A hundred years ago, the most famous banker in America testified before Congress in one of his last public appearances. His name (hint: you’ve seen it in recent headlines) was John Pierpont Morgan, the redoubtable founding father of today’s JPMorgan Chase. At the time, Morgan was without peer in American banking, simultaneously the old man and the great innovator of American finance. The list of corporations he organized was legendary: U.S. Steel, International Harvester, General Electric. So was his personal power. From the dawn of the Gilded Age, he reigned as “the boss of bosses,” in the words of muckraker Lincoln Steffens, a mystical figurehead and ruthless businessman wrapped up in a single top-hatted, pot-bellied package.
It was in his capacity as the great “boss” of American finance capitalism that an elderly Morgan appeared before Congress in December 1912 to answer for Wall Street’s alleged sins. Five years earlier, he had helped to stave off national economic collapse when stock market manipulation yielded a near-catastrophic Wall Street bank run. Despite his success, the Panic of 1907 had inspired outrage across the nation. How was it possible that one man had the power to save or destroy the American economy? And why could the federal government, by contrast, do nothing? To many Americans, Morgan’s machinations seemed to prove that a shadowy “money trust” controlled the national economy. The congressional hearings, led by Louisiana Democrat Arsène Pujo, aimed to expose the secrets of the money trust once and for all.
Morgan arrived in Washington in regal fashion, surrounded by a phalanx of lawyers, subordinates, and supportive heirs. Under questioning, he was blunt and impatient, offering a show of congressional truculence later matched only by communists and tobacco executives. His answers often consisted of two outraged words: “No, sir.” When he spoke at greater length, he sought primarily to justify the Wall Street status quo. Morgan portrayed himself as a besieged aristocrat, misunderstood by the masses despite his efforts to do good. Rather than a master of the universe, he claimed to be a servant to duty and to the iron laws of economics.
Morgan’s defiant performance increased his heroic status on Wall Street; congratulations poured in from bankers and brokers. Outside those confines, though, his arrogance helped to seal the case for financial reform. Building off the Pujo hearings, future Supreme Court Justice Louis Brandeis set out to write his influential Other People’s Money, a vicious (if rather tedious) indictment of the “interlocking directorates” that allowed Morgan and other banks to exercise undue economic influence. Based partly on Pujo evidence as well, in 1913 the Wilson administration pushed through plans for a new central bank known as the Federal Reserve. Historians and economists have argued ever since about whether the creation of the Fed ultimately increased or decreased Wall Street’s power. But there can be no question about its political meaning at the time. In 1913, nearly all Americans saw the Fed as a major government triumph against the likes of J.P. Morgan, and the beginning of the end of the money-trust era.