Tuesday, October 18, 2011
Book Review: The House of Morgan
At 720 pages in length The House of Morgan is near encyclopedic in its detail of the history of the Morgan family of companies (JP Morgan, Morgan Stanley, etc.) and their familial founders.
In truth its much more than that. It is also a history of American and in part, world, banking for the last 150 years as the Morgan companies had their hand in every major financial event during these times.
The breadth and influence of what now call JP Morgan is astounding and unknown to me until reading this account. From Churchill, to FDR to Teddy Rosevelt, to Lindbergh to Mussolini, to Hitler...these are just a very partial list of world icons that JP Morgan (or its direct relations) had close connections to and influence over.
Bombings, assassination attempts, congressional hearings and more are all events that occur to the direct principals of JP Morgan with its signature building in NYC (23 Wall St. which was sold for $100MM in recent years) still bearing the pockmarks of an early 20th century bombing to this day.
Yes, the book is long. No I won't read it again other than as a reference. But oh, what a reference. Going into the cause and effects of the Great Depression, Glass-Steagall, investment banking, merchant banking, monopolies, leveraged buyouts, and hosts of other financial events and terms, reading this book is like an advanced course economic history and a primer on economics itself. If you want to be able to speak coherently on modern banking, where it came from and where its going, you could do a lot worse than starting here.
Most striking in the books later stages is the moronic repetitiveness and blissful ignorance that can be conferred upon current views of the financial world and Wall Street. Quotations from the past seem eerily similar to those being cried today as if they were new or revolutionary.
In recent years there are many who have decried the bailout of various financial firms and nationalization (or near to it) of banks and other companies as if this were something new. Lets go back to the early '80s when the Reagan administration stepped in and nationalized Continental Illinois Bank and Trust in order to avert a massive collapse of the financial system (Continental was larger than all the banks that failed during the Great Depression combined). The author of this book, Ron Chernow, states "Washington was now saying that some banks were too big to fail". Sound familiar?
Later we review the 1980's financial boom (prior to the 1988 crash) and are reminded "As in the Jazz Age, much of the era's financial prestidigitation seemed premised on an unspoken assumption of perpetual prosperity, an end to cyclical economic fluctuations and a curious faith in the Federal Reserve Board's ability to avert disaster". Remind anyone of the idiocy seen in the Dot Com boom? Or the more government created housing boom? People constantly deluding themselves into thinking that things can go on and on forever...right before they don't...
We have the public's reaction shortly after the 1988 crash (a formative event in my youth and something I remember quite clearly discussing at length in my TAG class at the time). Quoting from The House of Morgan, "after the crash, Main Street again prayed that Wall Street had learned its lesson and gloated over its misery...a Newsweek cover asked, "IS THE PARTY OVER?", which is a near carbon copy of what we saw after the 2008 collapse and Dot Com bust.
And lastly we have the dissection of moronic politicians who aimed to shape the world of finance via legislation. Whether it be Glass-Steagall or other lesser known acts of government, the resulting financial landscape is shown to be the near opposite of regulation intentions. Power becomes more rather than less concentrated, banks and other financial institutions move toward riskier and riskier opportunities rather than becoming more conservative. Systematic failures seem to grow in scope rather than shrink.
In the end, this book, completed some 20 years or so ago at the tail end of the 1980's is as valid today as ever.