J.P. Morgan & Company
Founders: J. Pierpont Morgan.
Distinction: Preserved and expanded the American financial system.
Primary products: Commercial banking and investment services.
Annual sales: $18.110 billion.
Number of employees: 15,512.
Major competitors: Deutsche Bank, Goldman Sachs, Merrill Lynch.
Chairman and CEO: Douglas A. "Sandy" Warner III.
Headquarters: New York, N.Y.
Year founded: 1854.
Web site: www.jpmorgan.com.
The fabled House of Morgan first surfaced as a financial powerhouse in
the mid-19th century. It was instrumental in the formation of corporate
icons such as U.S. Steel and General Electric. At one time, it controlled a
significant portion of America's railroads. It loaned millions to the
governments of France, England, Mexico, and Russia. It helped preserve
America's monetary system more than once when it was threatened with
collapse. It endured the Great Depression, two World Wars, and federal
regulations that forced it to shed one of its most lucrative businesses.
Despite being such a major player in the business world, however, it
could not survive the massive changes that transformed its industry in
With roots going back to a London merchant bank opened in the 1830s,
J.P. Morgan & Company has long been more than a run-of-the-mill
From its headquarters on Wall street and offices in some three dozen
countries, the firm assembled by three generations of Morgans has served
as fiscal advisor to the most prominent and powerful people on earth. It
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has underwritten some of the largest stock offerings and corporate
mergers ever initiated. It was once the primary source of U.S.
Government financing, and members of the family from which it takes its
name are widely considered the most influential financiers of modern
In 1838, American businessman George Peabody opened a merchant
bank in London. A few years he took on a partner named Junius Spencer
Morgan, the descendent of a prominent New England trading family who
took over the firm in 1854 and renamed it J.S. Morgan & Company.
Morgan then ran the operation for more than three decades, serving as a
key financial connection between Britain and the U.S. and setting the tone
for its future by loaning $50 million to France during the Franco-Prussian
Before leaving for Europe, Morgan had a son. After attending schools in
Boston, Switzerland, and Germany, the young J. Pierpont Morgan
returned to New York for a job as an accountant with a firm representing
his father's company. During the 1860s and 1870s he worked for several
investment concerns, including Drexel, Harjes & Company of Paris. He
inherited his father's business after the senior Morgan's death in 1890,
changing the official name to J.P. Morgan & Company and consolidating
its European and American interests. He also made his first mark on the
financial world just few years later, assembling a bond issue to resupply
the U.S. Government's depleted gold reserves and relieve a treasury
With the company based back in New York, J. Pierpont started turning it
into a prime developer of American business. He bean with a foray into
the railway industry, arranging a rate agreement between two of the
largest competitors-the new York Central and Pennsylvania railroads0and
then helping reorganize others including the Southern, Erie, and Northern
Pacific. As partial compensation he accepted stock in the companies and
positions on their boards of directors, greatly expanding his wealth and
influence. By 1902, he controlled about one-sixth of all America's rails.
Morgan nicknamed Jupiter because of the dominance of his orbit, soon
branched into other fields. Three years after financing the 1989 creation
of the Federal Steel Company, he helped combine it with Carnegie Steel
and other independents to create U.S. Steel-the world's first billion-dollar
corporation. That same year he also arranged the merger of the Edison
General Electric and Thomson-Houston Electric companies to form
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General Electric. He later aided in the assembly of other corporate giants,
including International Harvester, AT&T, Western Union and
Critics charged that many of these deals were capitalized well above their
actual values so Morgan could make additional millions from investment
banking fees and stock subscription profits. And through such actionderisively
called "Morganizing" by observers of the day-Pierpont did
indeed become the most powerful private banker in America. If John D.
Rockefeller and Andrew Carnegie were responsible for rebuilding the
nation's small-scale economy into an industrial power, they contended,
Morgan was the one who financed the transformation. An imposing figure
with a bulbous red nose and booming voice, he ruled from a spacious
office adjacent to the New York Stock Exchange or from his 300-foot
yacht, the corsair, which constantly cruised the New York harbor. His
personal tastes were extravagant, but to his credit he valued character
and integrity over wealth and power when choosing clients and friends.
Morgan did make some serious business miscalculations, such as
establishing the Mercantile Marine shipping cartel (which ultimately failed)
and missing the emergence of the automobile (which helped doom his
railroads). But his company continued to thrive and help avert potential
economic disaster. During the stock market panic in 1907, for instance,
he convinced New York bankers to assemble a rescue fund that prevented
general financial collapse. The move additionally convinced U.S. officials
that a central bank was needed to avoid such private intervention in the
future, which paved the way for passage of the Federal Reserve Act in
1913-the same year Morgan died in Rome.
Pierpont's son, J.P. "Jack" Morgan Jr., had been with the firm since 1892
and immediately took over as senior partner. He continued steering it on
a similar path during the next three decades, enduring the subsequent
economic turbulence brought on by prosperity, depression, and two world
wars. During that period the firm also served as a fiscal representative for
the French and British governments, buying billions of dollars worth of
military and other supplies from U.S. companies on their behalf and
providing major financing for reconstruction after the conflicts ended.
Never the master financier that his father was, Jack Morgan nonetheless
also became the most important banking figure of his time.
J.P. Morgan & Company was partly blamed for the stock market crash of
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1929, which put 13 million Americans out of work and spelled the end to
thousands of competing investment firms. As a result, it ushered in a new
cycle of government regulation that would dramatically impact the
business. The most significant repercussion was the Banking Act of 1933,
better known as Glass-Steagall Act, which forced Morgan and others to
separate their banking and securities activities. When it went into effect,
Jack's son Harry left the company with about two dozen other employees
to form the Morgan Stanley investment bank. Most of the others stayed
with the remaining commercial operation, which went public in 1942.
The very next year, Jack Morgan died in Boca Grande, Fla. A partner
named Thomas Lamont became chairman. It marked the end of an era for
the company: The first time in almost a century that no Morgan was at its
To compete more effectively in the lending business, Morgan merged with
an-other large commercial bank in 1959. Over the next decade it also
began underwriting securities in Europe, where banking regulations were
not as restrictive. It still longed to reenter the business at home.
One year after developing a groundbreaking program so the Mexican
government so the Mexican government could restructure its debt by
issuing bonds (a practice it later used to aid Russia and other developing
nations) that wish was granted. The Federal Reserve pulled existing
prohibitions and in 1989 allowed Morgan to once again enter the field of
corporate underwriting. It resumed the practice eagerly, and its stock
became the highest valued of any bank in the country. The victory,
however, would eventually prove hollow.
During the 1990s, Morgan boosted its U.S. securities business and also
purchased a 45-percent share in American Century mutual funds. These
moves helped increase its net income, but it still ranked in the lower half
of all institutions underwriting lucrative initial public stock offerings and
other commercial deals. Morgan retaliated by hiring investment
professionals to focus on telecommunications, high tech, and Internet
companies, while launching a unit called Lab Morgan to develop ecommerce
services. It also added products that extended its base among
less well-heeled customer than those it traditionally attracted.
While this did provide significant new business, it proved insufficient to
match the needs of its dramatically reshaped industry. And so, in
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September 2000, it allowed the Chase Manhattan Corporation to acquire
it for about $31 billion. Chase, founded in 1799, had been trying to
remake itself into a global banking goliath through mergers and
acquisitions. With its new partner, it became the second-largest institution
in the industry.
The original House of Morgan was now officially shuttered. But the firm
that replaced it was dubbed J.P. Morgan Chase-which pointedly reflected
the proud heritage from which it arose.
Union Pacific Corporation
Founders: J. Oakes Ames, Oliver Ames, and Thomas C. Durant.
Distinction: Helped bridge east and west with first transcontinental
Primary products: Transportation services by train and truck.
Annual sales: $11.273 billion.
Number of employees: 52,000.
Major competitors: Burlington Northern, Santa Fe, FedEx Norfolk
Chairman, President and CEO: Richard K. Davidson.
Headquarters: Omaha, Neb.
Year founded: 1862.
Web site: www.up.com.
Union Pacific no longer operates passenger lines. It switched long ago to
the transport of commodities (such as lumber and coal) along some
36,000 miles of track in 23 states, Canada, and Mexico. But the largest
railroad in north America-in the form of its parent company, and with help
from its sister subsidiaries-enjoyed showcasing these relics from back in
the day when Congress chartered it in 1862 to help build the nation's first
transcontinental rail line. When the fabled symbolic spikes were driven
seven years later to mark its completion, the golden age of railroads and
of Union Pacific began in earnest.
UP was ready as hopeful miners and other pioneers rushed to the newly
opened West, and it jumped on the rollercoaster that followed. Before the
19th century came to an end, it had purchased several competing lines,
expended connections throughout the western United States, started a
coal company, passed in and out of bankruptcy, and changed hands in a
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Abraham Lincoln approved the Pacific Railroad Act in 1862 to create the
missing link in his drive to join America's established East and Midwest
with its rapidly growing West Coast. With the additional goal of possibly
opening trade with Asia, this activated a Congressional charter that
formed two private railroad companies-the Union Pacific and the Central
Pacific-and charged them with bridging the vast wilderness that separated
the country's present from its future. In reality, work had begun earlier on
lines that eventually would become part of UP and CP. But this was the
great beginning. Both companies drove iron rails across some of the most
dangerous and inhospitable land on the face of the Earth, spanning 1,700
largely vacant miles from Omaha to Sacramento to make a continually
dispersing nation whole.
The route east from California would be built by Central Pacific, and it
carefully planned its path over some very challenging terrain. The rails
west from Nebraska would be built by Union Pacific, along a politically
expedient course through the Platte River Valley, as determined by
Congress. The only settlement of consequence in between was Salt Lake,
and a spot northeast of the city was chosen for the actual connection. The
subsequent task proved far more difficult than many anticipated, taking
six long years to complete and some 20,000 men-most immigrants from
China and Europe-performed the backbreaking work entirely by hand. The
blistering desert and mountains as high as 8,000 feet didn't help, nor did
local animals and Native Americans (who were both, quite justifiably,
upset with the boisterous incursion on their land by hordes of people and
tons of machinery). A pictorial record of the process was made by former
official U.S. Army photographer Andrew J. Russell. But even today, there
is confusion over how many died during construction and how much the
project ultimately cost.
Problems in fact, surfaced from the beginning. Union Pacific broke ground,
badly underfinanced, just as the Civil War started. The uncertainties and
lack of money kept construction at bay until two wealthy Boston brothers
named Oakes and Oliver Ames threw their personal reputations (along
with about a million dollars) into the languishing effort. As Central Pacific
was already negotiating its way over the arduous Sierra Nevada's, UP
finally advanced under the supervision of Thomas C. Durant-but not
without complications. Problems couldn't be avoided in a project such as
this, which required 40 cars of material for every mile of track laid. It also
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required dealing with thousands of rough-and-tumble immigrants and war
veterans engaged in the punishing pick-and-shovel work.
Despite such obstacles, the competing crews hurried toward their
rendezvous spot called Promontory Summit in Utah's beautiful Salt Lake
Valley. The first to reach it would win the right to establish a depot and
capture future business, in addition to the 6,400 acres of public lands
(later doubled). They would also receive liberal loans to as much as
$48,000 per track mile that Congress set aside in its initial charter. When
the end was near, shiny trains bearing company and government officials
converged on the point. And on May 10, 1869, the connection was
memorialized with the symbolic driving of two special spikes: a silver one
by Durant, and a golden one by major Central Pacific backer Leland
Stanford. A Western Union telegrapher signaled "done" to the waiting
nation, and the New York-to-San Francisco journey that once took six
months by wagon now could be completed comfortably in a mere 10
Some former workers stayed on with the railroad to help it expand its
branch lines. UP's success remained elusive, particularly after an 1872
scandal that engulfed Durant and other leaders. It turned out that they
had been siphoning millions through a phony construction firm called
Credit Mobilize of America that held UP's liquid assets for five years. The
fraud, along with other management-related fiscal damage, left Union
Pacific heavily in debt. By 1893, it was forced into receivership, where it
remained for four years until it was purchased for $110 million by a group
of investors. It was reincorporated as the Union Pacific Railroad
Company in Utah. Now under the control of Edward H. Harriman,
serious remedies-such as buying new cars, replacing old bridges, and
adding track miles-were implemented. And finally, the company attained
During the previous decade, UP had been notably ahead of its time by
utilizing mergers and acquisitions to expand its reach. Not all of its
worked immediately, but all provided new and powerful connections
throughout the region. At the same time, luxurious passenger service was
building new converts and Americans became increasingly enchanted with
the rails. Shortly after more powerful locomotives and improved
construction (allowing trains to bend more easily around curves) was
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introduced. UP took advantage of its new financial equilibrium and added
its first subsidiary: the Union Pacific Coal company.
In the 20th century UP continued buying up competitors like its old
transcontinental partner, the Central Pacific. It also moved into other5
areas, such as its formation of the Pacific Fruit Express Company in 1906
and its opening of Idaho's Sun Valley Resort in 1936 (where it invented
the very first skier chairlift).
During the two World Wars, UP moved supplies and personnel to
American ports for shipment elsewhere; between the wars, it battled the
newfound popularity of autos among travelers and trucks among shippers
by increasing efficiency and upgrading equipment. Its top addition in the
1930s was the "City of Salina," an ultramodern high-speed diesel with
sleeping cars featuring a range of accommodations such as airconditioned
dining cars sporting fine china, expensive silver, and crisp
Americans would enjoy such standards of service for nearly four decades,
but it was never quite the same gain. Passenger traffic declined
precipitously after World War II as returning servicemen bought cars for
vacation drives along the nation's newly improved road systems. In 1969,
it established the Union Pacific Corporation as a holding company to
operate the railroad as well as two other companies now in its stable
(Overnight Transportation and Union Pacific Technologies).
A year later, the famed dome passenger train made its last run. In 1971
the transport of individuals was ended by UP entirely as the National Rail
Passenger Service Act went into effect and transferred most of the
country's remaining passenger service to Amtrak.
In the following years, Union Pacific battled floods, accidents, and federal
regulations as it refocused on its core rail business. In 1999, for the first
time ever, all of its "commodity groups" passed $1 billion in annual
revenues. The billions of tons of autos, chemicals, coal, grain, lumber,
and various consumer goods that it now hauls help it develop further
ways to better serve customers and reduce costs.