J.P. Morgan Bailouts Date Back to 1895

One of the biggest stories in the financial market today is the seizure and sale of Washington Mutual to J.P. Morgan. Although this is the largest failure in banking history and pages could and have already been written about the severity of WaMu’s demise, I choose instead to talk about how in times of crisis, the true heroes emerge.

This year, J.P. Morgan has swept both Bear Stearns and Washington Mutual into their coffers. This illustrates the comparative strength of the bank and a tradition that has been more than 100 years in the making.

jpmorgan John Pierport Morgan who established the original J.P. Morgan & Co in 1871 is widely credited for having rescued the US economy and the US government on 2 very prominent occassions – 1895 and 1907. 100 years later, CEO Jamie Dimon is following in Morgan’s footsteps in the credit crisis of 2008.

Here are some snippets from Wikipedia on John Pierport Morgan’s bailouts:

Panic of 1893

In 1895, at the depths of the Panic of 1893, the Federal Treasury was nearly out of gold. President Grover Cleveland arranged for Morgan to create a private syndicate on Wall Street to supply the U.S. Treasury with $65 million in gold, half of it from Europe, to float a bond issue that restored the treasury surplus of $100 million. The episode saved the Treasury but hurt Cleveland with the agrarian wing of his Democratic party and became an issue in the election of 1896, when banks came under 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 on a gold standard platform

Panic of 1907

The Panic in 1907 may have been worse if not for the intervention of J.P. Morgan, who convinced other bankers in the city to provide a backstop for the crisis. By November the contagion had largely stopped.

3 Comments

  1. But the panic of 1907 was caused by rumors generated by the “Money Trust” (JP Morgan’s bank) that the Knickerbocker Bank and the Trust Company of America were about to become insolvent. The public did a run on the banks threatening to make the rumors come true. Only then did JP Morgan step in lending $100 million, convincing the public that the US needed a Central Bank to stop future panics. I suggest you read “Banking and Currency and The Money Trust” by Congressman Charles Lindbergh Sr. before giving accolades to JP Morgan. According to Lindbergh, Morgan was actually the source and cure of the 1907 panic. Why do you think JP Morgan Chase is one of the few stable banks in the US today? They purchase their competition for pennies on the dollar.

    Reply
  2. Right. Nonetheless, the facts that I have outlined such as bailouts dating to 1895 and their ability to spend is true and it does reflect their comparative financial strength. As for the snippets from the Panic of 1893 and 1907, they are quoted and drawn from Wikipedia.

    Other reports such as this one from Reuters gives JPM the same credits.

    “Some historians see parallels between him and the legendary financier John Pierpont Morgan, who ran J.P. Morgan & Co and was credited with intervening to end a banking panic in 1907.”

    BTW – Thanks for leaving a comment!

    Reply
  3. Kathy Lien,

    You seriously call yourself a “foreign exchange currency expert”, and you hold J.P. Morgan up as a hero?

    It appears you have only – in cursory – analyzed dates and numbers while completely disregarding factors and intent.

    As ‘Ben’ previously alluded to, Morgan created the crises which he claimed to cure.
    Why pay market value for your ‘competition’ when you can have them pennies on the dollar?

    I wonder what Jefferson meant by:
    “…banking establishments are more dangerous than standing armies.”

    Reply

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