J.P. morgan & Co. Incorporated

views updated May 23 2018

J.P. morgan & Co. Incorporated

23 Wall Street
New York, New York 10015
U.S.A.
(212) 483-2323

Public Company
Incorporated: 1940
Employees: 15,350
Assets: $83.92 billion
Stock Index: New York London Swiss Paris Tokyo

J.P. Morgan’s clients are principally corporations, governmental bodies, and other financial institutions, although the company also offers a variety of banking and asset management services to wealthy individuals and other organizations.

J.P. Morgan’s principal banking subsidiary is Morgan Guaranty Trust Company of New York, the product of the 1959 merger between J.P. Morgan and Guaranty Trust Company of New York. The J.P. Morgan name re-emerged in 1968 as the holding company of Morgan Guaranty and a number of other subsidiaries.

Alternately one of the most admired and most hated men in America, the savior of his country and a robber baron, John Pierpont Morgan, the founder of J.P. Morgan & Company, was a legendary financier who wielded national and international power on a spectacular scale. Morgan did not allow publicity to influence his actions in the slightest degree. Indeed, Morgan’s confidence in his own ultimate success and his unapologetic arrogance are two legacies he handed down to the company that bears his name.

Morgan’s father, Junius Spencer Morgan, an American, became a partner in the influential London banking firm of George Peabody and Company in 1854, changing the name of the company to J.S. Morgan & Co. when Peabody retired and he took over in 1864. (Today that firm is Morgan Grenfell.) The firm soon became one of the most important links between London and the rapidly developing American financial community. J.P. Morgan entered his father’s banking house in 1854 at the age of 17. In 1857 he was sent to work for the firm Duncan, Sherman & Co. in New York, the New York correspondent of his father’s firm. In 1860, Morgan left Duncan, Sherman and founded J.P. Morgan and Company to act as agent for his father’s company. In 1864 J. P. Morgan asked Charles H. Dabney to be senior partner in a new firm, which became Dabney, Morgan & Co.

Morgan first drew the attention of the business community in 1869, when he successfully battled Jay Gould and James Fisk, two notorious American financial buccaneers, for control of the Albany and Susquehanna Railroad. In 1871 Dabney retired and Anthony J. Drexel, the head of the Philadelphia investment bank Drexel & Co., became Morgan’s new senior partner in a firm called Drexel Morgan & Co.

In 1879, Morgan arranged to sell $25 million worth of the Vanderbilt interest in New York Central Railroad through his father’s firm in England. Vanderbilt was impressed enough to give Morgan a seat on the board of directors of New York Central. Six years later Morgan used this position to settle a dispute between the New York Central and Pennsylvania railroads over the New York, West Shore and Buffalo Railroad. It was senseless, Morgan argued, for Pennsylvania and New York Central to engage in a rate war. He suggested that the Pennsylvania should allow the Central to buy the West Shore line and that the Central should turn over control of the South Pennsylvania to the Pennsylvania. They quickly agreed.

In 1886 Morgan implemented reorganization plans for both the Philadelphia and Reading Railroad and the Chesapeake and Ohio Railroad. A short time later, he also played a major role in reorganizing the Baltimore and Ohio. After the Interstate Commerce Act was passed in 1887, Morgan helped to convince the country’s railroad executives to abide by the law and cooperate with the Interstate Commerce Commission. After the Panic of 1893 Morgan was called upon by the government to reorganize a number of the leading railway systems in the nation, including the Southern, the Erie, the Philadelphia and Reading, and the Northern Pacific. By the end of the century, only two American systems were outside his control.

When Junius Morgan died in 1890, J. P. Morgan became head of the London house. Three years later, in 1893, Anthony Drexel also died, and in 1895 Morgan reorganized the Morgan and Drexel firms. New York-based Drexel Morgan became J.P. Morgan & Co., into which the Philadelphia-based Drexel & Co. was partially merged. At the same time, Drexel, Harjes & Co., Drexel’s prominent Paris-based investment banking business, was renamed Morgan, Harjes & Co. At the head now of houses in New York, Philadelphia, London, and Paris, Morgan was a a commanding figure in international finance.

At the time, Morgan was still relatively unknown to most of his fellow Americans, but not for long. In 1895 President Grover Cleveland turned to the international bankers for help in stemming the flow of the treasury’s gold reserves that had followed the panic of 1893. Morgan, with his connections to the European banking community, helped supply the government with $56 million in gold, much of it from abroad, and profited handsomely on the transaction. The public protest that followed, fueled among other things by Morgan’s refusal to reveal his profits to a congressional investigative committee, contributed to Cleveland’s fall from power in 1896.

Although Morgan had now become one of the most vilified men in America, his power was only enhanced by the constant publicity. Having organized the railroads and guided the infant Edison Electric Company through its early years, culminating in its merger with the Thomson-Houston Electric Company to create the General Electric Company in 1891, Morgan next turned to the steel industry. In the late 1890s he helped create the Federal Steel Company, the National Tube Company, and the American Bridge Company. The house of Morgan was also instrumental in arranging the takeover of the giant Carnegie Steel Company to form the U.S. Steel Corporation in 1901. A year later, Morgan financed the consolidation of McCormick Harvesting Machine Company, Deering Company, and three other harvesting-machine companies into the giant International Harvester Company.

Also in 1902 Morgan organized the International Mercantile Marine Company, a combination of British and American shipping concerns, to stabilize the shipping trade as his railroad combinations had done. It was one of his rare failures. At the same time, Morgan’s image was also sullied in a fight for control of the North Pacific Railroad.

But during the panic of 1907, government officials and important bankers quickly turned to Morgan for leadership, and the secretary of the treasury deposited substantial government relief funds with J.P. Morgan and its affiliate banks.

As he grew older, Morgan continued to consolidate his influence in a number of fields, particularly banking and insurance. Morgan owned a controlling interest in First National Bank of New York and his bank’s future partner, Guaranty Trust Company of New York, and was influential in many other prominent New York banks. He already had a significant voice in the administration of the New York Life Insurance Company when he gained a controlling interest in the Equitable Life Assurance Society in 1909.

It was fear of the power of this “money trust” within the New York banking and insurance community, firmly anchored by Morgan, that instigated a congressional investigation in 1912 by the Pujo Committee. The committee revealed that if all the Morgan partners and the directors of First National, Bankers Trust, and Guaranty Trust were added together, this group of businessmen held 341 directorships in 112 banking, insurance, transportation, public-utility, and trading companies with resources altogether of more than $22 billion.

When J. P. Morgan died in 1913, J. P. Morgan Jr., known as Jack, became the head of the family business. Jack Morgan continued his father’s work, dealing with industry, railroads, banks, and other financial institutions, but he also made his own reputation in government financing. As the most important international banking house in America, Morgan became the commercial agent for the French and British governments in the United States during World War I, handling orders for more than $3 billion in war supplies before America entered the war. Morgan also organized a group of more than 2,000 banks to underwrite bonds totaling some $1.5 billion for Great Britain and France.

After the war ended, J.P. Morgan & Co. was more powerful than ever. Before the war, the firm’s European connections were crucial in bringing capital to a developing America; in the postwar era, however, the United States became a creditor nation and the most important financial market in the world, and Morgan was its leading banker. Continuing to improve its reputation in government financing and the recapitalization of national debts, between 1917 and 1926 the bank floated bond issues totaling nearly $12 billion for Austria, Cuba, Canada, Germany, Belgium, France, Great Britain, and Italy.

When the stock market crashed on October 22, 1929, J.P. Morgan & Co. was again behind a major attempt to avert financial disaster. Five important bankers met in Jack Morgan’s office on October 24, 1929 to create a pool to preserve some order in the stock market and stave off disaster. Not only were they unsuccessful, but, afterwards J.P. Morgan and the other companies involved were kept under close governmental supervision to determine whether they contributed to the stock market crash.

During the 1930s J.P. Morgan underwent drastic changes. The Banking Act of 1933, better known as the Glass-Steagall Act, required a separation of deposit and investment banking. As a result, the following year J.P. Morgan & Co. left the investment-banking business and became a private commercial bank. Three Morgan partners left the bank in 1935 to create a new investment banking firm, Morgan Stanley & Company, to handle the business Morgan had been forced to abandon. Although Jack Morgan continued as head of the commercial bank, by the mid-1930s most of its actual management was left to other partners.

In 1940, J.P. Morgan and Company was incorporated as a state bank under the laws of New York and it began the sale of common stock on the New York exchange. This major change was made because Morgan needed more capital than its distinguished, but not particularly wealthy, partners could provide. With incorporation, Morgan’s ties with the still-private Drexel & Co. were severed. (Drexel went on to become the Wall Street phenomenon of the 1980s, Drexel Burnham Lambert.)

As a publicly owned, state-chartered bank, Morgan was now permitted to open a trust department, a business private partnerships were prohibited from entering. Formed by Thomas Lament, Morgan’s new chairman, the trust department managed the money of individuals, estates, and large institutions. This department soon became the new center of Morgan’s power, managing the pensions and profit sharing funds of some of the largest firms in the country.

Jack Morgan died on March 13,1943, and his eldest son, Junius S. Morgan II, assumed his position as a director of the firm. Junius, however, remained a figurehead; the operations of the bank were supervised by various partners and department heads. During the late 1940s and throughout the 1950s, Morgan concentrated on its trust and wholesale banking activities.

In 1959, the world financial community was surprised by the announcement of a merger between Morgan and Guaranty Trust.

The Guaranty Trust Company of New York traced its roots to two predecessors: the New York Guaranty and Indemnity Company, founded in 1864 and renamed Guaranty Trust Company of New York in 1896, and the National Bank of Commerce, the subsidiary of the Bank of Commerce, which was founded in 1839. New York Guaranty’s original business was loaning money against warehouse receipts. It was closely connected with the Mutual Life Insurance Company after 1891, and eventually became a power in financing international trade. It was separated from Mutual Life in 1911, and went on to establish a prominent bond department and to underwrite corporate securities. The National Bank of Commerce was also a commercial bank involved primarily in lending to manufacturers and tradesmen. Both Guaranty and National Commerce had close ties to J.P. Morgan & Co. J. P. Morgan himself was a director of the National Bank of Commerce from 1875 to 1910, while several Morgan partners were on Guaranty’s board.

Guaranty and National Commerce merged in 1929 to increase their strength and position themselves to broaden the range of wholesale services they could offer their customers. After the merger, the new bank, which retained the Guaranty name and charter, became New York’s most prominent trust bank as well as one of the largest dealers in government obligations.

J.P. Morgan and Guaranty Trust, both preeminent wholesale banks, primarily served large corporate accounts. Their merger was intended to make Morgan Guaranty not only the principal banker for corporate enterprise, but also the major banker for governments, foundations, and institutions both at home and abroad. In addition, the new bank managed $6.5 billion in trusts, the largest trust business in the world. The merger of Morgan and Guaranty meant that, unlike other major wholesale and commercial banks, the new Morgan Guaranty would have no retail business to fall back on, but the banks’ gamble, and the merger, worked.

In 1960 Morgan Guaranty established the Morgan Guaranty International Banking Corporation and Morgan Guaranty International Finance Corporation to further its international expansion. The next year, Morgan Guaranty made its first, and last, attempt to enter the retail banking business. Morgan Guaranty proposed an affiliation with six upstate New York banks, but the Federal Reserve rejected the arrangement in 1962, fearing too great a concentration of power. With this rejection, Morgan Guaranty renewed its commitment to international operations. The three foreign branches that the bank had at the time of its merger had jumped to 26 branches and representative offices by 1978.

In 1969, Morgan Guaranty became the wholly owned subsidiary of J.P. Morgan & Co., a new holding company. Nearly every major bank made similar arrangements at the time, following Citibank’s lead, to take advantage of a bank holding company’s greater freedom to engage in other financial businesses.

At the end of the 1970s, Morgan’s total assets amounted to $43.5 billion. The firm was the largest stockholder in America, with more than $15 billion invested in the stock market, and its trust department ranked as one of the top five investors in more than 50 major American corporations such as ITT, Sears, and Citicorp.

The 1980s saw drastic change in banking as major corporations increasingly raised working capital in the securities markets rather than from banks, and the trend towards global banking and universal financial services accelerated. J.P. Morgan began to move back to its origins in investment and merchant banking, including advising clients on corporate restructurings and mergers and acquisitions, and, when possible, securities underwriting and trading. While such securities activities in the United States were severely curtailed by the 1933 Glass Steagall legislation, J.P. Morgan entered the Eurobond market in 1979, and throughout the 1980s, J.P. Morgan Securities Ltd., the firm’s London-based securities subsidiary, was among the leading underwriters in that market.

J.P. Morgan continued to call for repeal of Glass Steagall legislation and for deregulation of the products and services that U.S. banks could offer. While Congress continued to postpone action, in 1987, the Federal Reserve Board allowed certain bank units, including J.P. Morgan Securities Inc., the firm’s U.S. securities subsidiary and a primary dealer in U.S. government securities, to deal in commercial paper, municipal revenue bonds, and consumer-related receivables. In 1989, the Federal Reserve gave J.P. Morgan Securities permission to underwrite, within a limit of 5% of total revenues, corporate debt securities, and the firm immediately began to trade and deal in corporate bonds. Pending final approval from the Federal Reserve, which is expected in 1990, J.P. Morgan will also begin to deal in equity securities, allowing the firm to add to the range of financial alternatives it can offer clients worldwide.

During the decade, J.P. Morgan achieved notable success in international corporate finance and mergers and acquisitions advisory. The firm’s emphasis on fundamental analysis and innovative financial structures won it a substantial number of complex and high-profile mandates, and in 1989, J.P. Morgan was involved in some of the largest cross-border and U.S. transactions of the year, including the mergers of SmithKline Beckman with the Beecham Group and McCaw Cellular Communications with Lin Broadcasting, and the leveraged buyout of Hospital Corporation of America. This success was marred slightly in 1986 when it came to light that Antonio Gebauer, a senior vice president, had diverted $8 million in clients’ funds for his own use, a scandal that prompted Morgan to tighten some controls.

Beginning in 1982, J.P. Morgan, like most of the international banking community, was severely affected by the inability of Third World countries to service and repay their growing debt obligations. Throughout the decade both banks and debtors nations were involved in the renegotiation and restructuring of existing debt programs. The crisis deepened when Brazil suspended payment of interest on its loans in 1987, and J.P. Morgan placed $1.3 billion of Brazilian debt on a non-accrual basis. It became clear that new solutions to the debt crisis had to be found and in 1988, J.P. Morgan and the Government of Mexico offered the first voluntary debt exchange program. However, the environment continued to be highly uncertain, and in September 1989, J.P. Morgan announced that it had added $2 billion to its allowance for loan loss reserves, bringing its reserves to approximately 70% of its Third World debt exposure but causing it to post losses of $1.3 billion for 1989.

J.P. Morgan’s capital strength and long-established reputation for high ethical standards will be a valuable advantage as markets around the world become increasingly volatile and competition fiercer. In the past decade, J.P. Morgan has emerged as a leading participant in the world’s most active capital markets, adviser to governments and large, international corporations, and provider of innovative products and services.

As it enters the 1990s, Morgan is still the blue blood of American banks. Although its founder, who told the Pujo Committee in 1912: “I do not compete for deposits.... They come,” might be surprised by the bank’s aggressive new posture, its transformation from a traditional commercial bank into an international institution has brought it closer to J. Pierpont Morgan’s own firm.

Principal Subsidiaries:

Morgan Guaranty Trust Company of New York; Morgan Bank; Morgan Futures Corp.; Morgan Investment Corp.; J.P. Morgan International Finance N.V.; J.P. Morgan International Capital N.V.; Morgan Trust of Florida N.A.; Morgan Trust of the Bahamas Limited; J.P. Morgan Investment Management Inc.; J.P. Morgan Private Finance Corp. of Florida; Morgan Capital Corp.; Morgan Portfolio Corp.; Morgan Realty Corp.; Morgan Securities Services Corp.; Morgan Shareholders Services Trust Co.; Morgan Fonciere Cayman Island Ltd.; Morgan Holdings Corp.; Morgan Christiana Bank; Morgan Community Development Corp.; J.P. Morgan Securities Holdings, Inc.; J.P. Morgan Equities, Inc.; Morgan Christiana Corp.; J.P. Morgan International Holdings Corp.; Morgan Trust Company of the Cayman Islands Ltd.; J.P. Morgan Securities, Inc.

J.P. Morgan & Co. Incorporated

views updated Jun 11 2018

J.P. Morgan & Co. Incorporated

60 Wall Street
New York, New York 10260-0060
U.S.A.
(212) 483-2323
Fax: (212) 648-5213
Web site: http://www.jpmorgan.com

Public Company
Incorporated: 1940
Employees: 15,674
Total Assets: $261.06 billion (1998)
Stock Exchanges: New York Amsterdam Frankfurt London Paris Swiss Tokyo
Ticker Symbol: JPM
NAIC: 52211 Commercial Banking; 551111 Offices of Bank Holding Companies; 522293 International Trade Financing; 52222 Sales Financing

J.P. Morgan & Co. Incorporated is a holding company for entities engaged in a wide range of banking activities worldwide, including corporate finance advisory, securities and trading, trust and agency, and other financial services. J.P. Morgan’s clients are principally corporations, governmental bodies, and other financial institutions, although the company also offers a variety of banking and asset management services to wealthy individuals and other organizations. J.P. Morgan’s principal banking subsidiary is Morgan Guaranty Trust Company of New York, the product of the 1959 merger between J.P. Morgan and Guaranty Trust Company of New York. The J.P. Morgan name re-emerged in 1968 as the holding company of Morgan Guaranty and a number of other subsidiaries.

Early American Banking: The Legendary John Pierpont Morgan

Alternately one of the most admired and most hated men in the United States, the savior of his country and a robber baron, John Pierpont Morgan, the founder of J.P. Morgan & Company, was a legendary financier who wielded national and international power on a spectacular scale. Morgan did not allow publicity to influence his actions in the slightest degree. Indeed Morgan’s confidence in his own ultimate success and his unapologetic arrogance are two legacies he handed down to the company that bears his name.

Morgan’s father, Junius Spencer Morgan, an American, became a partner in the influential London banking firm of George Peabody and Company in 1854, changing the name of the company to J.S. Morgan & Co. when Peabody retired and he took over in 1864. (Today that firm is Morgan Grenfell.) The firm soon became one of the most important links between London and the rapidly developing American financial community. J.P. Morgan entered his father’s banking house in 1854 at the age of 17. In 1857 he was sent to work for the firm Duncan, Sherman & Co. in New York, the New York correspondent of his father’s firm. In 1860, Morgan left Duncan, Sherman and founded J.P. Morgan and Company to act as agent for his father’s company. In 1864 J.P. Morgan asked Charles H. Dabney to be senior partner in a new firm, which became Dabney, Morgan & Co.

When Junius Morgan died in 1890, J.P. Morgan became head of the London house. Three years later, in 1893, Anthony Drexel also died, and in 1895 Morgan reorganized the Morgan and Drexel firms. New York-based Drexel Morgan became J.P. Morgan & Co., into which the Philadelphia-based Drexel & Co. was partially merged. At the same time, Drexel, Harjes & Co., Drexel’s prominent Paris-based investment banking business, was renamed Morgan, Harjes & Co. At the head now of houses in New York, Philadelphia, London, and Paris, Morgan was a commanding figure in international finance.

At the time, Morgan was still relatively unknown to most of his fellow Americans, but not for long. In 1895 President Grover Cleveland turned to the international bankers for help in stemming the flow of the treasury’s gold reserves that had followed the panic of 1893. Morgan, with his connections to the European banking community, helped supply the government with $56 million in gold, much of it from abroad, and profited handsomely on the transaction. The public protest that followed, fueled among other things by Morgan’s refusal to reveal his profits to a Congressional investigative committee, contributed to Cleveland’s fall from power in 1896.

Although Morgan had now become one of the most vilified men in the United States, his power was only enhanced by the constant publicity. Having organized the railroads and guided the infant Edison Electric Company through its early years, culminating in its merger with the Thomson-Houston Electric Company to create the General Electric Company in 1891, Morgan next turned to the steel industry. In the late 1890s he helped create the Federal Steel Company, the National Tube Company, and the American Bridge Company. The house of Morgan was also instrumental in arranging the takeover of the giant Carnegie Steel Company to form the U.S. Steel Corporation in 1901. A year later, Morgan financed the consolidation of McCormick Harvesting Machine Company, Deering Company, and three other harvesting machine companies into the giant International Harvester Company.

During the panic of 1907, however, government officials and important bankers quickly turned to Morgan for leadership, and the secretary of the treasury deposited substantial government relief funds with J.P. Morgan and its affiliate banks.

It was fear of the power of this “money trust” within the New York banking and insurance community, firmly anchored by Morgan, that instigated a Congressional investigation in 1912 by the Pujo Committee. The committee revealed that if all the Morgan partners and the directors of First National, Bankers Trust, and Guaranty Trust were added together, this group of businessmen held 341 directorships in 112 banking, insurance, transportation, public utility, and trading companies with resources of more than $22 billion.

When J.P. Morgan died in 1913, J.P. Morgan, Jr., known as Jack, became the head of the family business. Jack Morgan continued his father’s work, dealing with industry, railroads, banks, and other financial institutions, but he also made his own reputation in government financing. As the most important international banking house in the United States, Morgan became the U.S. agent for the French and British governments during World War I, handling orders for more than $3 billion in war supplies before the United States itself entered the war. Morgan also organized a group of more than 2,000 banks to underwrite bonds totaling some $1.5 billion for Great Britain and France.

Postwar Years

After the war ended, J.P. Morgan & Co. was more powerful than ever. Before the war, the firm’s European connections were crucial in bringing capital to a developing America; in the postwar era, however, the United States became a creditor nation and the most important financial market in the world, and Morgan was its leading banker. Continuing to improve its reputation in government financing and the recapitalization of national debts, the bank floated bond issues between 1917 and 1926 totaling nearly $12 billion for Austria, Cuba, Canada, Germany, Belgium, France, Great Britain, and Italy.

Company Perspectives:

We are committed to offering advice and execution of the highest quality, conducting our business in a principled way, and maintaining the global market presence that helps our clients succeed while enhancing returns for our stockholders.

When the stock market crashed on October 22, 1929, J.P. Morgan & Co. was again behind a major attempt to avert financial disaster. Five important bankers met in Jack Morgan’s office on October 24, 1929 to create a pool to preserve some order in the stock market and stave off disaster. Not only were they unsuccessful, but afterwards J.P. Morgan and the other companies involved were kept under close governmental supervision to determine whether they contributed to the stock market crash.

During the 1930s J.P. Morgan underwent drastic changes. The Banking Act of 1933, better known as the Glass-Steagall Act, required a separation of deposit and investment banking. As a result, the following year J.P. Morgan & Co. left the investment banking business and became a private commercial bank. Three Morgan partners left the bank in 1935 to create a new investment banking firm, Morgan Stanley & Company, to handle the business Morgan had been forced to abandon. Although Jack Morgan continued as head of the commercial bank, by the mid-1930s most of its actual management was left to other partners.

In 1940 J.P. Morgan and Company was incorporated as a state bank under the laws of New York and it began the sale of common stock on the New York exchange. This major change was made because Morgan needed more capital than its distinguished, but not particularly wealthy, partners could provide. With incorporation, Morgan’s ties with the still private Drexel & Co. were severed. (Drexel went on to become the Wall Street phenomenon of the 1980s, Drexel Burnham Lambert.)

As a publicly owned, state-chartered bank, Morgan was now permitted to open a trust department, a business private partnerships were prohibited from entering. Formed by Thomas Lamont, Morgan’s new chairman, the trust department managed the money of individuals, estates, and large institutions. This department soon became the new center of Morgan’s power, managing the pensions and profit sharing funds of some of the largest firms in the country.

Jack Morgan died on March 13, 1943, and his eldest son, Junius S. Morgan II, assumed his position as a director of the firm. Junius, however, remained a figurehead; the operations of the bank were supervised by various partners and department heads. During the late 1940s and throughout the 1950s, Morgan concentrated on its trust and wholesale banking activities.

Mid-Century: Morgan—Guarantee Trust Merger

In 1959 the world financial community was surprised by the announcement of a merger between Morgan and Guaranty Trust. The Guaranty Trust Company of New York traced its roots to two predecessors: the New York Guaranty and Indemnity Company, founded in 1864 and renamed Guaranty Trust Company of New York in 1896, and the National Bank of Commerce, the subsidiary of the Bank of Commerce, which was founded in 1839. New York Guaranty’s original business was loaning money against warehouse receipts. It was closely connected with the Mutual Life Insurance Company after 1891, and eventually became a power in financing international trade. It was separated from Mutual Life in 1911, and went on to establish a prominent bond department and to underwrite corporate securities. The National Bank of Commerce was also a commercial bank involved primarily in lending to manufacturers and tradesmen. Both Guaranty and National Commerce had close ties to J.P. Morgan & Co. J.P. Morgan himself was a director of the National Bank of Commerce from 1875 to 1910, while several Morgan partners were on Guaranty’s board.

In 1969 Morgan Guaranty became the wholly owned subsidiary of J.P. Morgan & Co., a new holding company. Nearly every major bank made similar arrangements at the time, following Citibank’s lead, to take advantage of a bank holding company’s greater freedom to engage in other financial businesses.

At the end of the 1970s, Morgan’s total assets amounted to $43.5 billion. The firm was the largest stockholder in the United States, with more than $15 billion invested in the stock market, and its trust department ranked as one of the top five investors in more than 50 major U.S. corporations such as ITT, Sears, and Citicorp.

Industry Changes: 1980s

The 1980s saw drastic change in banking as major corporations increasingly raised working capital in the securities markets rather than from banks, and the trend towards global banking and universal financial services accelerated. J.P. Morgan began to move back to its origins in investment and merchant banking, including advising clients on corporate restructurings and mergers and acquisitions, and, when possible, securities underwriting and trading. While such securities activities in the United States were severely curtailed by the 1933 Glass-Steagall legislation, J.P. Morgan entered the Eurobond market in 1979, and throughout the 1980s J.P. Morgan Securities Ltd., the firm’s London-based securities subsidiary, was among the leading underwriters in that market.

J.P. Morgan continued to call for repeal of Glass-Steagall legislation and for deregulation of the products and services that U.S. banks could offer. While Congress continued to postpone action, in 1987 the Federal Reserve Board allowed certain bank units, including J.P. Morgan Securities Inc., the firm’s U.S. securities subsidiary and a primary dealer in U.S. government securities, to deal in commercial paper, municipal revenue bonds, and consumer-related receivables. In 1989 the Federal Reserve gave J.P. Morgan Securities permission to underwrite, within a limit of five percent of total revenues, corporate debt securities, and the firm immediately began to trade and deal in corporate bonds.

During the decade, J.P. Morgan achieved notable success in international corporate finance and mergers and acquisitions advisory. The firm’s emphasis on fundamental analysis and innovative financial structures won it a substantial number of complex and high-profile mandates, and in 1989, J.P. Morgan was involved in some of the largest cross-border and U.S. transactions of the year, including the mergers of SmithKline Beckman with the Beecham Group and McCaw Cellular Communications with Lin Broadcasting, and the leveraged buyout of Hospital Corporation of America. This success was marred slightly in 1986 when it came to light that Antonio Gebauer, a senior vice-president, had diverted $8 million in clients’ funds for his own use, a scandal that prompted Morgan to tighten some controls.

Beginning in 1982, J.P. Morgan, like most of the international banking community, was severely affected by the inability of Third World countries to service and repay their growing debt obligations. Throughout the decade both banks and debtor nations were involved in the renegotiation and restructuring of existing debt programs. The crisis deepened when Brazil suspended payment of interest on its loans in 1987, and J.P. Morgan placed $1.3 billion of Brazilian debt on a non-accrual basis. It became clear that new solutions to the debt crisis had to be found, and in 1988 J.P. Morgan and the Mexican government offered the first voluntary debt exchange program. However, the environment continued to be highly uncertain, and in September 1989 J.P. Morgan announced that it had added $2 billion to its allowance for loan loss reserves, bringing its reserves to approximately 70 percent of its Third World debt exposure but causing it to post losses of $1.3 billion for 1989.

Ups and Downs: 1990–99

In 1990 the Federal Reserve granted J.P. Morgan permission to deal in equity securities in addition to its corporate bonds and traditional commercial banking activities. After years of petitioning the Fed for this freedom, Morgan rapidly set about becoming one of the world’s top investment banks. With its global presence and sterling reputation, it managed to stake out a spot near the top within just a few years. By 1998 it was ranked second in the world in loan syndications and sixth in domestic debt underwriting, global equity underwriting, and worldwide mergers and acquisitions advice.

Morgan’s permission to re-enter the securities business after the 55-year hiatus imposed by the Glass-Steagall Act came at a propitious time. Low inflation and interest rates and an improving global economic outlook had spurred investors to buy into higher-yielding assets—first in the U.S. market, then in Europe and emerging markets. For J.P. Morgan, the culmination of this late-1980s/early-1990s market rally came in 1993, when the bank posted record earnings. The trend reversed, however, in early 1994 when the Federal Reserve raised interest rates, causing risk-averse investors to reduce their involvement in many previously active markets. The situation was exacerbated by a sharp devaluation of the Mexican peso, causing investor panic in Latin American emerging markets.

In 1997 J.P. Morgan again fell victim to an emerging market crisis, when the economies of several East Asian nations suffered sudden slowdowns, leaving them unable to repay their foreign debt. Nicknamed “the Asian flu,” the crisis resulted in estimated worldwide equity losses of more than $700 billion—at least $30 billion of which was lost by U.S. investors. In addition, the Asian crisis provoked a deceleration in corporate growth in developed nations, as export orders and Asian expansion projects were cancelled. Morgan’s earnings reflected the effect of the crisis, showing a seven percent decrease in net profit for the year, due in large part to canceled underwritings in Asia and Asia-related derivatives losses.

Another blow to investors and investment banks was struck in 1998. Near the middle of the year, the struggling Russian economy collapsed, causing the country to default on its national debt. J.P. Morgan said, in an August 28, 1998 press release, that its Russian exposure was approximately $160 million. However, ancillary losses—including missed growth opportunities and depressed revenues from other emerging markets—added up to an estimated $600 million in missed revenues, according to the company’s 1998 annual report. The Russian default, following so closely on the heels of the Asian crisis, demanded a reassessment of strategy. Acknowledging the inherent risk in emerging markets, Morgan cut back substantially on its credit exposures to Asia and Latin America by 50 percent and 40 percent, respectively.

Looking at the Next 100 Years

As J.P. Morgan prepared to enter the 21st century, it remained committed to becoming a top investment bank. Toward that end, the company appeared to be stepping away from its traditional role as the stuffy, blue-blooded banker for the wealthy and powerful—by aggressively targeting the more average investor. Morgan also planned to expand its presence in global capital markets and to grow its asset management business. In both these areas, as well as in investment banking and equities, the company’s capital strength and long established reputation for high ethical standards promised to prove valuable advantages as markets around the world became increasingly volatile and competition fiercer.

Principal Subsidiaries

Morgan Futures Corp.; Morgan Guaranty International Finance Corporation; Morgan Guaranty Trust Company; Morgan Guaranty Trust Company of New York; J.P. Morgan Investment Management Inc.; Morgan Holdings Corp.; J.P. Morgan Delaware; J.P. Morgan & Co. Incorporated; J.P. Morgan California; J.P. Morgan Capital Corporation; J.P. Morgan Florida; J.P. Morgan Futures Inc.; J.P. Morgan Overseas Capital Corporation; J.P. Morgan Securities Inc.; J.P. Morgan Services Inc.; J.P. Morgan Trust Company of Delaware; Banco J.P. Morgan S.A. (México); Banco J.P. Morgan S.A. (Brazil); Euroclear Operations Centre (Belgium); JPM Corretora de Cambio, Titulos e Valores Mobiliarios S.A. (Brazil); ICICI Asset Management Company Limited (India); ICICI Securities & Finance Company (India); Morgan Gestión S.A. (Spain); Morgan Guaranty Trust Company (Australia); Morgan Guaranty Trust Company (U.K.); Morgan Guaranty Trust Company (Belgium); Morgan Guaranty Trust Company (Argentina); Morgan Guaranty Trust Company (Brazil); Morgan Guaranty Trust Company (Italy); Morgan Guaranty Trust Company (Hong Kong); Morgan Guaranty Trust Company (Singapore); Morgan Guaranty Trust Company (Germany); Morgan Guaranty Trust Company (Switzerland); Morgan Guaranty Trust Company (Spain); Morgan Guaranty Trust Company (Japan); Morgan Guaranty Trust Company (France); Morgan Guaranty Trust Company (Belgium); Morgan Guaranty Trust Company (Bahamas); Morgan Guaranty Trust Company (Indonesia); Morgan Guaranty Trust Company (Korea); Morgan Guaranty Trust Company (Taiwan); Morgan Guaranty Trust Company (Rome); Morgan Guaranty Trust Company (Philippines); Morgan Guaranty Trust Company (Mexico); Morgan Guaranty Trust Company (Brazil); J.P. Morgan & Cie S.A. (France); J.P. Morgan & Co. Incorporated (China); J.P. Morgan Argentina Sociedad de Bolsa S.A.; J.P. Morgan Australia Limited; J.P. Morgan Australia Securities Limited; J.P. Morgan Benelux S.A. (Belgium); J.P. Morgan Canada; J.P. Morgan Casa de Bolsa S.A. de C.V. (Mexico); J.P. Morgan Chile Ltda.; J.P. Morgan España S.A.(Spain); J.P. Morgan Fondi Italia S.p.A.; Futures Hong Kong Ltd.; J.P. Morgan Futures Inc. (Singapore); J.P. Morgan GmbH (Germany); J.P. Morgan Grupo Financiero S.A. (Mexico); J.P. Morgan Holding Deutschland GmbH; J.P. Morgan Ibérica S.L. (Spain); J.P. Morgan International Capital Corporation (Singapore); J.P. Morgan International Capital Corporation (Hong Kong); J.P. Morgan International Ltd. (Czech Republic); J.P. Morgan Investment GmbH (Germany); J.P. Morgan Investment Management Australia Ltd.; J.P. Morgan Investment Management (Singapore); J.P. Morgan Investment Management (U.K); J.P. Morgan Investment Management (Germany); J.P. Morgan Investment Management (Japan); J.P. Morgan Nederland N.V.; J.P. Morgan Polska (Poland); J.P. Morgan Securities Asia Ltd. (Singapore); J.P. Morgan Securities Asia Ltd. (Hong Kong); J.P. Morgan Securities Asia Ltd. (Japan); J.P. Morgan Securities Asia Ltd. (Thailand); J.P. Morgan Securities Asia Ltd. (Korea); J.P. Morgan Securities Asia Ltd. (Taiwan); J.P. Morgan Securities Canada; J.P. Morgan Securities Hong Kong Ltd.; J.P. Morgan Securities Ltd. (U.K.); J.P. Morgan Securities Ltd. (Switzerland); J.P. Morgan Sociedad de Valores y Bolsa S.A. (Spain; 50%); J.P. Morgan Sterling Securities Ltd. (U.K.); J.P. Morgan (Suisse) S.A.; J.P. Morgan (Switzerland) Ltd.; J.P. Morgan Trust Bank Ltd. (Japan); J.P. Morgan Venezuela S.A.; Morgan Trust Company of The Bahamas Limited; Morgan Trust Company of the Cayman Islands Ltd.; Societe de Bourse J.P. Morgan S.A. (France).