Grove Press
Grove Press
Grove Press

The House of Morgan

An American Banking Dynasty and the Rise of Modern Finance

by Ron Chernow

“As a portrait of finance, politics, and the world of avarice and ambition on Wall Street, the book has the movement and tension of an epic novel. It is, quite simply, a tour de force.” —The New York Times Book Review

  • Imprint Grove Paperback
  • Page Count 832
  • Publication Date January 19, 2010
  • ISBN-13 978-0-8021-4465-2
  • Dimensions 6" x 9"
  • US List Price $24.00

About The Book

The House of Morgan may be the most ambitious history ever written about an American banking dynasty. Like the best-sellers Ford and The Rockefellers, the book has the sweep of an epic novel as it traces the rise of the J. P. Morgan empire from its obscure beginnings in Victorian London up to the crash of 1987. It is a rich, panoramic story of four generations of Morgans and the powerful, secretive firms they spawned—J. P. Morgan & Co. (Morgan Guaranty), Morgan Stanley, and Morgan Grenfell. Covering over 150 years in the banking and financial community, every boom and panic on Wall Street and in London’s City, The House of Morgan is a compelling and incisive account of the rise of the modern financial world.

Yet this fascinating chronicle is far more than just financial history. It evokes the social milieu of J. Pierpont Morgan, with his colossal art collection, numerous mistresses, and cruiser-sized yacht, and tells of his son, J. P. Morgan, Jr., who financed the Allies in World War I and waged a marathon feud with Franklin Roosevelt. Also prominent are the Morgan partners of the interwar period—Tom Lamont, Dwight Morrow, and Russell Leffingwell—who hobnobbed with presidents and epitomized period glamour with their North Shore mansions and transatlantic cruises. There are revelations about many famous families (Du Ponts, Astors, Vanderbilts) and companies (U.S. Steel, AT&T, General Motors, Exxon), as well as dozens of startling disclosures about the bank’s dealings with the U.S. and British governments. The book is studded with new information about many historical figures, including Henry Ford, Woodrow Wilson, Herbert Hoover, Franklin Roosevelt, Winston Churchill, Louis Brandeis, Nancy Astor, and Charles Lindbergh.

Based on extensive interviews and newly opened family and business archives, the book is an investigative tour de force, documenting Morgan intrigue with Mussolini, Japanese militarists, Mexican dictators, and Nazi finance ministers. It shows how, in the post-World War II period, Morgan firms evolved from the very model of gentlemanly propriety into pioneers of the aggressive new world of hostile takeovers, junk bonds, and LBOs. This final section follows the Morgan banks into Japan, France, Saudi Arabia, and Brazil and describes the Morgans’ dealings with many famous contemporary figures, including Henry Ford II, Rupert Murdoch, Adnan Khashoggi, and Paul Volcker.

A compelling account of a remarkable institution and the men who ran it, The House of Morgan is a penetrating look at the real power—the money—behind the historical events, the eminent statesmen, and the industrial empires that have transformed the world in the last century and a half.


“As a portrait of finance, politics and the world of avarice and ambition on Wall Street, the book has the movement and tension of an epic novel. It is, quite simply, a tour de force.” —The New York Times Book Review

“As informative and entertaining a history, especially of the period from 1880 to 1930, as this reviewer has ever read . . . Nowhere has our tenuous financial system been better described than by Chernow.” —John Rothchild, Los Angeles Times Book Review

“Chernow deftly mixes biography with economics and explicates arcane matters of high finance with sparkling clarity. . . . A fascinating historical journey from Charles Dickens’ London to Tom Wolfe’s New York.” —David M. Kennedy, The Atlantic Monthly

“An astonishingly detailed and fascinating story of the Morgan banks and the men who have run them. Chernow uses his gift for description to bring out vividly the personalities of his principals.” —Don Keown, San Francisco Chronicle

“Epic . . . Chernow melds deep insights into the life and times of Morgan bankers over 150 years with the flow of world history and the growth of banking and finance. With rich detail and warmth, he brings to life the defunct species of gentleman banker.” —Bill Barnhart, Chicago Tribune


Winner of the National Book Award


Chapter One — Scrooge

When Baltimore merchant George Peabody sailed for London in 1835, the world was in the throes of a debt crisis. The defaulting governments weren’t obscure Balkan nations or South American republics but American states. The United States had succumbed to a craze for building railroads, canals, and turnpikes, all backed by state credit. Now Maryland legislators, with the bravado of the ruined, threatened to join other states in skipping interest payments on their bonds, which were largely marketed in London. As one of three state commissioners assigned to renegotiate the debt, Peabody urged officials to tone down their rhetoric and placate British bankers. But American legislators found it easier to pander to the hatred of foreign bankers rather than to raise new taxes to service debt.
London was the sun in the financial solar system. Only Britain had a huge surplus of funds in a capital-short world, and sterling was the currency of world trade; its official use dated back to William the Conqueror.

In the afterglow of the Napoleonic Wars, bankers of the City—London’s financial district—were self-styled potentates, often with access to more money than the governments and companies they financed. Firms such as Barings and Rothschilds maintained an imperial reserve, omitting their names from doorways and letterheads, refusing to solicit business or open branches, and demanding exclusive client relations. Statesmen from Europe and Latin America trooped humbly to their doorsteps. One observer remarked, “to be asked for lunch was like being received in audience by a king.”

Though intensely patriotic, the forty-year-old Peabody identified with the British creditors. When the other Maryland commissioners returned home in despair, Peabody threw a glittering dinner for a dozen bankers to persuade them that Americans weren’t all rustic swindlers. He argued that only new loans could guarantee repayment of the old—a convenient line to be echoed by many future debtor states. Far from cutting off Maryland’s credit, the bankers advanced another $8 million. As his friend the English political leader George Owen said of Peabody, “He borrowed the money on his face.” To mitigate British prejudice against “venal” Americans, he boldly waived his $60,000 commission from Maryland.

Peabody, a good talker, was not prepossessing. Over six feet tall with light blue eyes and dark brown hair, he had a rumpled face, with knobby chin, bulbous nose, side whiskers, and heavy-lidded eyes. That this homely man would found the House of Morgan—later a white-glove affair with high-society partners famous for good looks and stylish dress—is ironic. He carried the scars of early poverty and was quick to feel slights and perceive enemies. Like many who have overcome early hardship by brute force, he was proud but insecure, always at war with the world and counting his injuries.

Born in Danvers, Massachusetts, he had only a few years of schooling. When he was a teenager, his father died, and Peabody worked in his brother’s shop to support his widowed mother and six siblings. When he later prospered in a Baltimore dry-goods business with a rich older partner, Elisha Riggs, he remained haunted by his past. “I have never forgotten and never can forget the great privations of my early years,” he later said. He hoarded his money, worked incessantly, and retained a lonely air.

In 1837, Peabody moved to London. A year later he opened a merchant house at 31 Moorgate in London, furnishing it with a mahogany counter, a safe, and some desks. He joined a select group of merchant bankers who traded in dry goods and also financed such trade; hence, their businesses became known as merchant banks. They developed a form of wholesale banking remote from the prosaic world of bank books, teller windows, and checking accounts. Their specialty was “high finance”—serving only governments, large companies, and rich individuals. They financed overseas trade, issued stocks and bonds, and dealt in commodities. Ordinary people could no more do business with George Peabody than they can today place a deposit with Morgan Guaranty, Morgan Grenfell, or Morgan Stanley.

In setting up in London, Peabody planted the American flag in alien territory. The United States relied on British capital to finance development and often resented that its economic fate was decided abroad. As one congressman said in 1833, “the barometer of the American money market hangs up at the stock exchange in London.” Peabody, hoping to tap this transatlantic money flow, became a leading dealer of American state bonds in London, reversing a contemporary trend in which London banks sent representatives to America. The House of Baring—which bankrolled the Louisiana Purchase and always had an American on its board—employed Thomas Ward as its American agent, while the Rothschilds, who were ambivalent about America, posted August Belmont, Sr., to New York.

Instead of blending into his British milieu, Peabody shrewdly flaunted his Americanism, wrapping himself in the flag and boosting American products. He declared that George Peabody and Company would be “an American house,” and that he wanted to give it “an American atmosphere—to furnish it with American journals—to make it a centre for American news, and an agreeable place for my American friends visiting London.” Yet amid the patriotic pride lurked a colonial mentality, possibly a sense of his own inferiority, a constant need to impress the British. He hoped to refute what had “almost become a byword among the English. hat no American House in London could long sustain their credit.”

Beneath a genial air, Peabody was a solitary miser. He lived in furnished rooms in a Regent Street hotel and aside from taking occasional fishing trips, worked nonstop. During one twelve-year period, he never took off two consecutive days and spent an average of ten hours per day at work. Notwithstanding his stirring speeches about America’s destiny, he didn’t return home for twenty years, and during that time his personality darkened along with the dismal performance of American state bonds. During the severe depression of the early 1840s—a decade dubbed the Hungry Forties—state debt plunged to fifty cents on the dollar. The worst came when five American states—Pennsylvania, Mississippi, Indiana, Arkansas, and Michigan—and the Florida territory defaulted on their interest payments. In an early debtors’ cartel, some American governors banded together to favor debt repudiation. To this day, the reprobate Mississippi remains in unashamed default.

British investors cursed America as a land of cheats, rascals, and ingrates. State defaults also tainted federal credit, and when Washington sent Treasury agents to Europe in 1842, James de Rothschild thundered, “Tell them you have seen the man who is at the head of the finances of Europe, and that he has told you that they cannot borrow a dollar. Not a dollar.” Clergyman Sydney Smith sneered at the American “mob” and said that whenever he met a Pennsylvanian at a London dinner, he felt “a disposition to seize and divide him. . . . How such a man can set himself down at an English table without feeling that he owes two or three pounds to every man in the company, I am at a loss to conceive; he has no more right to eat with honest men than a leper has to eat with clean men.” Even Charles Dickens couldn’t resist a jab, portraying a nightmare in which Scrooge’s solid British assets are transformed into “a mere United States’ security.”

When his beloved Maryland defaulted, Peabody’s own nightmare was complete. Whenever he met a British investor, he said, he felt shame. The British were especially incensed over Maryland and Pennsylvania because those states were settled by Anglo-Saxon stock and therefore should have known better. Having marketed about half of Maryland’s securities to individual investors in Europe, Peabody was victimized by his own success. The brouhaha had direct repercussions, and he became persona non grata around London. The London Times noted that while Peabody was an “American gentleman of the most unblemished character,” the Reform Club had blackballed him for being a citizen of a country that reneged on its debts. Gloomily he wrote a friend, “You and I will, I trust, see that happy day, when as formerly, we can own ourselves Americans in Europe, without a blush for the character of our Country.”

A hallmark of merchant bankers was that they vouched for the securities they sponsored. At first, Peabody merely sent letters to Baltimore friends, scolding them about the need for Maryland to resume interest payments. Then he tired of persuasion and rewarded reporters with small gratuities for favorable articles about the state. At last, in 1845 he conspired with Barings to push Maryland into resuming payment. They set up a political slush fund to spread propaganda for debt resumption and to elect sympathetic legislators; they even drafted the clergy into giving sermons on the sanctity of contracts. By means of a secret account, the two firms transferred £1,000 to Baltimore, 90 percent from Barings and 10 percent from Peabody—a strategy Barings duplicated in Pennsylvania. Most shocking of all, Barings bribed Daniel Webster, the orator and statesman, to make speeches for debt repayment. The bankers conducted this shabby campaign with a skulking sense of guilt; it wasn’t their preferred style. “Your payment to Mr. Webster would not appear very well if it should get out,” Joshua Bates, the senior Baring partner, warned Thomas Ward, American bagman for the operation. Bates, a sober, diligent Bostonian, cringed at what they were doing: “I have a sort of instinctive horror of doing one thing to effect another, or using any sort of subterfuge or reserve,” he confessed to Ward.

Whatever their scruples, the conspiracy thrived: pro-resumption Whigs were elected in both Maryland and Pennsylvania, and London bankers again received payments from both states. Peabody, never one to forget an injury, excluded the most persistent debtors, Florida and Mississippi, from his later philanthropies. Even altruism had its limits.

When the depreciated state bonds Peabody had bought up in the early 1840s paid interest again, he reaped a fortune. Then, as revolution swept across the Continent in 1848, American securities seemed a safe haven in comparison with Europe. And as the California gold rush and Mexican War wiped away the last vestiges of depression by the late 1840s, Peabody took new pride in his native roots. Now he fancied himself the ambassador of American culture in London and dispensed barrels full of American apples, Boston crackers, and hominy grits.

On July 4, 1851, he hosted the first of his Independence Day dinners, featuring the elderly duke of Wellington as guest of honor. Beneath a portrait of Queen Victoria and a Gilbert Stuart of George Washington, the British minister in Washington and the American minister in London drained an oak loving cup and toasted the start of the Great Exhibition in London’s new Crystal Palace. Because Congress wouldn’t finance American exhibitors, Peabody played the impresario, paying to display Cyrus McCormick’s reaper and Samuel Colt’s revolvers. But not all of Peabody’s July Fourth pageants of Anglo-American friendship followed the desired script. In 1854, when Peabody toasted Queen Victoria before President Pierce—an act Washington thought arch heresy—James Buchanan, the U.S. ambassador in London and later President, indignantly stormed from the room.

As banker and cicerone for Americans in London—once, in a single week, he dined eighty visiting Americans and took thirty-five to the opera—Peabody was constantly exposed to the fierce snobbery of British aristocrats toward the American commercial class. This condescension was particularly flagrant during Commodore Vanderbilt’s trip to London in 1853. The Commodore—vulgar, profane, and lecherous—wanted to show London society the full splendor of America’s richest man. With his wife and twelve children, he had sailed to England aboard his ornate, two-thousand-ton North Star, equipped with caterer, doctor, and chaplain. Peabody squired the Vanderbilts about Hyde Park and installed them in his box at Covent Garden; meanwhile, the court ostracized the ostentatious Commodore.

Peabody amassed a $20-million fortune in the 1850s as he financed everything from the silk trade with China to iron rail exports to America. Although he built a lyceum and library for his native Danvers in the early 1850s, he mostly hoarded his money in preparation for the next panic. His insecurities only worsened as he had more to lose. He told a friend in 1852, “My capital is . . . ample (certainly nearer 400,000 pounds than 300,000) . . . but I have passed too many money panics, unscathed, not to have seen how often large Capitals are swept away, and that even with my own I must use caution.”

Junius Morgan, who became Peabody’s partner in 1854, later told how he found him one morning at the countinghouse looking sickly and rheumatic. The miserly Peabody didn’t own a carriage but came to work by public horsecar. “Mr. Peabody, with that cold you ought not to stick here,” Morgan said. Taking hat and umbrella, Peabody agreed to go home. Twenty minutes later, on his way to the Royal Exchange, Morgan found Peabody standing in the rain. “Mr. Peabody, I thought you were going home,” the younger man said. “Well, I am, Morgan,” Peabody replied, “but there’s only been a twopenny bus come along as yet and I am waiting for a penny one.” By this time, Peabody’s bank account bulged with over £1 million.

Enjoying the clerk’s revenge, Thomas Perman, Peabody’s assistant, handed down a trove of nasty stories that tarnish the halo Peabody acquired as a result of his benevolence. He told how his boss, who ate lunch at his desk each day from a small leather lunch box, would dispatch an office boy to buy him an apple. These apples cost one pence halfpenny, and Peabody would give the boy twopence; although the boy dreamed of keeping the halfpenny change as a tip, Peabody always demanded it back.

By the early 1850s, Peabody was approaching sixty and plagued by gout and rheumatism. His annual savings were staggering: he spent only about $3,000 of a total annual income of $300,000. With such wealth and such stinjiness, he was ripe for spiritual conversion. As he later said, “When aches and pains came upon me, I realized I was not immortal . . . I found that there were men in life just as anxious to help the poor and destitute as I was to make money.”

Wanting to dedicate himself to philanthropy, Peabody had only one problem. As an autocratic banker, he had never shared authority and only reluctantly made his office manager, Charles C. Gooch, a junior partner in 1851, so that someone could act in his absence. Gooch was a sad-faced Bob Cratchit who addressed Peabody like a trembling clerk; in fact, he had started as head clerk. He started one letter to his boss by writing, “Dear Sir, I do not often trouble you with letters, for I know you do not like the trouble of reading them, & mine are on subjects not over agreeable.” Gooch was being groomed for a career of permanent subordination and forelock tugging.

Ordinarily, Peabody would have chosen a son or nephew to take over the business. Most merchant banks were family partnerships with a few talented outsiders. But as a bachelor, Peabody was in the unusual position of having to shop for an heir and bequeath his empire to a stranger. He was, however, no stranger to the company of women. While he didn’t smoke or drink, he resorted to the shadowy world of illicit pleasures. The tale-bearing Perman regaled the Morgans with the story of Peabody’s mistress in Brighton, whom he liberally favored with advances of £2,000. He excluded this woman and her illegitimate daughter from his will, and for years after his death, Peabody’s daughter Mrs. Thomas would materialize and badger the Morgans for money. In the late 1890s, the Morgans received an appeal from her two sons—one training to be a barrister, the other at Oxford or Cambridge. The aging Perman was dispatched to verify their Peabody genes. When he returned, he breathed with amazement, “Both of them have the old man’s nose to a dot.”

We don’t know why Peabody relegated love to the dim corners of his life. In general, he specialized in what Dickens called telescopic philanthropy—bountiful love for abstract humanity combined with extreme stinginess toward the individuals he knew personally. He would enjoy a reputation for generosity throughout the Victorian world—everywhere, in fact, but among his unacknowledged family and employees.

Peabody had definite requirements for his successor: he wanted a sociable American with a family and experience in foreign trade. His Boston associate, James Beebe, recommended his junior partner, funius Spencer Morgan. Junius had been with J. M. Beebe, Morgan for three years. In May 1853, he visited London with his family, bringing along his high-spirited but sickly son, John Pierpont, then recovering from rheumatic fever. Pierpont was boyishly thrilled with his first exposure to British culture. He visited Buckingham Palace and Westminster Abbey, excitedly handled a million pounds of bullion at the Bank of England, and listened to a Sunday sermon at Saint Paul’s. Meanwhile, his father talked business with Peabody, whom Pierpont found “pleasant but smoky.” In general, Pierpont found Peabody a queer, likable old buzzard.

Junius Spencer Morgan was tall with sloping shoulders and the thickening midriff of a strong but sedentary man. He had a wide face, light blue eyes, a prominent nose, and a firm mouth. He was witty and genial, but a deep reserve and watchfulness lay behind the charm. Junius Morgan always had a gravely mature air. His skeptical eyes gave him a hooded gaze, a banker’s air of vigilance. Big and brooding, he was the sort of prematurely middle-aged young man old financiers found consoling. A contemporary writer called him grim-mouthed; indeed, it is hard to imagine him young or carefree. He was solemn and businesslike and always master of his emotions.

Peabody asked Morgan to be his partner and receive his empire on a silver platter. Junius’s grandson, J. P. Morgan, Jr., later recounted their exchange:

“You know,” said Peabody, “I shall not want to go on much longer but, if you will come as a partner for ten years, I shall retire at the end of them, and at that time shall be willing to leave my name, and, if you have not accumulated a reasonable amount of capital in the concern, some of my money also, and you can go ahead as the head of it.”

“Well, Mr. Peabody,” replied Morgan, “that sounds like a very good offer, but there are many things to be considered, and I could not think of giving an answer until I have looked over the books of the firm and have some idea of the business and of the methods by which it is done.”

It is revealing that Morgan didn’t leap at the fortune but responded with cool self-control. Evidently he was mightily pleased by the books—capital of £450,000, a caliber of business only one rung below the houses of Baring and Rothschild. So in October 1854, he was admitted into partnership, and he settled into new walnut-paneled headquarters at 22 Old Broad Street. The partnership document stipulated that the firm would buy and sell stocks, engage in foreign exchange, extend banking credits, and broker railroad iron and other commodities. To entertain American visitors, Peabody gave Morgan an expense account of £2,500 per year. A fortune had been deeded over—or so it seemed at the time. A decade later, as Peabody was being canonized for his philanthropy, Junius Morgan would bitterly recall the promises Peabody had made to him. And he would join the ranks of those spurned during George Peabody’s ascent to sainthood.

WHEN Morgan moved to London in 1854, it was a more auspicious time for an American banker than it had been when Peabody was flogging the hated Maryland bonds in the 1830s. American grain prices soared during the Crimean War, and western railroads that transported grain boomed as well, creating a mania for their shares. Railroads devoured vast amounts of capital, and in the decade before the Civil War, investors poured $1 billion into their development, triple any former commitment. As a leading London dealer of American railroad securities, George Peabody and Company was well placed to exploit this latest craze.

Yet, as the decade passed, Junius Morgan must have doubted the wisdom of transplanting his family to England. Peabody was a trying partner, and no real warmth existed between the two, as shown by their correspondence when the junior partner visited America each year. Their letters are formal and correct but notably lacking even in pleasantries. Morgan would make obligatory inquiries about Peabody’s health—always apt to please his hypochondriacal partner—but addressed him as “Dear Sir” and signed each letter with frosty respect—“J. S. Morgan.” Morgan found Peabody petty and vindictive and told how his partner once spent half the afternoon hauling some poor cab driver down to the police station for overcharging him.

Then, in 1857, it looked as if Morgan would be denied his promised fortune. Wheat prices tumbled with the end of the Crimean War, causing hardship for American banks and railroads. By October, New York banks stopped gold payments, preventing American correspondents from transferring funds to Peabody in London. He was suddenly overextended on his American bills. At the same time, London investors sold American securities, siphoning more funds from Peabody and provoking a serious cash squeeze. Rumors raced through London that George Peabody and Company was about to fail, a prospect heartily relished by rivals, who disliked the old American. Morgan had also earned the displeasure of Barings by aggressively cutting prices on American securities and trying to steal their accounts.

Now the major London houses told Morgan they would bail out the firm—but only if Peabody shut down the bank within a year. When Morgan relayed this patent blackmail to Peabody, the older man reacted “like a wounded lion.” Defiant, he dared them to bring down his firm. George Peabody and Company was saved by an emergency credit line of £800,000 from the Bank of England, with Barings a guarantor of the loan. The vengeful Peabody, who felt Barings had mercilessly pressed him to pay outstanding bills, asked that the name of the firm be stricken from a published list of banks rescuing his firm. For Peabody, who had just made a resplendent return to America after a twenty-year absence, the incident confirmed his innate pessimism. “It is not yet three months since I parted from you, and left the country prosperous and the people happy,” he wrote his niece. “Now all is gloom and affliction.”

The 1857 panic made a deep impression on Morgan’s twenty-year-old son, Pierpont, who had just started on Wall Street as an unsalaried apprentice at Duncan, Sherman and Company, New York agent for Peabody. Tutored by partner Charles Dabney, an excellent accountant, Pierpont learned to evaluate ledgers and fathom the mysteries of the chaotic American banking system. Ever since Andrew Jackson killed the second Bank of the United States in 1832, the United States lacked a uniform currency. Each state had a separate banking system, and in many places debts could be settled in foreign currency. Pierpont, new to Wall Street, was vexed by rumors of his father’s pending default and heard about the Bank of England rescue while visiting Cyrus Field’s office. His later tolerance for the proposed Federal Reserve System has often been traced to this early Bank of England bailout of his father’s firm.

It was a baptism by fire for the Morgan family. Shaken, the elder Morgan became a more cautious and skeptical banker. He now demanded to see statements from correspondent banks in America, even if it meant offending them. And he began to lecture his son, often at wearisome length, on the need for conservative business practice; the 1857 panic would be the text of many sermons. “You are commencing upon your business career at an eventful time,” he wrote. “Let what you now witness make an impression not to be eradicated . . . slow &, sure should be the motto of every young man.” Junius Morgan developed a lofty disdain for price competition and adopted the royal passivity of the Rothschilds and the Barings, who refused to offer cut-rate terms: “If we cannot keep the account on such a basis we must be content to let others outbid us.”

Another disaster soon followed. Like the French banques d’affaires or the universal German banks, London merchant banks took equity stakes in ventures. For instance, George Peabody and Company had helped to bankroll Sir John Franklin’s expedition in search of the Northwest Passage. But its most farsighted bet was a £100,000 investment in Cyrus Field’s transatlantic cable, which would unite Wall Street and the City. The scheme looked inspired on August 16, 1858, when Queen Victoria made the first cable call, to President James Buchanan. In a burst of national pride, New York City engaged in two weeks of fireworks and euphoric celebration. Peabody dizzily wrote to Field, “Your reflections must be like those of Columbus after the discovery of America.” He spoke too soon, however: in September, the cable snapped, the venture’s share prices plummeted, and Peabody and Junius Morgan absorbed steep losses. Eight years would pass before full service was restored.

Although Peabody was nominal head until 1864, Junius Morgan assumed control of George Peabody and Company in 1859. In increasingly poor health, Peabody took his first European vacation in twenty-one years. After the outbreak of the American Civil War, Morgan traded Union bonds, which seesawed with the outcome of each battle. After the Union army was routed at Bull Run, bonds plunged, then rebounded sharply when Union troops stopped the Confederate advance at Antietam Creek. Sending a telegram via Nova Scotia, Pierpont alerted his father to Vicksburg’s fall in July 1863—in time for the elder Morgan to profit from a sudden rise in American securities. Such calamity trading wasn’t thought bloodthirsty or reprehensible among merchant bankers but had an honored place in their mythology. As one Rothschild boasted, “When the streets of Paris are running with blood, I buy.”

Despite his Yankee sympathies, Morgan was stymied in undertaking Union financing. After southern banks drained their deposits from the North, Lincoln cast about for new sources of funds. With Lancashire textile mills closely allied with southern cotton plantations, the City was cool to any large-scale operation for the North. To finance the war debt, the president turned to Philadelphia banker Jay Cooke—later dubbed a financial P. T. Barnum—whose agents fanned out across America to sell war bonds in the first mass-market securities operation in the country’s history. Among the buyers in London were George Peabody and Junius Morgan. Yet the Civil War was the one major military conflict in which the Morgans were handicapped by political circumstances: it was a bonanza for German-Jewish bankers on Wall Street, who raised loans from the numerous Union sympathizers in Germany. In future, the Morgans’ political impulses would mesh perfectly with profitable opportunities.

THE Civil War years saw the metamorphosis of George Peabody from Scrooge to Santa Claus. He had been a prototypical heartless banker, a one-dimensional hoarder. As a contemporary said, “Uncle George, as Americans . . . call him—was one of the dullest men in the world: he had positively no gift, except that of making money.” Yet this dour man suddenly became prodigal in his gifts; his philanthropy was as immoderate as his earlier greed. He found it hard to break his miserly habits. “It is not easy to part with the wealth we have accumulated after years of hard work and difficulty,” he confessed. Now a lifetime of hoarding was disgorged in one compensatory binge, cleansing his Yankee conscience. Perhaps as a young man Peabody had worked too much for others and as an adult too much for himself. In any event, he could do nothing by halves and again went to extremes.

By 1857, he had begun to endow a Peabody Institute in Baltimore. (Unlike later Morgan benefactions, often anonymous and discreet, Pea-body wanted his name plastered on every library, fund, or museum he endowed.) In 1862, he began to transfer £150,000 to a trust fund to build housing projects for London’s poor. These Peabody Estates, with gas lamps and running water, would be a vast improvement over the medieval poorhouses of Victorian London, and they still dot the city. He deeded a five-thousand-share block of the Hudson’s Bay Company to finance the operation. For this revolutionary act of generosity, he became the first American to receive the Freedom of the City of London. “From a full and grateful heart,” he declared at a Mansion House dinner, “I say that this day has repaid me for the care and anxiety of fifty years of commercial life.” Peabody’s openhandedness became so proverbial that he was soon besieged with a thousand begging letters a month.

During Peabody’s last years, the scope of his charity grew dazzling. He endowed a natural history museum at Yale University, an archaeology and ethnology museum at Harvard, and an educational fund for emancipated southern blacks. For this last, he handed over a $l-million batch of defaulted Mississippi and Florida bonds, hoping these states would someday resume payment and enrich the fund. There were further bequests for the housing projects, finally amounting to £500,000. As Peabody turned into a one-man welfare state, admirers saw celestial virtues in this former skinflint. Victor Hugo remarked, “On this earth there are men of hate and men of love. Peabody was one of the latter. It is on the face of these men that we see the smile of God.” Gladstone said that he “taught men how to use money and how not to be its slave.” Queen Victoria tried to honor him with a baronetcy or a knighthood, but Peabody—as if a stranger to worldly pleasures—declined this one. Instead, the queen dashed off a fulsome personal note from Windsor Castle, praising Peabody’s “princely munificence” to London’s poor and enclosing a miniature portrait of herself, wearing the Koh-i-noor diamond and the decoration of the Order of the Garter.

Throughout this apotheosis, Peabody never extended his charity to Junius Morgan. In 1864, their ten-year agreement expired, and Peabody retired. At this point, according to the promise Peabody had made to lure Morgan to London, the junior partner was to receive the use of his name and possibly his capital. Instead, Peabody decided to pull both his name and his capital from the concern. Perhaps in his new sanctity he wanted to erase his name from the financial map and enshrine it in the world of good works. But to Morgan, as later recorded by his grandson, “it was, at that time, the bitterest disappointment of [his] life that Peabody refused to allow the old firm name to be continued.” Junius reluctantly renamed the firm J. S. Morgan and Company (its name until Morgan Grenfell was formed in 1910). Peabody also forced Morgan to buy the office lease at 22 Old Broad Street on onerous terms. J. P. Morgan, Jr., wrote, “My Grandfather always used to say that Mr. Peabody had been very hard on him as to the price of the lease.” Of course, Junius Morgan’s anger toward Peabody was tempered by the extraordinary profits they had divided—over “444,000 earned in a ten-year period. And he had inherited the chief American bank in London.

When Peabody died, in 1869 at age seventy-four, the British government dug a grave for him in Westminster Abbey, but his deathbed words, “Danvers—Danvers, don’t forget” deprived London of his remains. The Prince of Wales, later Edward VII, unveiled a statue of Peabody behind the Royal Exchange—a rare honor, considering the scarce space in the City. Even in death, Peabody managed to foster Anglo-American harmony. The British had just built a forbidding warship, the Monarch, whose sheer size caused consternation in America and scare talk of the vessel’s being used to demand tribute from American cities. The young Andrew Carnegie sent an anonymous cable to the British cabinet: “First and best service possible tot Monarch, bringing home body Peabody.” Whether this was the genesis of the idea or not, Queen Victoria shipped Peabody’s corpse to America aboard the ironclad. The ship rigged up a maudlin funeral chapel, with tall candles burning above a black-draped coffin. In America, the ship was met by Admiral Farragut’s squadron. Pierpont Morgan, in charge of funeral arrangements, devised a tribute of martial splendor, with British and American soldiers marching together behind the financier’s coffin.

Before leaving Peabody, we might note an exchange about him within the House of Morgan in 1946. Thomas W. Lamont, chairman of J. P. Morgan and Company, asked Lord Bicester, senior partner of Morgan Grenfell, for a photostat of Queen Victoria’s letter thanking Peabody for aiding London’s poor. Two years from his death, Lamont was in a nostalgic mood, but Lord Bicester enjoyed shocking the unsuspecting:

I have always understood that Mr. Peabody, though known as a great philanthropist, was one of the meanest men that ever walked. I do not know if you ever saw the statue of him sitting on a chair behind the Royal Exchange. Old Mr. Burns told me once that when subscriptions were invited in the City to erect a statue there was so little enthusiasm that there was not sufficient money to pay for the chair, and Mr. Peabody had to pay for it himself. When I first came here the head of our office was Mr. Perman, and I remember when he had been here sixty years Teddy [Grenfell] and I gave all the staff a dinner at the Saucy, and we took them to a Music hall afterwards, and old Mr. Perman was at his desk at nine o’clock the next morning. He knew George Peabody’s form well and used to tell Jack [Morgan] many stories. . . indicative of his meanness. I always understood that when he retired he announced he was leaving his money in the business—and at once proceeded to take it out. I believe he left several illegitimate children totally unprovided for.