On January 2, 1889, a circular marked “ Private and Confidential,” was issued by the three banking houses of Drexel, Morgan and Company, Brown Brothers and Company, and Kidder, Peabody and Company.  The most painstaking care was exercised that this document should not find its way into the press, or otherwise become public.  Indeed, extraordinary measures were taken to surround its contents with every precaution of secrecy.

Why this fear ?  Because the circular was an invitation, tacitly understood as a command, to the great railroad magnates to assemble at Morgan’s house, No. 219 Madison avenue, and there form, in the phrase of the day, an iron-clad combination.  The plan was to make a strict compact which would efface competition among certain railroads, and unite those interests in an agreement by which the people of the United States could be bled even more effectively than before.  For the sake of appearance, in case the nature of the undertaking should leak into public print, the promoters garnished over their real purposes with a string of diverting phrases.  Their sole aim, so they pleasantly indited it, was an association “to maintain public, reasonable, uniform and stable rates,” and they added that another object would be the gathering of statistics regarding railways.

Such subterfuges deceived nobody but the credulous or uninformed.


That circular is a historic document, well worth more than passing notice ;  and he who is familiar with the forces then at work will rightly consider it of far greater importance than Presidents’ messages, ordainments of Congress or Courts’ decrees.

At a time when the whole gravamen of law and juridical precedent was being used to insist upon industrial forces remaining stationary and stagnant, this circular came as a proclamation of defiance.  Common and statute law sternly declared that the thing called competition in trade must be kept alive, and that if it could not sustain itself by its own merits, the law should demand its maintenance.  The causes producing and justifying competition were passing away, but none of the law-making bodies recognized the newer conditions, nor made any provisions for them.  But the magnates realized that the old indiscriminate system of competition was rapidly becoming archaic, and that the time was ripe for a more systematic organization of industry.  And so, while Congress and the legislatures were busily enacting law after law, supposedly edicts of “ the sovereign people of the united States,” a few magnates issued a brief circular which intrinsically was of far, far more binding weight than entire volumes of statutes impotent, in the long run, in the face of onrushing economic forces.

But the ideas of the people at large and the self-interest of the middle class were against any overthrow of the competitive system.  Tone their statement of purposes down, as the magnates did, and however harmless they might represent their aims, the plan of this group of bankers and railroad grandees was certain to arouse the sharpest suspicions.  A restless, sullen state of mind pervaded the mass of people.  Distrustful of any assertions made by the magnates, they were ever ready to see sinister projects beneath bland announcements.  Furthermore, the magnates’ definition of “ reasonable ” was diametrically different from that of the people at large.  Matters and charges that the magnates honeyed over as “ reasonable adjustments,” impressed the popular understanding as extremely unreasonable ;  as gross extortions of which the law should take condign notice.


At the behest of the middle class, laws directed, superficially at least, against the magnates’ arbitrary power and concentration of resources were everywhere being passed.  Since the putting down and dissolution of the great labor movement of 1886, serious inroads from that quarter were no longer feared.  But the work of extinguishing the middle class had to be proceeded with slowly and discreetly.

Workers’ uprisings, political or other, could be crushed by force and court decrees and by bribery and fraud at the polls.  In any emergency the whole middle class would stand with the great propertied interests in subduing the working class.  Yet when the fight for supremacy was one confined to the middle class and the plutocracy, the magnates had good reason not to attack the middle class too openly.  The country swarmed with organizations of manufacturers, jobbers and small tradesmen, and in the West and South the Farmers’ Alliance, an ally, was at its strongest.  This middle class arrogated to itself the distinction of being “ the public.”  The working class, whom it used and exploited, had only a few obscure trade journals to disseminate its views and voice its demands, and, although comprising the immense bulk of the voters, had not a single real representative in political office.  But the interests of the middle class were represented by thousands of newspapers and journals ;  by a host of political spokesmen and lawyers and college professors, and by the force of prevalent law and commercial institutions.

In warring upon the magnates the most persistent argument that the middle class used in its appeal for sympathy and support, was that the extortions of the magnates were immoral.  Precisely as, when the workingmen in previous decades had struck for a shortening of their hours of daily labor, the manufacturers had declared the movement insurrectionary and immoral, so now they used the same plea against the exactions of the magnates.  When the workers complained that their bosses oppressed them, the bosses retaliated with the charge that the workingmen were unruly, and that their demands for redress were not based on morality.  But when the magnates squeezed the manufacturers, jobbers and retailers then these divisions of the middle class made vehement lamentations that they were the victims of an immoral conspiracy.

Nothing could exceed the baseness and hypocrisy of the middle class, as a class.  It demanded the widest latitude in law in placing no restrictions upon it either in exploiting its employes, or in robbing back from them in various swindling ways the meager wages it paid.  It insistently fought the workers’ struggle for a shorter workday and more wages ;  it opposed the passage of even slight laws for the protection of the workers’ labor ;  it combated movements for factory and tenement reforms.  At the same time it insisted upon its right to make and sell shoddy goods and adulterated products, and impose them upon the workers at extortionate prices.

The many laws which, after strong agitation on the part of labor organizations and various other bodies, the different legislatures were passing at this time, indicate the widespread practice of manufacturing and selling adulterated and often poisonous foods and drugs.  The passage of these laws had long been contested by the capitalist class, as a whole ; and even after they were enacted, they were not generally enforced, and were so ineffective that, many years later, during Roosevelt’s administration, a National Pure Food Act was passed by Congress after the severest and most persistent opposition on the part of the beneficiaries of the frauds.  This law, also, has been largely ineffective.

In 1879, Wisconsin enacted a penal law, providing penalties for the adulteration of foods and drugs.  Ohio, in 1887, 1896, and 1898 passed laws for the punishment of various kinds of adulteration.  New York, in 1893 and 1898, passed laws forbidding the fraudulent sale of certain imitation foods and certain fraudulent stamped goods.  After years of agitation, Massachusetts, in 1897, passed a law (Chap. 344) prohibiting the manufacture or sale of adulterated food.  Missouri, in 1889 and 1897, passed laws against the adulteration of certain foods.  Iowa enacted laws for the punishment of those selling adulterated milk, cheese, butter and linseed oil.  Illinois, in 1881, passed a law against the fraudulent manufacture or sale of imitation butter, and reenacted it in 1897.  New Jersey, in the same year, passed an act to prevent the adulteration of foods and drugs, and enacted another law in 1897.  Pennsylvania prohibited the sale of adulterated drugs, and provided penalties for the adulteration of milk and cream.  Michigan, in 1895, passed an act to prohibit and prevent adulteration, fraud and deception in the manufacture and sales of articles of food and drink.  Nebraska and Kentucky passed similar laws.  South Dakota, in 1885, enacted penal laws relating to the adulteration of food and drink, and, in 1897, passed another act increasing the penalties.  These are some examples of the various State laws.  Nearly all of the States also passed laws against the sale, by fraudulent weights and measures, of coal, wheat and various other foods and commodities.


Not a move, on the other hand, could the magnates make without the middle class raising the cry of fraud — a not untrue accusation, it is hardly necessary to say, but one singularly ill-chosen from a class itself gangrened with fraud.  The Farmers’ Alliance and kindred organizations virtuously fulminated against the extortions and frauds of the magnate class ;  the cattle dealers of the Southwest especially were not merely bitter, but rancorously so, against the railroad kings.  Yet all of the large cattle ranches had been obtained by fraud in more or less degree.1  The cattlemen not only practiced extortions, but in their economic wars with adjacent cattlemen, forced their cowboys to fight and kill the cowboys of their neighbors, and risk being killed themselves ;  nearly all of those cowboy affrays so romantically described in fiction, arose from nothing more or less than economic disputes between competing rival master cattlemen.

To say that the entire manufacturing class was defrauding and swindling in every conceivable form is but to state a truism elaborated upon specifically in many a public document.

Leaving aside the current stupendous frauds in profiting from misleading semi-worthless merchandise, or adulterated products sold under false pretenses — a traffic shared in by wholesaler, jobber and retailer ;  aside from this phase and a multitude of other phases, we shall simply give one typical graphic example of what the manufacturers were doing in one of the largest manufacturing States in the Union.  While protesting against the evasion of taxation by the railroad corporations, the manufacturers were defrauding in the one item of taxation alone of a sum gigantic in the aggregate.  “ It is a notorious fact,” reported Comptroller Morgan, of New York State, in 1900, “that hundreds of manufacturing companies, whose plants are located in this State, whose business is chiefly transacted here, and which for all practical purposes are New York enterprises, escape all indirect taxation in this State, and much local taxation, by being incorporated in other States.”  They paid substantially nothing for fire and police protection, Comptroller Morgan added.2  Yet in case their employes struck, these manufacturers were ever ready to requisition the pretext of violence and demand police and militia to club or shoot into submission the very working class from whose labor the entire burden of taxation came.  This had been a long-continuing condition of affairs in every State.


These facts will give a fairly clear idea of the composition and pretensions of that middle class which the news of the meeting in Morgan’s house was bound to excite into convulsions.  A momentous gathering it certainly was that assembled in Morgan’s mansion on January 8, 1889.  Who are they we note there ?  Apparently private citizens ;  in reality monarchs of the land :  Jay Gould with his son George, held by the leading strings ;  Stickney, of the Northwest territory ;  Roberts, of the Pennsylvania Railroad, sleek Depew, echoing the Vanderbilts ;  Sloan, of the Delaware, Lackawanna and Western Railroad, and a half dozen more magnates or their accredited mouthpieces.  The honorable legislatures could gravely discuss the advisability of this or that legislation ;  the noisy “ Congress of the United States” could solemnly meet and after wearing out months in rodomontade, profess to make laws ;  the high and mighty Courts could blink austerely and pompously hand down their decisions.  But in that room in Morgan’s house sat many of the actual rulers of the United States ;  the men who had the power in the final say of ordering what should be done.

Morgan was chairman of the meeting, and with wonted brusque directness went straight to the point.— Thanks to a stenographic report of the proceedings which fortunately we have been able to get hold of, the work of that meeting is clear.  The name of the organization was to be the “ Interstate Commerce Railway Commission ”;  its essential purpose the cessation of competition among its members.  But how was any magnate to be prevented from competing with another, or stopped from encroaching upon another’s domain ?  What penalties should there be, and how could they be enforced ?  Certainly no law could be invoked to compel the carrying out of such an agreement, for the law explicitly prohibited combinations, and any legislation would not only be outlawed, but would reveal the extent of the whole criminal compact.


There was, however, a far greater power than that of law, namely, the power of massed money.  If any magnate present were inclined to balk at the prepared program he was brought to an instant realization of the punishment when Morgan announced :

I am authorized to say, I think, on behalf of the [banking] houses represented here that if an organization can be formed practically upon the basis submitted by the committee, and with an executive committee able to enforce its provisions, upon which the bankers shall be represented, they are prepared to say that they will not negotiate, and will do everything in their power to prevent the negotiation of, any securities for the construction of parallel lines, or the extension of lines not approved by that executive committee.  I wish that distinctly understood.3
JP Morgan share

The threat, or promise, as it could be differently interpreted, was assuredly understood.  Vast as was the wealth of the magnates present or represented, neither any one or a combination of them, dared (had they been so disposed) to defy such an ultimatum.  To do so meant inviting the vindictive, crushing wrath of a clique of national and international bankers whose money and power could be used with the most destructive results.  Nor was there any possible way of appealing to a higher power.

What if many of the State legislatures had penalized combinations in restraint of trade ?  What if the irate middle class was frantically clamoring for the enforcement of these laws ?  What if in both common and statute law this coercive decree of the bankers was criminal conspiracy ?  Every man in that assemblage knew that, judged by prevailing laws, he was participating in a conspiracy, yet no apprehension was acutely felt that the numerous national and State laws would be strictly enforced against him.  So confident of its ground was the meeting, that the subject of possible prosecution was not given a thought.  The sacred doctrine, the “ inalienable, undeprivable right ” of competition was, without any ambiguity or ceremony, given a deadly blow.  For that, if for no other reason, the meeting was memorable.  The magnates were sure of immunity.  To them laws were instruments not obstacles ;  the same code of laws which they lightly stamped under foot they could always successfully use against workingmen on strike, as they did, for example, five years later, in the great railroad strike of 1894, when Federal troops were ordered out at their command to overawe, and, if necessary, mow down the strikers.

Another phase of that meeting (a “conference,” as it was called) deserves mention.  How much of a vacuity men were considered, magnates though they were, and how all important property was held, was shown by the method of voting.  As each proposition was advanced, it was put to a vote.  The names of the magnates were not mentioned in the roll-call ;  it was the corporate railroads which were expected to vote and which did vote.  Thus, instead of Gould’s name, the name of his railroads was called ;  the Missouri Pacific and the Wabash voted, not Gould.  What could have been more beautifully simple and direct, so free from cant, so faithful to the spirit of the human money bags present ?  If this method were only adopted in Congress much good in point of popular understanding would result, for while the old forms there still persist, most of our “ statesmen ” would not be libelled were the roll-call made by corporations instead of by putative representatives of the people.

If a mere threat of the powerful bankers, led by Morgan, was enough to convince or overawe a group of the railroad dictators of the United States, what could not the banking power accomplish when it actively concentrated its might of money upon a given object ?  Neither capitalist foe nor any government could withstand it. The extremes to which it could go in successfully executing its plans and in dissipating all obstacles by its terrorism, was typically shown in a noted bond deal, in 1895, whereby the United States Government was held up by a syndicate of bankers headed by Morgan, and forced to give over a virtual gift of many millions of dollars for the privilege of having a nominal and transient claim on a supply of gold which those same bankers had drained from the United States Treasury only a short time previously.


Before describing this transaction a digression will be made to chronicle some intervening facts in Morgan’s career.  His father died in 1890, bequeathing to him a fortune superficially estimated at $10,000,000.  But it is needless to say that J. Pierpont Morgan was already a seignorial multimillionaire.  That he was intensely hated by a large portion of the element in the financial district was undeniable, but it was a hatred caused not by objection to his methods, but because he eminently surpassed in either the brutality or finesse of those methods.  All of his decriers of his own rank had at basis some personal grievance resolving itself into a rankling enmity at being outwitted or outdone by Morgan.  Had he given them the slightest opening they would have enmeshed and swindled him and gloated over the deed.

But with the exception of one distinguished antagonist, to whom we will refer later, he anticipated and overcame them all, and left many of them with the embittered memory of their collision with him, but with nothing more substantial.  No doubt Morgan’s personality had much to do with this current hatred on the part of those who came into contact with him ;  he was at no time to be suspected of being of the unctuous order of men, full of blandishments and sweetened guile.  Rather, he was a sort of plug-ugly in the financial purlieus, belligerent and ruthless, with a rough, dictatorial manner, unsparing of the feelings or interests of those who in any way crossed his will or plans.

Those personal details, however, were not known to the great mass of the people the country over.  The popular conception of men in public notice was derived almost wholly from what the newspapers said, and these constantly, with rare departures, portrayed Morgan as a great financier and benevolent gentleman.  In Morgan’s financial transactions immense numbers of the middle class, as well as people higher in the scale of the well-to-do, lost, in the aggregate, great sums of money torn from them in the stockjobbing operations in Wall street.  But they did not blame Morgan personally ;  their bitterness was cast at the generic monster called Wall street.  And yet not a single one of those thus stripped had not deliberately set out to enrich himself at someone else’s expense ;  even those who put their funds in stocks for the purpose of “ legitimate investment,” did so with the full knowledge that the lower the wages paid on the railroads and in the factories, and the longer the daily labor of the workers, the brighter were the chances for a larger dividend.

At the same time, while hated in the financial district, Morgan was deeply feared for his far-reaching power, and what were considered his relentless methods both in accomplishing his ends and in settling scores.  Observers usually described him, in the slang of Wall street, as a man who was in business “ for all there is in it.”  As though anyone else were in Wall street for a different purpose !  His policy was regarded as that of finding a weak spot in a corporation and then “ squeezing it for all it was worth ”— a very much biased accusation, inasmuch as every other successful financier incontrovertibly pursued the same methods, although not always in the same way.  His favorite expression, when questioned about his transactions was, “ I am not in Wall street for my health.”  His enemies whispered about that he was a “ freebooter in finance ”;  his admirers — those who profited by his bounty — loudly proclaimed his greatness.


Of Morgan’s methods in siezing, in conjunction with William H. Vanderbilt, the Philadelphia and Reading Railroad from McLeod, in 1893, we have already given a description.4  In that account it was shown how, when McLeod pressingly needed funds both to finance his railroad’s coal combination and to pay for improvements, he found that the leading banking institutions had impaired, and then cut off, his credit.  Morgan and Vanderbilt were then able to assault and beat down the price of Reading stock, buy large quantities of it at a very low figure, and gain control of the system.  As a railroad, the Reading line was not extensive ;  its great value lay in its ownership of anthracite coal mines, of vast unmined deposits, and in its coal-carrying traffic.

To his other manifold powers Morgan now added that of coal magnate.  The Constitution of Pennsylvania, as we have seen, expressly forbade railroad corporations from owning and operating coal mines.  But that law did not exist which the very rich were not able to evade.  Dummy holding companies were organized ;  and, although everybody knew that these companies were mere subterfuges, the public authorities took no action, and when, after many years of inactivity, they, with indifferent energy brought suit, the case was appealed by the magnates to the Supreme Court of the United States, from which, in 1909, the railroads emerged victorious with a decision of so equivocal a nature as to be tantamount to one in their favor.

Two immediate results signalized Morgan’s entry as a monarch of the coal fields.  To both we have adverted in a previous chapter, but they will here bear repetition.  Every housekeeper using hard coal was taxed to add more millions to Morgan’s fortune ;  the price of stove coal was raised from $1.25 to $1.35 more a ton than had been charged before.  The second result was the more rapid process of crushing out the independent coal operators.  By a concatenation of ruthless methods5 these independents were ruined and driven out, not without much wailing against oppression, and shrill charges of fraud.

Yet the very mines which they were virtually coerced into giving up had been secured by fraud, either by them or by their predecessors.  The law records of the State of Pennsylvania reveal case after case, before and after the Civil War, of fraudulent tax sales of lands containing coal ;  and the bribery of the Pennsylvania Legislature by individuals and corporations for coal mining and other kinds of charters and special rights had been so admittedly brazen that, in 1847, the Legislature, with self-righteous display, was constrained to pass an “Act to Define and Punish the Offense of Bribery,” making the crime of giving or receiving a bribe a felony, punishable with a fine not exceeding $5,000 or a sentence of five years in prison.6  This law was treated with levity ;  it had no other effect than to refine and obscure the methods of bribery.  Another act was passed on March 3, 1860, and a third on April 29, 1874, which laws were likewise facetiously regarded by the seekers of vested privileges, and the bribery went on persistently.7  Time after time the Legislature of Pennsylvania was forced to appoint investigating committees to report on this or that charge that bribes had been used ;  one of the few times when any of the bribed ever went to prison was in the Riot Indemnity Bill trials in 1879-80.

Some excuse was needed to give the appearance of a necessity for the great increase in the price of coal.  The coal magnates supplied it beforehand.  They inquired how they could avoid charging more.  Had not the production of coal fallen ?  And were not the freight rates extremely high ?  But the Government knew that these claims were fabrications.  The House Committee on Interstate Commerce had unanimously reported that the coal magnates had deliberately reduced the output of coal ;  that although the capacity of the collieries was 50,000,000 tons a year, yet only about 40,000,000 tons were being mined, so as to make a show of scarcity.  And as regards freight rates for coal the committee reported, “ Although coal in freight can be handled cheaper than almost any class of freight, yet it pays nearly double the rate of wheat and cotton.”8

Without quibble, this combination was a conspiracy, criminally and civilly liable.  But neither National or State law was enforced against it.  The House Committee reported that the Interstate Commerce Act was too ineffective a law to proceed under, and that ended talk of criminal prosecution.  The Government machinery of the United States practically became (as it did in so many other instances) an accessory of the coal combination in allowing it to squeeze more huge extortions from the sufferings of the mass of the people.

The boasted Government “ of, for and by the people,” was a Government run wholly by the great propertied interests as a necessary appendage, based upon force, for compelling the people to submit without redress or quarter.  Such operations as this explain how Morgan’s fortune leaped by millions at a time ;  every dollar extorted in that increase of price came very largely from families who, already burdened by a thousand and one extortions, were forced to suffer still more keenly ;  each new compression from above drove them deeper into abject poverty, with all its demoralizing and horrible evils.  The whole edifice of capitalism was built on a vast, ghastly charnal house, overcrowded with the bones of numberless victims.  Yet the industrial grandees who thus slaughtered with impunity in the insidious ways of trade paraded themselves as very devout men :  Morgan was a vestryman of St. George’s Church, New York City, and ostentatiously passed the contribution plate in the name of Christ.

To this coal transaction of Morgan’s there is a sequel, showing how, and by what methods, he expanded as a coal dictator, but the recounting of this will be deferred to its proper chronological place, and that famous bond deal of his in 1895 will be considered.


The two Drexel partners of his, Frank and Anthony Drexel, passed away, each leaving an estate of $25,000,000.  They, too, had acquired the glorious name of philanthropists ;  before dying they had together given away the sum of $8,000,000 to found sundry charitable institutions in or near Philadelphia.  Since their partnership with Morgan they had, of course, shared in all of his transactions.  Some of these we shall have to pass over with only a reference, inasmuch as the facts are exceedingly involved.  But this one point sticks out :  Great railroad systems, in the building of which neither Morgan nor his associates had in the slightest participated, which had been constructed largely with public funds and gifts of public land, and which they had never seen until long after they were in operation : — these railroads suddenly passed into the ownership of the Morgan combine, which largely meant Morgan.

How did this transformation come about ?  Shall we have to retell the old story ;  the original looting, the bankruptcies, reorganizations, and tricks of finance, squeezing out of creditors and small stockholders ?  However glib financial writers may attempt to explain it, or with whatever fine phrases apologists might gloss it over, the matter reduces itself to this trenchant fact :  That Morgan became possessed of great railroad systems in the South, with the initiation and operation of which he had had no more to do than a babe.  The Industrial Commission reported these railroads as being in the “ Morgan group ” by 1901 :  The Southern Railway, with its 6,807 miles of track ;  the Mobile and Ohio Railroad, the Queen and Crescent, the Central of Georgia (later taken over by Harriman), the Georgia Southern and Florida, the Macon and Birmingham, the Philadelphia and Reading, the Lehigh Valley, the Erie (subsequently acquired by Harriman), the Central of New Jersey, and the Atlantic Coast line.9  The total extent of these railroads was 19,073 miles.

Compared to the tortuous and difficult details of Morgan’s “ reorganizations,” the tale of his United States bond transaction of 1895 is simple enough to be easily comprehended.

As gold was the international trade standard of value, the United States Government followed the policy of holding a certain amount as a treasury reserve.  When, by reason of some cause or other, this reserve was depleted the Government was compelled to issue bonds to replenish it.

2 dollar treasury note,
legal tender act of July 14, 1890

The powerful junta of leading national and international bankers definitely and deliberately forced the United States Government to put out these bond issues.  This they did by draining the treasury of its gold, and by then going through the empty form of selling back that gold in return for bonds.  The treasury notes and greenbacks, comprising much of the currency of the United States Government, were redeemable in coin.  This provision was construed as calling for payment in gold.  The bankers would take over to the sub-treasury in New York City great stacks of treasury notes and greenbacks and exchange them for gold.  This gold they would then hoard in their vaults.  The Government authorities were fully aware of this proceeding, and knew quite well that the ulterior purpose was to force a bond issue.  After the banking clique had obtained the bonds, it could do two things — sell large amounts of them, at enhanced premiums, to smaller banks, savings banks, insurance companies, estates and investors in general, and it could use such portion of the issue that is kept as a basis for issuing new currency.  The large private bankers, such as Morgan, had their chain of auxiliary national banks, by means of which bond issues could be converted into currency, and the time-honored extortion of getting a double interest could be managed.


In 1894 the Government had been drawn into handing over two bond issues of $50,000,000 each to these bankers.  Their profits ;  it is estimated, reached tens of millions.  With the advent of the year 1895 the United States Treasury was again emptied of gold.  Where had the gold, which the Government had purchased only a short time previously at usurious rates, gone ?  The reports of the large banks gave the answer.  By the end of January, twenty-six banks in New York City had in their vaults a hoard of $65,000,000 in gold.  Presently the amount totaled $129,000,000, all told.  The Government shrieked in helplessness ;  President Cleveland was reported as saying privately that “ the banks have got the country by the throat.”

At the appropriate moment a syndicate of bankers appeared in the open and magnanimously offered to supply gold to the Government in exchange for bonds.  This syndicate was composed of J.P. Morgan and Company, August Belmont and Company, representing the Rothschilds :  James Speyer, the National City Bank and four other extremely powerful national banks.

In the negotiations with President Cleveland for the bond issue, Morgan’s emissary and clever man of law was Francis Lynde Stetson, who had been regular counsel for Morgan since 1887.  Stetson had been Jacob Sharp’s attorney at the very time when, in 1884, Sharp had bribed the New York Board of Aldermen with $500,000 to give him a franchise for a surface railroad in Broadway.  His activities in Sharp’s transactions caused him to be subjected to some severe questioning in 1886 by the New York State Senate Committee on the Broadway Railroad.  After Sharp had successfully bribed the New York Aldermen, Elkins and Widener, who were likewise bribing the Philadelphia Common Council and the Pennsylvania Legislature, and who became multimillionaire street railway magnates, tried (although for the time unsuccessfully), to lease the Broadway Railroad for a term of 999 years, and as an earnest of good faith, deposited 10,000 shares of Broadway stock, which they had secured, with Drexel, Morgan and Company.10  Morgan knew that every one of these shares was the product of bribery, and that the whole Broadway franchise had been so obtained.  Perhaps Stetson’s excellent and adroit work for Sharp highly commended him to Morgan.

After Cleveland had been defeated in his candidacy in 1888 for a second term as President of the United States, he resumed the practice of law, and formed a partnership with Stetson.  Cleveland was reŽlected President in 1892 ;  thereafter Stetson was a frequent and confidential caller at the White House.  These various circumstances were much commented upon, and with particular animadversion, when Cleveland was virtually charged in 1895 with openly selling out the people of the United States to the Morgan syndicate, represented by Stetson.


The situation, then, was this :  The syndicate had squeezed the United States treasury of its gold ;  it had then compelled a bond issue, and declared that it alone could supply the required gold.  This was a transparent falsehood.  Many members of Congress urged Cleveland and John G. Carlisle, Secretary of the Treasury, to make the bond issue a “popular” one.  By “popular” was not meant the mass of the people, who had neither gold nor other kind of money, but from the smaller capitalist interests.  Cleveland and Carlisle, however, turned over the $62,000,000 of four per cent. bonds to the Morgan syndicate at the price of 104.  The syndicate immediately resold the bonds to investors in America and in Europe at 118, 119 and 120, clearing, it was estimated, in direct profits, about $18,000,000.11  This sum represented the sum that would have gone to the Government had the sale of bonds been accomplished without this intermediary operation.  The contract with the Government entirely dictated by the bankers, headed by Morgan, gave the syndicate, furthermore, an option on all bond issues up to October 1, following, and allowed it to choose its own time to deliver one-half of the total amount in gold.

From every public quarter came the severest denunciations of Cleveland, on the one hand, and Morgan, on the other.  Even partisan newspapers and periodical supporters of Cleveland condemned the bargain as scandalous, and declared that the Government had been shamelessly “ buncoed,” if, indeed, no worse charge could be brought against its chief executive.12  His own political party repudiated Cleveland.  But a significant insight into the indifference with which the great magnates viewed storms of criticism was furnished by the fact that Morgan ignored the denunciation of his acts, yet deeply and openly resented a published description of himself as a “ ruby-visaged magnate.”  He was very sensitive as to his facial deformities.

So far as strictures on his acts went, they soon passed away, and the very journals which had been foremost in verbally flaying him, reverted to their old sycophantic policy of extolling him as an illustrious financier and philanthropist.  Of all the magnates, none had a more biting contempt for the newspapers than Morgan.  None knew better than he that whatever outbreak they might occasionally make, their course on the whole could be easily controlled by the great propertied interests.


To realize, however, the full import of the action of the Government in this particular bond sale, by which a present of fully $18,000,000 was made to a few bankers already surfeited with wealth, it is necessary to recall the conditions among the mass of people, especially after the panic of 1893.  In normal times, according to the estimate of Carroll D. Wright, for some years United States Labor Commissioner, the number of unemployed at any one time was about 1,000,000 men, women and children.  After the panic of 1893 the number reached perhaps 3,000.000.  Not a finger was lifted by the Government in the aid of any of these, nor was the remotest consideration given to means for alleviating this misery or to the causes producing it.  Repressive measures were used to suppress street meetings of protest, and leaders of labor unions were flung into prison on the alleged charge of contempt of the Federal courts.  Only the year before, in 1894, the regular army had been ordered out by Cleveland against the railroad workingmen on strike.  Nowhere and in no respect did Government do other than carry out the demands made by the great capitalists who dominated all of its functions.

a 3 million dollar cheque


1 See House Reports, Forty-eighth Congress, Second Session, 1884-5.  Executive Document No. 267: xxviv.  This document deals with the Texas ranches.  In previous chapters of this work many facts have been given from official documents showing the illegal, and often violent, seizure of cattle ranches throughout the West.

2 Annual Report of the Comptroller of New York State, 1900:xxiii.

3 “Proceedings of Conference Between Presidents of Railroad Lines West of Chicago and St. Louis, and Representatives of Banking Houses, held at No. 219 Madison Avenue, New York, January 8 and 10, 1889”:36.

4 See Chapter vii, Vol. ii.

5 See testimony before the House Committee on Interstate Commerce, House Reports, Fifty-second Congress, Second Session, 1892-93, Vol. i.

6 Laws of Pennsylvania, 1847:217.

7 One of the many continuous scandals growing out of corruption of the Pennsylvania Legislature was that of the passage of an act in 1876 in the interest of the lumbermen.  Members of the Legislature were paid or offered from $300 to $500 each to vote for or against the bill.  This bill was entitled, “An Act to Regulate the Amount of Toll and Other Charges to be Laid and Collected by Boom Companies.”  It was fought by certain interests.  See, “ Testimony Before the Committee to Investigate the Means to Secure or Defeat the Passage of the Boom Bill,” Pennsylvania Legislative Docs., 1876, Vol. v.

8 House Reports, etc., 1892-3, i : iv.

9 Final Report of the Industrial Commission, 1902, xix:308.

10 See testimony of James W. Forshay, president of the Broadway and Seventh Avenue Railroad Company, New York Senate Committee on the Broadway Railroad. 1886, 491-492.

11 The bond contract made with the Government, on February 8, 1895, was kept secret for some days.  After the issuance of the bonds, Morgan personally superintended the receipt of the bids at his office.  The rush to buy bonds from him was so great that twenty-two minutes after the bidding began, he announced that no more bids would be received ;  that the whole supply of bonds had been sold.

12 Hardly had the gold reserve by this $62,000,000 bond issue been obtained, than it was again quickly drained by the bankers.  In the latter part of 1895, sinister rumors spread that a new bond issue was under way.  These rumors were confirmed by the issuance of a private circular by J. Pierpont Morgan and Company, announcing their purpose to form a syndicate to take over an expected additional issue of $200,000,000 Government bonds.  Morgan and his associates anticipated a profit of $20,000,000.  Evidently, Morgan knew the precise amount the Government intended to borrow ;  when the Government issued its call, its terms corresponded with those of the Morgan circular issued one week earlier.  Such a public uproar resulted, that Cleveland and his Cabinet were compelled to throw over the Morgan syndicate, and the new loan was “ popularly floated,” at a saving to the national treasury of $20,000,000.
      It need scarcely be remarked, as a typical and memorable fact, that in his official correspondence and public statements, Morgan was representing himself as actuated by “ patriotic considerations” and a desire to serve “the best interests of the Government and the people !”  One Wall Street broker, in a public statement, cynically described it as “ fascinating and lucrative patriotism.”  When Morgan was planning to get hold of the new $200,000,000 loan, a banking friend asked whether he could not have some details of the syndicate’s plans before subscribing.  “ Can’t give you any particulars,” Morgan was quoted as responding.  “ If you want to make some money and have got the gold, subscribe.  If not, au revoir.”