Jp Morgan Case Study

J.P. Morgan

Born into a wealthy family in Hartford, Connecticut in 1837, John Pierpont Morgan began his rise to the top of the financial world. During his upbringing, Pierpont Morgan was exposed to international banking at its highest levels. As he traveled and was educated around the world, Morgan kept immaculate records of his own financial thriftiness demonstrating his attention to detail. Graduating from Gottingen University in Germany, Morgan moved to New York to start his financial career on Wall Street. At the age of 25 he opened his own banking firm which enjoyed some success but Pierpont wanted to be the best. In 1894 due to the deaths of father, Junius Spencer Morgan, and his banking partner Anthony Drexel, Pierpont combined his father's London based firm with his own, forming J.P. Morgan & Co. The firm grew at a great rate and had many large transactions causing Morgan to soar to the top of the financial world. Although he was not the wealthiest man of his time, J. Pierpont Morgan lived the American dream by possessing an immeasurable amount of power and authority over American business due to his control of the nation's railroads, his rescuing of the United States Government out of an almost certain economic meltdown, his role in the creation of the country's first billion dollar corporation, and his unrivaled leadership and impeccable success.

The first area of the business world that Morgan dominated was the bustling railroad industry. In the late 1800s, railroads were at the center of the United States economy. When the financial depression of the mid 1890s hit, many railroads became financially unstable and were headed towards bankruptcy. "Within two years nearly one-fourth of the total railway capitalization of the United States had passed through the bankruptcy courts" (Strouse 126). Among the railroad companies that went bankrupt were some of the biggest in the country: Baltimore & Ohio, Erie, Northern Pacific, Union Pacific, Santa Fe, Reading, and the Richmond Terminal. As a solution to the many railroad company failures, the bankruptcy courts allowed for the reorganization of ownership of the railroads. The reorganizers didn't need to be experts in railroading, the reorganizing "called rather for a mastery of money and the paper instruments which provide money" (Allen 83). No single financial problem in the previous history of the world equaled in difficulty and magnitude as the reorganization of the railroads in the United States. Pierpont Morgan was the perfect man for the job. "Furthermore there was nobody in the country who could match Morgan's own experience as a negotiator among railroad executives and financiers, or his reputation for financial impregnability, reliability, and personal authority" (Allen 84).

Over the next four years, Morgan successfully reorganized several railroad companies to make them