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JP Morgan
March 2, 2024
On February 25, 1901, financier J. P. Morgan’s men filed the paperwork to incorporate a new iron and steel trust, and over the weekend, businessmen waited to see what was coming. Five days later, on March 2, the announcement came: J. P. Morgan was overseeing the combination of companies that produced two thirds of the nation’s steel into the United States Steel Corporation. It was capitalized at $1.4 billion, which at the time was almost three times more than the federal government’s annual budget.
While the stock market was abuzz with news of the nation’s first billion-dollar corporation, Vice President–elect Theodore Roosevelt was on his way from New York to Washington, D.C., where he and his family arrived at 5:00 in the evening. The train was an hour behind schedule because the crowds coming to see the upcoming inauguration, scheduled for Monday, March 4, 1901, had slowed travel into Washington.
Two days later, President William McKinley took the oath of office for the second time, and Roosevelt became vice president.
McKinley was a champion of big business and believed the role of government was to support industry, dismissing growing demands from workers, farmers, and entrepreneurs for the government to level the economic playing field that had tilted so extraordinarily toward a few industry leaders. McKinley had won the hard-fought election of 1896 handily, but by 1900, Republicans were so concerned about the growing demand for reform that party leaders put Roosevelt, who had won a reputation for standing up to business interests, on the ticket, at least in part because they hoped to silence him there.
Roosevelt hoped he could promote reform from the vice presidency, but he quickly discovered that he couldn’t accomplish much of anything. His only official duty was to preside over the Senate, which would not convene until December. He was so bored he asked the chief justice of the Supreme Court if it would be unseemly for him to enroll in law school to finish his degree. (Horrified, the justice offered to supervise Roosevelt’s studies himself.)
But then, in September, an unemployed steelworker assassinated McKinley, and Roosevelt became president. “I told McKinley it was a mistake to nominate that wild man at Philadelphia,” one of McKinley’s aides said. “I told him what would happen if he should die. Now look. That damned cowboy is president of the United States.”
Two months later, on November 13, J. P. Morgan and railroad magnates brought together the nation’s main railroad interests, which had been warring with each other, into a new conglomerate called the Northern Securities Company. Even the staunchly big business Chicago Tribune was taken aback: “Never have interests so enormous been brought under one management,” its editor wrote.
Midwestern governors, whose constituents depended on the railroads to get their crops to market, suggested that their legislatures would find a way to prohibit such a powerful combination. Northern Securities Company officials retorted that they would simply keep all business transactions and operations secret. When Roosevelt gave his first message to Congress in December, industrialists watched to see what the “damned cowboy” would say about their power over the government.
They were relieved. Roosevelt said the government should start cleaning up factories and limiting the working hours of women and children, and that it should reserve natural resources for everyone rather than allow them to be exploited by greedy businessmen.
But Roosevelt did not oppose the new huge combinations. He simply wanted the government to supervise and control corporate combinations, preventing criminality in the business world as it did in the streets. He asked businessmen only for transparency. Once the government actually knew what businesses were up to, he said, it could consider regulation or taxation to protect the public interest.
Senators and businessmen who had worried that the cowboy president would slash at the trusts breathed a sigh of relief that all he wanted was “transparency.” According to the Chicago Tribune, the “grave and reverend and somewhat plutocratic Senators immediately admitted in the most delighted fashion that the young and supposedly impetuous President had discussed the trust question with rare discrimination.”
But they were wrong to think Roosevelt did not intend to reduce the power of big business. In early January 1902, Minnesota sued to stop the Northern Securities Company from organizing on the grounds that such a combination violated Minnesota law. While the Supreme Court dithered over whether or not it could rule on the case, the Roosevelt administration put the federal government out in front of the issue. In February, Roosevelt’s attorney general told newspapers that the administration believed the formation of the Northern Securities Company violated the 1890 Sherman Antitrust Act and that he would be filing a suit to keep it from organizing.
Businessmen were aghast, not only because Roosevelt was going after a business combination but also because he had acted without consulting Wall Street. When J. P. Morgan complained that he had not been informed, Roosevelt coolly told him that that was the whole point. “If we have done anything wrong,” said the astonished Morgan, “send your man [the attorney general] to my man [one of his lawyers] and they can fix it up.” The president declined. “We don’t want to fix it up,” explained the attorney general. “We want to stop it.”
“Criticism of President Roosevelt’s action was heard on every side,” reported the Boston Globe. “Some of the principal financiers said he had dealt a serious blow to the financial securities of the country.” For his part, Roosevelt was unconcerned by the criticism. “If the law has not been violated,” he announced, “no harm can come from the proposed legal action.”
In late February, the Supreme Court decided it would not hear the Minnesota case; on March 10, the United States sued to stop the organization of the Northern Securities Company.
In August 1902, Roosevelt toured New England and the Midwest to rally support for his attack on the Northern Securities Company. He told audiences that he was not trying to destroy corporations but rather wanted to make them act in the public interest. He demanded a “square deal” for everyone. As the Boston Globe put it: “‘Justice for all alike—a square deal for every man, great or small, rich or poor,’ is the Roosevelt ideal to be attained by the framing and the administration of the law. And he would tell you that that means Mr Morgan and Mr Rockefeller [sic] as well as the poor fellow who cannot pay his rent.”
In 1904 the Supreme Court ruled that the Northern Securities Company was an illegal monopoly and that it must be dissolved, and by 1912, Roosevelt had come to believe that a strong federal government was the only way for citizens to maintain control over corporations, which he saw as the inevitable outcome of the industrial economy. He had no patience for those who hoped to stop such combinations by passing laws against them. Instead, he believed the American people must create a strong federal government that could exert public control over corporations.
In a famous speech at Osawatomie, Kansas, in 1912, he called for a “new nationalism.”
“The citizens of the United States must effectively control the mighty commercial forces which they have called into being,” he said. He warned that “[t]here can be no effective control of corporations while their political activity remains…. We must have complete and effective publicity of corporate affairs, so that the people may know…whether the corporations obey the law and whether their management entitles them to the confidence of the public.”
Roosevelt had come to believe that a strong government must regulate business. “The absence of effective State, and, especially, national, restraint upon unfair money-getting has tended to create a small class of enormously wealthy and economically powerful men, whose chief object is to hold and increase their power,” he said.
After all, he said, “[t]he object of government is the welfare of the people.”
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Notes:
Boston Daily Globe, February 26, 1901, p. 1.
Boston Daily Globe, March 3, 1901, p. 4.
Chicago Daily Tribune, March 3, 1901, p. 1.
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