"The First Thing Is Character"

A great shift had indeed taken place, and Morgan had labored hard to
bring it about. The United States had grown wealthy, and it could now
finance its own securities and buy up the equities of its industries.
Where once Morgan, and his father before him, had focused on
channeling British investment westward across the Atlantic, the
banking world in New York and other domestic sources of investment
had overtaken foreign financing.

On the face of things, the trustbusters and the laws on the
books--most notably the Sherman Antitrust Act of 1890--should have
had Morgan and his philosophy of consolidation on the run. The
small-scale, rural-based antebellum economy was gone for good, urban
labor unrest stalked the land, and the muckrakers wrote their exposés
of ghastly deeds by the wealthy. But the truth of economic life was
more subtle.

The politicians in Washington, the bankers in New York, and the
industrialists throughout the heartland knew better than to launch a
full-scale war between capital and political power. A run on the
banks and a downturn in the economy in 1907 put on visible display
the need for a politically sustainable economic strategy. A shortage
of capital and money supply had triggered the crisis; between January
and March of that year the Dow Jones average lost 25 percent of its
value. At the hub of the rescue effort stood Morgan. A lifetime of
experience had brought him to the fore, and he stanched the wound.
Gold reserves successfully solicited on European markets, Treasury
resources, and the vast reserves of U.S. Steel carried the day. But
the brush with disaster had been close; the country was in need of a
more elastic money supply and of banking legislation to protect
against panic-driven damage. An aging private banker had only put off
that moment of reckoning.

Beyond his banking acumen, the one characteristic that shaped Morgan
was a belief in progress. America was being re-invented, and this
newness appealed to him. Morgan was a worldly and progressive man at
home on both sides of the Atlantic, fluent in French and German, and
familiar with the capitals of Europe. He bridged the divide in
American society between old and new money: he had the pedigree of
the former, but the meritocratic work ethic of the latter. He had the
prescience to bankroll the early work of Thomas Edison, and his home
in New York was the first to be entirely illuminated by Edison's
lights. Morgan also loved books and rare manuscripts, and was an avid
collector of art. He represented in his person both the authority of
capital and the need for its regulation. Is there a more fitting
tribute to him than the fact that the Federal Reserve System, the
nation's central bank, was launched in the year of his death, 1913?

Pierpont Morgan had not been wildly rich when he died. He left behind
an estate of some $80 million. John D. Rockefeller, who never cared
for the financier and his flamboyant style and cigars and his grand
tours of Europe and Egypt, and who thought that the collecting of art
was something both egotistical and useless, was bemused to know of
the estate Morgan had left his heirs. "And to think he wasn't even a
rich man", the industrialist said of the banker who cast such a large
shadow over his world.

Jean Strouse did not set out to rehabilitate or prettify the image
and legacy of Morgan--the robber baron, the heartless banker, the
snob, the man with rhinophyma (excess growth of sebaceous tissue)
whose deformed nose became the cartoonists' fodder. But by the time
she has finished telling of this remarkable man and his love of
order, and of his acceptance of responsibility for his country's
solvency during times of crisis, by the time she has told of his love
of travel and of his sexual and romantic entanglements, she delivers
us an affecting portrait.

In a profound passage Strouse suggests that she had arrived at some
sympathy for her subject in a surprising and unexpected way. The
giants of big business, she writes, had won political ascendancy and
shaped modern America. But the populists and the muckrakers had won a
victory of their own: they got to write the story of that turbulent
time, and so won with their pens and exposés the battle of historical
narrative. John D. Rockefeller may have created a big industrial
empire, but his nemesis, the tireless researcher and debunker Ida
Tarbell, got to write the history of Standard Oil and so to shape for
generations the public perception and profile of Rockefeller. Morgan,
too, Strouse tells us, was depicted as a predator who "robbed
America's farmers and workers to line his own pockets." Generations
had fallen for that view of economic history. It was high time, this
gifted and exacting writer observes, to tell a fuller history.

Morgan's was a simpler world than ours, of course. He was never in
doubt about the basis of a workable economy and, ultimately, for him
the essence of it all was moral. Shortly before his death, Morgan was
called before a congressional committee with strong populist
leanings. It was one of those eagerly anticipated appearances, for
the aged banker was both star witness and would-be villain. Lawyers,
clerks, politicians, reporters and casual visitors all came to
witness the grilling. The old man resolutely stood his ground. The
counsel for the committee was politically insistent, eager to show
the hegemony and power of Morgan, and the long reach of his money.
"Is not commercial credit based primarily upon money or property?",
the lawyer asked. "No sir; the first thing is character", Morgan
replied. "Before money or property or anything else . . . because a
man I do not trust could not get money from me on all the bonds in
Christendom." Might we be lucky enough to have Morgan's likes in this
second Gilded Age?

* * *

If Morgan's odyssey was so thoroughly American, the tale of European
finance was the tale of the House of Rothschild. From the Judengasse
(Jews' Lane) of Frankfurt, this extraordinary family rose, over the
course of the nineteenth century, virtually to invent the
international bond market, and to tower over European finance and
diplomacy.

The tale of the Rothschilds is the stuff of legend: a dealer in rare
coins, one Mayer Amschel Rothschild (the family name comes from the
German for "red shield", for the placard on the door of their house
in Frankfurt) works his way out of the ghetto in the late years of
the eighteenth century, and his five sons are dispatched to the
capitals of Europe, in time to become Europe's wealthiest financiers.
This is the material that the young and prolific Oxford historian
Niall Ferguson works in his sprawling two-volume economic history of
the Rothschilds.

There is a certain amount of "buzz" surrounding Ferguson--he is
thought of as something of an inheritor of the mantle of the late
A.J.P. Taylor. This work, an "authorized" history based on Ferguson's
full access to the Rothschild papers, is a major accomplishment and a
tribute to his talent and tenacity as a historian. It is an
overwhelming work, however, not particularly easy to read. Ferguson
has not really assimilated his own historical material. He presents
it raw, and drowns the story in the details at times. The sort of
talent--the eye for things that matter, the "feel" for history--that
gave Fritz Stern's Gold and Iron (1977) and David Landes' Bankers and
Pashas (1958) their place as classics in the annals of historical
writings on international finance is not to be found in Ferguson. His
is big, plodding history, so crowded with characters--four
generations of Rothschilds and countless statesmen who relied on
Rothschild loans--as to preclude intimacy with the players.

Seizing Their Chance

Ferguson writes that the tale of the Rothschilds is a "single
myth"--a myth of "immense wealth, of meteoric social ascent; of
limitless political and diplomatic power, and of some enigmatic
ultima ratio connected with the family's religion." He gives us the
elements of the myth--the details, the loans given or denied to
warring European states--and for this gift readers of
nineteenth-century finance should be grateful. They will have to
supply their own sense of the pathos of the story, though, for this
kind of texture eludes Ferguson's touch.

The two great revolutions that created the modern European
world--France's Revolution of 1789 and the Industrial Revolution
pioneered by Britain--gave the Rothschilds their chance. France's
revolt had shaken up the old systems of privilege and exclusion, and
opened new possibilities for the Jews of Europe. When the
revolutionary armies of France overran Germany, they literally
demolished the Jewish ghetto of Frankfurt. For Mayer Amschel and his
children, a much bigger world was suddenly within reach. Just a few
years later, the patriarch of the family sent the most capable of his
sons, Nathan, to represent the family in Britain. Arriving in 1800 to
be a merchant in the textile industry, he was that country's--and
perhaps the world's--single wealthiest individual at the time of his
death in London in 1836. Three decades later in France there were
estimates that the fortune of his brother James amounted to 4 percent
of France's GDP. The Rothschilds would partake of the glories of that
"long century" in European history, from the Revolution of 1789 to
the eruption of the First World War, and be seared by the populism
and anti-Semitism that shadowed the emancipation of the Jews. As
capital replaced land as the source of power, and as aristocracy
yielded to commerce, the Rothschilds were both beneficiaries of that
change and a lightning rod for the disgruntled and for every wave of
nostalgia and reaction that swept over the raw social landscapes of
the time.