonds offering 7 per cent, the average interest in 1886 was 4.7 per cent, while the average yield on stock was only 2 per cent (including “watered” stock). In 1876 railroad bonds in default represented 39 per cent of the total, and in 1879 sixty-five roads capitalized at $234,000,000 were sold under foreclosure. One year later bankrupt railroads represented 20 per cent of total mileage and capitalization. 145.

As foreign investors in Europe bore a great deal of the brunt of this worthless stock, the situation was ruining the reputation of Morgan House in London. So that he acquired control over the railroads and centralized them.


Chapter XVI: Reorganizing railroads.

“These railroad reorganizations revealed the essential Morgan quality–constructive force, an acute sense of financial values, ruthless determination in pursuing objectives, never abandoning the practical, and the spirit of dictatorship in imposing his will upon other men. When Morgan reorganized a railroad he told the managers bluntly, almost brutally: The road now belongs to me! Some growled, others admired, all obeyed and admitted he got things done” 147.


The 1907 panic 

“Under Morgan’s direction organization and plans were being developed to meet the crisis. On October 20, in spite of underlying uneasiness, Wall Street was confident, Jacob H. Schiff saying: “The trouble is over and the general situation sound. Within three days banks began to crash and panic broke loose on the Stock Exchange.

Secretary of the Treasury George B. Cortelyou rushed to New York and held conferences with Morgan, Perkins, Baker, Stillman, and others. Government accepted the Morgan dictatorship – an inescapable decision. There was no central banking institution under government control to mobilize the banks’ resources in the crisis. In spite of financial centralization by Morgan and others, the nation’s banking system was incompletely co-ordinated, reserves being scattered in the vaults of thousands of banks which distrusted each other and did not or could not effectively cooperate. There was a scramble for money by the banks and no central institution to provide and distribute the money. Co-operation and centralized organization had to be improvised in the midst of the panic, while [342] banks crashed, necessarily by the House of Morgan, the most powerful of financial institutions and under control of the only man with sufficient financial authority, J. Pierpont Morgan. What a properly organized banking system would have done automatically Morgan had to do in an improvised and dictatorial style. 341-2.


The Treasury deposited $42,000,000, without interest, in banks under control of or affiliated with the House of Morgan, the disposal of which for purposes of relief was determined by a series of conferences under final authority of Morgan himself. 

J.P. Morgan & Co. were in shipshape condition to meet the crisis, having learned for the experience of 1903-4 to maintain a high degree of liquidity in their resources. In the persons and institutions of Morgan and his chief lieutenants, George F. Baker of the First National Bank and James Stillman of the National City, was concentrated an immense money power which dominated all the other banks and the general situation. They necessarily determined measures to meet the crisis, and [343] Baker and Stillman unquestioningly accepted Morgan’s authority. With royal generosity Morgan afterward said to his son (who was not in New York during the panic): “Of course, you see, it could not have been done without Mr. Baker; he is always ready to do his share–and more.”

It was Morgan’s supreme moment, the final measure of power and its ecstasy. President Roosevelt, the scourge of ‘malefactors of great wealth’ accepted Morgan’s financial dictatorship through the Secretary of the Treasury. One after another Morgan’s antagonists came to him, offered their resources and asked his orders–John D. Rockefeller, Edward H. Harriman, Jacob H. Schiff, Thomas F. Ryan and after them came presidents of banks, railroads and industrial combinations […] All of them asked Morgan’s orders, which he issued in his sharp, abrupt manner.  342-3.



Corey, Lewis. The House of MorganA Social Biography of the Masters of Money. New York: Howard Watt, 1930. Internet Archive.

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