JP Morgan and its success story
For the past few months, we have tried to bring you every important information regarding personal finance, knowing its utmost importance and core finance for all the finance enthusiasts out there. Today, we are here with something entirely different. Let’s begin with the story!
J.P. Morgan, one of the largest and renowned banks in the U.S. and a perfect dream for finance professionals to work for, has been at the center of finance for more than a century. It has more than 2 trillion in assets as of 2019 and is the biggest and the largest bank in the world by market capitalization. From 1907 to 2007, whether it be the Mortgage based crisis leading to the financial crisis of 2008-09, JP Morgan has revolutionized the US Financial markets and has come out bigger and stronger even after the great depression. And for all the prestige and trust the bank has earned, John Pierpont Morgan or J.P. Morgan was the man behind the enormous success.
Let’s look at what led to the evolution of J.P. Morgan. Pierpont’s father Junius Morgan was the most important and prominent personality in his life. He was a successful financier and believed in morals. He was of the opinion that your word and reputation is everything. In1871, JP Morgan with former banker Anthony Drexel created a private merchant partnership called Drexel Morgan and Company which later came to be known as JP Morgan. The US in the 19 th century was booming and busting to become a major industrial economy. J.P. Morgan was not putting in their own capital except some minor investments. They were rather funneling investments from Europe to the American companies.
Morgan was heavily involved and played a crucial role in consolidating railroads. Morgan monitored and disciplined the company who had sold their securities to his clients, hiring new officials if the current did not perform well. Morgan’s next target was the steel industry. Morgan decided that he would do for the steel industry what he did for the railroad industry. That is, Consolidation, of smaller companies to a giant one. Steel capitalized at 1 billion dollars in 1901. Not only steel and rails, Morgan financed American’s electrification. It was influential in creating AT&T, the world’s largest telecommunication company. His own first private house was the first to be illuminated entirely by electricity. Morgan combined Edison Electric with one of its chief rivals which later became general electric.
What he was doing was good for wealthy people who had money to invest. It was very good for growing American economy overall. The dollar became stronger. However, it became difficult for farmers and small borrowers as they had to pay back more value taken through loans which was painful and controversial. Apart from shaping the economy, JP Morgan also facilitated the largest foreign loan in 1915 in the history of the USA. $500 million was lent to English and the French to support war during world war I. Morgan also supplied $62 million to the U.S. government in gold to relieve a treasury crisis.
Then came the panic of 1907 regarded as the first worldwide crisis hitting the modern world. There were less government regulations during this period without any Central Bank and regulations. Stock market crash despite corporate earnings and stocks plummeted on foreign exchange. However, the group functioned as the country's unofficial central bank.
An Incident as described by one of the former employees stated, due to stock market crash in place, New York exchange couldn't function and hence went to JP Morgan, who lent 20 million dollars in just 20 minutes as Morgan felt that stopping the same would make the economy worse. His employees used to trust him for every decision he made and that is the kind of leader he was. He was known for reorganizing businesses to make them profitable. He revolutionized not only the global banking industry but ushered the modern era of American Business.
The crisis soon began to subside. Morgan was celebrated on wall street for saving the economy. He became the much known International hero. However, People realized that one banker should not have so much power and this led to a series of financial reforms including the creation of a Federal reserve. Morgan died in 1913. The New York exchange was closed for a day in his honor. His son Jr JP Morgan took over and the company continued to play a prominent role in financing major projects.
Deregulation from 1990 came in two parts, one was national banking for efficiency. JP Morgan saw great mergers after the same including the merger with Chemical bank. 5 of 8 banks of 1990 were merged into JP. Jamie Dimon being the current CEO of JP Morgan, dominates the banking industry. JP Morgan is not just the most valuable bank but also a brilliant business and Dimon needs to be acknowledged for the same. Aaron Burr was also regarded as an eminent personality and one of the earliest predecessors of JP Morgan. Despite lawsuits and controversies over the involvement in the Financial crisis, the bank with a fortress balance sheet has a market capitalization of over $350 billion and has outperformed bank industry benchmarks.
JP Morgan played a major role in making the Banking industry stronger. JP Morgan ranks first in digital banking. Since 2004, JP Morgan has outperformed bank stock index by average return of 6% every year. JP Morgan announced its aggressive growth plans to reach 80 million more consumers to cover 93 percent of population by 2022.
With eminent leaders and thinkers, JP Morgan has gained trust and huge profits by serving the government, its customers and the economy.
“Go as far as you can see; when you get there, you'll be able to see farther.”
- JP Morgan