Read more about Wall Street's ongoing crisis.
"This is the place to stop this trouble!" J.P. Morgan declared on the afternoon of Oct. 23, 1907. After the failure of several trust companies (unregulated banks, kind of like today's subprime lenders), the banker had decided that the collapse of the Trust Company of America would cause too much damage to America's fragile financial system. He pulled together leading bankers and pooled funds to bail out the firm. Over the course of two weeks, as a fevered crisis gripped Wall Street and Washington, Morgan acted time and again: saving brokerage firms, rounding up $25 million in cash in 20 minutes to help the New York Stock Exchange stay open, underwriting municipal bonds for New York City, and bringing in gold from Europe to bolster the dollar and replenish Washington's coffers.
"He essentially single-handedly saved New York City from failure," said Sean Carr, co-author of Panic of 1907. One of the troubling features of our current, rolling financial crises has been the absence of a single, Morgan-esque financial statesman—someone who can bring a stop to our financial trouble. President Bush is essentially AWOL, and Federal Reserve Chairman Ben Bernanke doesn't command the respect of the global markets the way his predecessor Alan Greenspan (who, it is now clear, helped create this mess) did. "I don't think any one man in today's immense and immensely complex markets could play the role J.P. Morgan played in 1907," says Jean Strouse, author of the magnificent Morgan biography American Financier. Indeed, the best we have is a troika of unrelated executives who are performing different components of Morgan's historic role.
John Pierpont Morgan, all paunch and haughty jowls, owner of a rhinophyma-ridden nose that launched a thousand caricatures, was the dominant banker of America's gawky financial adolescence. Today, the most powerful banker in Gotham is Jamie Dimon, the CEO of a firm that descends (historical irony alert!) from the House of Morgan itself. Like J.P., he is aloof and willing to play hardball. In March, Dimon's JPMorgan Chase picked up the failed investment bank Bear Stearns, and in September, he snagged the banking operations of the ailing Washington Mutual, both for a nominal price. As a result, Dimon now commands a mammoth bank with more than $2 trillion in assets, 5,400 branches, and $900 billion in deposits.
At his core, Morgan was an investment banker—a seeker of order, a deal-maker, and adviser. Today, the investment banker in chief is Treasury's Henry Paulson, the former CEO of Goldman Sachs. Morgan was known to bring feuding railroad executives aboard his yacht, the Corsair, and sail it around New York Harbor until they made a deal. Paulson doesn't have a yacht, but he has repeatedly summoned Wall Street executives, members of Congress, and investors to the offices of the New York Federal Reserve and the Treasury Department for marathon deal meetings.
Paulson has the balance sheet of the Federal Reserve and the taxpayers behind him. Morgan had only his name. But in his day, that was more powerful than any guarantee Uncle Sam could provide. Now, it is Warren Buffett, the proprietor of Berkshire Hathaway, whose name commands such respect. In recent weeks, Buffett has stepped in with his own cash and reputation to stop runs on the bank at Goldman Sachs and General Electric. (Disclosure: Buffett is a director of Slate's parent, the Washington Post Co.) Of course, like Morgan, who profited on some of his system-saving maneuvers in 1907, Buffett was also out to make a buck.
There are important differences between Morgan and today's wannabes. All three lack his courage: Both Dimon and Buffett made their investments only because of the prospect of government assistance to the sector. And all three lack his imperium: Morgan would never have strummed a ukulele to entertain shareholders, as Buffett does, nor gotten down on his knees to beg a congressional leader for support, as Paulson did to House Majority Leader Nancy Pelosi. But mostly, the difference is that the world has changed. J.P. Morgan, sitting in his fortresslike office at the corner of Wall and Broad streets, could easily survey the entirety of the U.S. financial system and get his arms around the problems. Today, as his modern-day imitators look at a chaotic, interconnected global economy, all they can do is play whack-a-mole.
A version of this article appears in Newsweek.
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