Sunday, November 28, 2010

Followup on 23 Wall Street

A Credit Bubble Stocks correspondent writes in with a comment on my 23 Wall Street post.

I read [House of Morgan] last year. I am curious what you think of it (I guess I'll wait for your review) as well as what prompted you to pick it up.

Chernow is a bit of a statist and apologist for Morgan's anti-market political interventions and scheming. Overall he seems like an individual who is in love with "great men" and feels that almost anything can be excused if it's done in the interests of greatness.

He also doesn't seem to clearly understand the economic and financial issues which he writes about in the book.

Other than that, I found it to be a compelling read and I especially liked the first few hundred pages which talked about Junius and the rise of young Morgan through the ranks of the banking and trading world. I found them to be similar in description and dynamic to probably the first couple hundred pages of The Prize, which I enjoyed the most for similar reasons. Those were the parts of each story where these people are actually creating something new and being innovative and dedicated to expansion.

After that, they all got bogged down in protecting what they had from newcomers and competitors by way of manipulating the political process to their benefit.

By the way, I lived 2 doors down from that spot at 45 Wall for a time. Used to walk by the scars of the "anarchist bomb" every single day. I don't think you could have an office closer to the NYSE, which is right across the street!
There were a number of occasions in the book where Chernow's obnoxious politics (statist is probably an accurate description) caused me to make an exasperated margin note. Chernow has a new book out about George Washington, so your observation about "great men" seems correct, although that is natural for a biographer.

To read Chernow's account, you would assume the Morgans were pretty conspicuously absent from the exciting new industries being formed circa 1900. Yet, Morgan was backing Thomas Edison and even invested in a Tesla experiment.

I think Chernow glosses over this because the Morgans were generally more interested in either making a dignified, white-shoe vig off of bonds issued by a stuffy, established company or cloak-and-dagger lending to deadbeat sovereigns (England, Germany, Latin American countries, etc).

The cloak-and-dagger part was because these sovereign loans went bad with alarming frequency, necessitating corrupt machinations in order to get paid. [It's hard to even tell to what extent Morgan was exposed to these bad loans. Did Morgan just make a quick vig on these too before pawning them off on retail rubes?]

I think a much more interesting man than either of the Morgans is Andrew Mellon. Andrew Mellon was our type of economist:
"liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate… it will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people."
Mellon was smarter, richer, and of better character than the Morgans. And, by the way, Mellon built the National Gallery of Art even as he was being harassed by the Roosevelt administration on false income tax charges. 

Mellon and the Morgans are both examples of how quickly most men grow tired of compounding wealth, and of what little imagination most rich men have at finding a use for vast wealth.

Planes and boats are classic rich man's toys and credit bubble assets, because you can get them as big (and expensive) as your heart desires, plus there is a long lead time to build them, making the price swings extra-volatile. The pinnacle, though, is works of art, because the supply has zero elasticity so the prices just get bid up to infinity during a bubble. Check out this article (


Taylor Conant said...


My understanding of biographers, and historians in general, is that they are not "great men" themselves so they get a sense of vicarious satisfaction in playing up the greatness of these men and then basking in the glory of being that person's "biographer". It's like, if you can't be the great man yourself, there is something ennobling about being his trusted servant.

How many bureaucrats and functionaries of the modern American state does this psychology describe?

So, you mentioned making a margin note. Out of simple curiosity, do you make a habit of writing in books as you read them or even of writing or typing separate notes on another piece of paper or on your laptop as you read? Do you try to summarize what you're learning or do you only record specific important thoughts, key pieces of info or memorable quotes?

I have found that I retain more information when I type an outline as I read something formal like a textbook or economic treatise. I think I'd benefit in terms of memorization from making margin notes, as well, but I just can't bring myself to write in my books! It's a strange, perfectionist anxiety issue I have. Maybe I need to start buying two copies of everything-- one to READ and one to merely look at on the shelf!

I find your comments on Chernow's focus interesting. This is an omission it would be hard to realize without having some outside knowledge and context of the subject. I would say I definitely approached the book with an "this is all encompassing" attitude. I guess the lesson here is always read with a skeptical, questioning mind and never assume you can ever trust just one resource or "authority", a good lesson in general in life, too.

Taylor Conant said...


The cloak and dagger part was interesting as well. If I remember what I read, it seems that Morgan was at least partly responsible for the establishment of private foreign intelligence networks in places like China and the rest, which would eventually merge with the intelligence operations of other large, international industrial combines (such as the oil interests) and then eventually be subsumed into the American State in the form of OSS/CIA, etc., after the "evolution" in corporate capitalism/fascism was fully achieved.

I got the sense that despite its outward appearances, there was nothing necessarily sinister in intent about any of this by an individual like Morgan-- working from a flawed understanding of right and wrong, morality, economic law, what have you, he simply thought he was doing business and this was all natural and right. After all, he was a "great" banker, how could anything he do be wrong?

Mellon and the Morgans are both examples of how quickly most men grow tired of compounding wealth, and of what little imagination most rich men have at finding a use for vast wealth.

I truly appreciate your unique perspective on things. You catch things and pick up on themes that I won't or at least didn't the first time around. Now that you mention it I understand exactly what you mean but at the time I read the book I think I was taking a much more narrow-minded, less thoughtful approach to what I was reading.

Well done! Maybe I should go back and re-read sometime. If only it wasn't 900 pgs. I'll have to go back and skim read, I guess.

By the way, do you agree that the book was much more exciting, informative and "follow-able" in the first few hundred pages, when Morgan was still competing and growing, and that after his banking regime was an established enterprise and he disappeared from the scene and his various heirs, business and otherwise, took over, the book lost some steam, coherence and entertainment value?

I find the building of empires to be much more fascinating than the maintaining of them. As a youngster playing games I often had the same approach-- starting out in a game at a low "level" I found the games thrilling and challenging, but once I had dominated the computer and had only to pay mind to keeping my empire from eroding at the margins I found it to be dull, boring and not even worth playing.

CP said...

Yes, I thought the book became pretty dull once Pierpont (senior) died.

CP said...

Just looking at this again in the context of a twitter debate. This was a good thread!

P.S. I'm pruning my library and the Chernow book is GONE. My new policy is to try to buy fewer of that type of book, and review and discard whenever something doesn't meet the 5/5 standard.