J.P. Morgan Bailouts Date Back to 1893

One of the biggest stories in the financial market today is the seizure and sale of Washington Mutual (WM) to J.P. Morgan (JPM). Although this is the largest failure in banking history and pages could and have already been written about the severity of WaMu’s demise, I choose instead to talk about how in times of crisis, the true heroes emerge.

This year, J.P. Morgan has swept both Bear Stearns (BSC) and Washington Mutual into their coffers. This illustrates the comparative strength of the bank and a tradition that has been more than 100 years in the making.

John Pierport Morgan who established the original J.P. Morgan & Co in 1871 is widely credited for having rescued the US economy and the US government on 2 very prominent occassions - 1895 and 1907. 100 years later, CEO Jamie Dimon is following in Morgan’s footsteps in the credit crisis of 2008.

Here are some snippets from Wikipedia on John Pierport Morgan’s bailouts:

Panic of 1893

In 1895, at the depths of the Panic of 1893, the Federal Treasury was nearly out of gold. President Grover Cleveland arranged for Morgan to create a private syndicate on Wall Street to supply the U.S. Treasury with $65 million in gold, half of it from Europe, to float a bond issue that restored the treasury surplus of $100 million. The episode saved the Treasury but hurt Cleveland with the agrarian wing of his Democratic party and became an issue in the election of 1896, when banks came under withering attack from William Jennings Bryan. Morgan and Wall Street bankers donated heavily to Republican William McKinley, who was elected in 1896 and reelected in 1900 on a gold standard platform

Panic of 1907

The Panic in 1907 may have been worse if not for the intervention of J.P. Morgan, who convinced other bankers in the city to provide a backstop for the crisis. By November the contagion had largely stopped.

Comments

[ertsfan:]

Thanks, Kathy.

2008 Sep 28 03:36 PM

[Phaesed:]

Yes, JP Morgan has often exploited financial crises to their own accord. After all, it was Morgan who help create the Federal Reserve, shouldn't it be them who claims $500 billion of assets for $2 billion? Even better that they don't have to pay off WaMu's debt.

2008 Sep 28 04:51 PM

[T'd off!:]

Mr. Potter from It's a Wonderful Life and J.P. Morgan...hmmmm...now I know where Capra got his inspiration.

2008 Sep 28 05:40 PM

[sumosama:]

Pierpont.

Clearly, financial crises of pandemic proportions are nothing new.

Keynes to the rescue - again!

2008 Sep 29 01:10 PM

[hamptoner:]

Jamie Dimon is in no way like J.P. Morgan, has no relation to the firm of J.P Morgan & Co. (other than having inherited it from Sandy Warner & co who lost sight of J.P Morgan's history and values and ran it into the ground in ten years). His own values were learned somewhere else (on the knee of Sandy Weill?) and he had the government pushing him to rescue both Bear Stearns and WaMu. J. P. Morgan rescued the system by dint of his ownn strengths and personality. If Dimon ultimately turns out to be more than a smart, ambitious and opportunistic leader, so much the better. We'll have to wait and see!

2008 Oct 20 09:14 PM