For 146 years, until 2000, J.P. Morgan specialized in commercial banking, before a merger with Chase Manhattan Bank led to the business line spinning off under the Chase brand.[3][4]
Early history
23 Wall Street, former headquarters of J.P. Morgan & Co.
The origins of the firm date back to 1854 when Junius S. Morgan joined George Peabody & Co. (which became Peabody, Morgan & Co.), a London-based banking business headed by George Peabody. Junius took control of the firm, changing its name to J.S. Morgan & Co. in 1864 on Peabody's retirement. Junius's son, J. Pierpont Morgan, first apprenticed at Duncan, Sherman, and Company in New York City, then founded his own firm with a cousin, J. Pierpont Morgan & Company, in 1864.[5] J. Pierpont Morgan & Company traded in government bonds and foreign exchange. It also acted as an agent for Peabody's. Junius, however, considered some of Pierpont's ventures to be highly speculative. Therefore, Pierpont took on Charles H. Dabney (a connection established when Pierpont was sent to the Azores as a child) as a senior partner, and the firm was known first as Dabney, Morgan, and Company (beginning in 1864) and then "Drexel, Morgan & Co." (in 1871). In those firms, Pierpont used his Peabody connection to bring British financial capital together with the rapidly-growing U.S. industrial firms, such as railroads, which needed capital.[6] The Drexel of Drexel, Morgan & Co. was Philadelphia banker Anthony J. Drexel, founder of what is now Drexel University.[7]
House of Morgan
On Junius's death in 1890, Pierpont Morgan took his place at J.S. Morgan and Company. After Drexel's death, Drexel, Morgan reorganized in 1895 and became J.P. Morgan and Company.[6] It financed the formation of the United States Steel Corporation, which took over the business of Andrew Carnegie and others and was the world's first billion-dollar corporation. In 1895, it supplied the United States government with $62 million in gold to float a bond issue and restore the treasury surplus of $100 million. In 1892, the company began to finance the New York, New Haven, and Hartford Railroad and led it through a series of acquisitions, which made it the dominant railroad transporter in New England. In 1905 a close alliance was formed with the banking house of J. P. Morgan & Co., New York, for joint action in international finance and issue operations, particularly the absorption of American securities by German investors with the Dresdner Bank.
The Wall Street bombing September 16, 1920: a bomb exploded in front of the headquarters of J.P. Morgan Inc. at 23 Wall Street, injuring 400 and killing 38 people.
Built in 1914, 23 Wall Street was known as "The Corner" and "The House of Morgan". At noon, on September 16, 1920, an anarchist bomb exploded in front of the bank, killing 38 and injuring 400. Shortly before the bomb went off, an unknown person placed a warning note in a mailbox at the corner of Cedar Street and Broadway. The warning read: "Remember we will not tolerate any longer. Free the political prisoners or it will be sure death for all of you. American Anarchists Fighters." While theories abound about who was behind the Wall Street bombing and why they did it, after twenty years of investigation the FBI rendered the file inactive in 1940 without ever finding the perpetrators.
Financing of Allied bonds during World War I
In August 1914, Henry P. Davison, a Morgan partner, traveled to London and made a deal with the Bank of England to make J.P. Morgan & Co. the sole underwriter of war bonds for Great Britain and France. The Bank of England became a fiscal agent of J.P. Morgan & Co. and vice versa. Over the course of the war, J.P. Morgan loaned about $1.5 billion (approximately $45.63 billion in today's dollars) to the Allies to fight against the Germans.[8]:63 The company also invested in the suppliers of war equipment to Britain and France, thus profiting from the financing and purchasing activities of the two European governments.
In 1933, the provisions of the Glass–Steagall Act forced J.P. Morgan & Co. to separate its investment banking from its commercial banking operations. J.P. Morgan & Co. chose to operate as a commercial bank because after the stock market crash of 1929, investment banking was in some disrepute and commercial lending was perceived to be the more profitable and prestigious business. Also, many within J.P. Morgan believed that a change in the political climate would allow the company to resume its securities businesses but that it would be nearly impossible to reconstitute the bank if it were disassembled.
In 1935, after being barred from the securities business for over a year, the heads of J.P. Morgan made the decision to spin off its investment banking operations. Two J.P. Morgan partners, Henry S. Morgan (son of Jack Morgan and grandson of J. Pierpont Morgan) and Harold Stanley, founded Morgan Stanley on September 16, 1935, with $6.6 million of nonvoting preferred stock from J.P. Morgan partners. At the beginning, Morgan Stanley's headquarters were at 2 Wall Street, just down the street from J.P. Morgan, and Morgan Stanley bankers routinely used 23 Wall Street in closing transactions.
Morgan Guaranty Trust
Morgan Guaranty logo c. 1976
In the years following the spin-off of Morgan Stanley, the securities business proved robust, while the parent firm, which was incorporated in 1940,[9] was less profitable. By the 1950s, J.P. Morgan was only a mid-sized bank. To bolster its position, in 1959, J.P. Morgan merged with the Guaranty Trust Company of New York to form the Morgan Guaranty Trust Company. The two banks already had numerous relationships between them and had complementary characteristics as J.P. Morgan brought a prestigious name and high-quality clients and bankers while Guaranty Trust brought a significant amount of capital. Although Guaranty Trust was nearly four times the size of J.P. Morgan at the time of the merger in 1959, J.P. Morgan was considered the buyer and nominal survivor and former J.P. Morgan employees were the primary managers of the merged company.
Return of J.P. Morgan & Co.
J.P. Morgan & Co. logo prior to its merger with Chase Manhattan Bank in 2000
Ten years after the merger, Morgan Guaranty established a bank holding company called J.P. Morgan & Co. Incorporated, but continued to operate as Morgan Guaranty through the 1980s before beginning to migrate back to use of the J.P. Morgan brand. In 1988, the company once again began operating exclusively as J.P. Morgan & Co.
Also in the 1980s, J.P. Morgan along with other commercial banks pushed the envelope of product offerings toward investment banking, beginning with the issuance of commercial paper. In 1989, the Federal Reserve permitted J.P. Morgan to be the first commercial bank to underwrite a corporate debt offering.[10] In the 1990s, J.P. Morgan moved quickly to rebuild its investment banking operations and by the late 1990s would emerge as a top-five player in securities underwriting.
By the late 1990s, J.P. Morgan had emerged as a large but not dominant commercial and investment banking franchise with an attractive brand name and a strong presence in debt and equity securities underwriting.
Beginning in 1998, J.P. Morgan openly discussed the possibility of a merger, and speculation arose of a pairing with Goldman Sachs, Chase Manhattan Bank, Credit Suisse or Deutsche Bank AG.[11]In the previous decade, Chase Manhattan had emerged as one of the largest and fastest-growing commercial banks in the United States through a series of mergers. In 2000, it merged with J.P. Morgan to form JPMorgan Chase & Co.[12][13]
In 2004, JPMorgan began a joint venture with Cazenove, which combined Cazenove's investment banking operations with JPMorgan's UK investment banking business. By 2010 JPMorgan bought the company out.[14] J.P. Morgan Cazenove is a marketing name for the U.K. investment banking businesses and EMEA cash equities and equity research businesses of JPMorgan Chase & Co. and its subsidiaries.
In 2005, JPMorgan Chase acknowledged that its two predecessor banks had received ownership of thousands of slaves as collateral prior to the Civil War. The company apologized for contributing to the "brutal and unjust institution" of slavery. The bank paid $5 million in reparations in the form of a scholarship program for Black students.[15][16][17]
J.P. Morgan, the company itself, is still active as the business and investment banking subsidiary of JPMorgan Chase; Chase Manhattan Bank is still active as the personal banking subsidiary of the company.
Following J.P. Morgan & Co.'s formation in 1871, John Pierpont "J. P." Morgan was universally accepted as its highest executive authority (despite holding the mere title of "senior partner"). Upon Morgan's death in 1913, the bank's leadership passed to his son, John Pierpont "Jack" Morgan Jr. Once J.P. Morgan & Co. was incorporated in 1942, Jack emerged as its first chief executive within his capacity as chairman of the board of directors. Henceforth, the bank would be led by 12 executives (eight of whom chaired the board of directors while simultaneously holding the title of CEO) before merging with Chase Manhattan Bank to become JPMorgan Chase.
Investment banking is an advisory-based financial service for institutional investors, corporations, governments, and similar clients. Traditionally associated with corporate finance, such a bank might assist in raising financial capital by underwriting or acting as the client's agent in the issuance of debt or equity securities. An investment bank may also assist companies involved in mergers and acquisitions (M&A) and provide ancillary services such as market making, trading of derivatives and equity securities, FICC services or research. Most investment banks maintain prime brokerage and asset management departments in conjunction with their investment research businesses. As an industry, it is broken up into the Bulge Bracket, Middle Market, and boutique market.
John Pierpont Morgan Sr. was an American financier and investment banker who dominated corporate finance on Wall Street throughout the Gilded Age and Progressive Era. As the head of the banking firm that ultimately became known as J.P. Morgan and Co., he was a driving force behind the wave of industrial consolidations in the United States at the turn of the twentieth century.
Chemical Bank, headquartered in New York City, was the principal operating subsidiary of Chemical Banking Corporation, a bank holding company. In 1996, it acquired Chase Bank, adopted the Chase name, and became the largest bank in the United States. Prior to the 1996 merger, Chemical was the third-largest bank in the U.S., with $182.9 billion in assets and more than 39,000 employees. In addition to operations in the U.S., it had a major presence in Japan, Germany, and the United Kingdom. It was active in both corporate banking as well as retail banking as well as investment banking and underwriting corporate bonds and equity.
JPMorgan Chase & Co. is an American multinational financial services firm headquartered in New York City and incorporated in Delaware. It is the largest bank in the United States and the world's largest bank by market capitalization as of 2023. As the largest of the Big Four banks in America, the firm is considered systemically important by the Financial Stability Board. Its size and scale have often led to enhanced regulatory oversight as well as the maintenance of an internal "Fortress Balance Sheet". The firm is headquartered at 383 Madison Avenue in Midtown Manhattan and is set to move into the under-construction JPMorgan Chase Building at 270 Park Avenue in 2025.
JPMorgan Chase Bank, N.A., doing business as Chase, is an American national bank headquartered in New York City that constitutes the consumer and commercial banking subsidiary of the U.S. multinational banking and financial services holding company, JPMorgan Chase. The bank was known as Chase Manhattan Bank until it merged with J.P. Morgan & Co. in 2000. Chase Manhattan Bank was formed by the merger of the Chase National Bank and the Manhattan Company in 1955. The bank merged with Chemical Bank New York in 1996 and later merged with Bank One Corporation in 2004 and in 2008 acquired the deposits and most assets of Washington Mutual. In May 2023, it acquired the assets of First Republic Bank.
Junius Spencer Morgan I was an American banker and financier, as well as the father of John Pierpont "J.P." Morgan and patriarch to the Morgan banking house.
Anthony Joseph Drexel Sr. was an American banker who played a major role in the rise of modern global finance after the American Civil War. As the dominant partner of Drexel & Co. of Philadelphia, he founded Drexel, Morgan & Co, which later became J.P. Morgan & Co., in New York City in 1871 with J. P. Morgan as his junior partner. He also founded Drexel University in Philadelphia in 1891.
Morgan, Grenfell & Co. was a leading London-based investment bank regarded as one of the oldest and once most influential British merchant banks. It had its origins in a merchant banking business commenced by George Peabody. Junius Spencer Morgan became a partner in 1854. After Peabody retired the business was styled J. S. Morgan & Co. In 1910, it was reconstituted as Morgan Grenfell & Co. in recognition of the senior London-based partner, Edward Grenfell, although J. P. Morgan & Co. still held a controlling interest. In the 1930s, it became a commercial bank and the Morgan family relinquished their controlling interest in the business. After a period of retrenchment, it expanded under the management of second Viscount Harcourt in the 1960s. The link with J. P. Morgan & Co. ended completely in the 1980s. The business also became embroiled in the Guinness share-trading fraud at that time. In 1990, Morgan Grenfell was acquired in an agreed deal by its minority shareholder, Deutsche Bank. The use of the Morgan Grenfell name was discontinued by Deutsche Bank in 1999.
Cazenove was a British stockbroker and investment bank, founded in 1823 by Philip Cazenove. It was one of the UK's last independent investment banks and one of the last to remain a private partnership. The investment banking business entered into a joint venture with JPMorgan Chase in 2004, and the fund management business Cazenove Capital Management spun off in 2005. In 2009, JPMorgan Chase acquired the remainder of the investment banking business. Cazenove Capital Management was acquired by Schroders in 2013.
John Pierpont Morgan Jr. was an American banker, and finance executive. He inherited the family fortune and took over the business interests including J.P. Morgan & Co. after his father J. P. Morgan died in 1913.
Douglas 'Sandy' Warner is an American banker who joined Morgan Guaranty Trust Company of New York out of college in 1968 as an officer's assistant and rose through the ranks to become chief executive officer and chairman of the board of J.P. Morgan & Co. Inc. in 1995. Among his many accomplishments, Warner may be best known for spearheading the 2000 sale of J P Morgan & Co. to Chase Manhattan Bank for $30.9 billion.
J. S. Morgan & Co. was a merchant banking firm based in London and New York City founded by Junius Spencer Morgan, father of J. P. Morgan.
James Bainbridge Lee, Jr. was an American investment banker, notable for his role in the development of the leveraged finance markets in the U.S. in the 1980s. He is widely credited as the architect of the modern-day syndicated loan market. At the time of his death, Lee was vice chairman of JPMorgan Chase & Co. and a member of the bank's executive committee. He was also Co-Chairman of JPMorgan's investment bank.
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Anu Aiyengar is a finance professional based in Manhattan and Global Co-Head of mergers and acquisitions at JPMorgan Chase & Co, a multinational banking and financial services holding company based in New York City.
The Morgan family is an American family and banking dynasty, which became prominent in the U.S. and throughout the world in the late 19th century and early 20th century. Members of the family amassed an immense fortune over the generations, primarily through the work of Junius Spencer (J.S.) Morgan (1813–1890) and John Pierpont Morgan Sr. (1837–1913).
The National Bank of Commerce in New York was a national bank headquartered in New York City that merged into the Guaranty Trust Company of New York.
↑ On October 11, 1989 J.P. Morgan & Co. underwrote an offering for Savannah Electric & Power, per the L.A. Times article, the first corporate debt offering underwritten by a commercial bank in the United States since 1933. Morgan Underwrites Debt Issue: J.P. MorganArchived January 16, 2022, at the Wayback Machine (L.A. Times, October 11, 1989)
Morris, Charles R. The Tycoons: How Andrew Carnegie, John D. Rockefeller, Jay Gould, and J. P. Morgan Invented the American Supereconomy (2005) ISBN978-0-8050-8134-3
Pak, Susie J. Gentlemen Bankers: The World of J.P. Morgan. (Harvard University Press, 2013) excerpt, 1890s-1930s
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