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Desire for Dynasty
The story of the House of Morgan
Only a few people want to build a family dynasty. One of them was Junius Spencer Morgan who became a banker in 1854. The result was the Morgan banking dynasty which lasted for four generations before the family lost all influence over the banks that still carry their name.
To build his dynasty, Junius first needed children. He had three daughters but, to his way of thinking, they didn’t count for dynastic purposes. His first-born son died at the age of 12. So this only left one hope: a rather sickly boy called John Pierpont Morgan.
The question was how Junius could prepare the young J.P. Morgan for his role in developing the family fortune. The first stage of Junius’ plan was excellent education and he sent J.P. to top schools in Boston followed by studies in Switzerland and Germany. The second stage was to provide J.P. with management experience in the family business. The third stage was Junius’ personal attention which came in the form of a stream of instructions, warnings and criticism.
In his book called ‘Dynasties’ (Viking 2006) David Landes writes that Junius believed in giving no praise to his son but only demands without limits. The result was that J.P. felt the need to drive himself to ‘fatigue, depression, even physical illness’ and also to great success.
By the 1870s J.P. was fast building up a hugely powerful banking operation in New York. He made large amounts of money from railroads and in 1892 helped form the General Electric Company. GE became one of America’s best known multinationals.
The plan for the children was education, experience and advice 
It was now J.P.’s turn to train his son, called Jack, to continue the dynasty. He paid for the best education and helped Jack to experience the family business. In 1898 Jack was sent to the London bank to learn how to build an even greater fortune for the family.
But J.P.’s great success carried with it the seeds of later problems. On arriving in London the young and wealthy Jack found himself at the centre of society. The joys of luxury took up a great deal of time. Why spend time on the details of banking when he could be having lunch with the king of England and other members of the British aristocracy? Jack just did not have the same drive as J.P. Morgan.
In truth, Jack had little chance of keeping on top of the business. Junius, the great founder, had managed to keep complete control while bringing in managers to help run the business. But the banks were growing much faster than the very limited supply of Morgan family members. It was necessary to bring in more and more outsiders, not just as managers but also as partners who expected a share of the profits.
For example, the Morgan family’s London bank was called J. S. Morgan and Company until 1910. But from 1905 almost all the leadership was provided by partners like Edward Grenfell. In 1910 the London bank changed its name to Morgan, Grenfell and Company and it operated completely as a managerial partnership.
In 1933 the USA government, concerned by the power of large organisations, passed the Glass- Steagall Act. The result was that the ‘House of Morgan’ had to be split into three businesses: Morgan Grenfell, Morgan Stanley and J.P. Morgan and Company.
The business grew much faster than the family
Despite these difficulties Jack Morgan was still making an effort to continue his grandfather’s dream of a dynasty. He kept the family together by inviting his children and grandchildren to regular formal dinners, as often as once a week. He also encouraged his sons to follow in his footsteps. But he only had two sons Ð Junius Spencer Junior and Harry Ð to go around the three separate businesses.
Neither of the sons was able to become dominant. By now most of the real power had moved into the hands of the other partners. The Morgan family had less and less influence as the managerial partners ran the organisation that had become their own.
When Harry wanted to bring his second son John into the business, the managerial partners showed the level of their power. They refused to give John a job, claiming that there was a rule against nepotism. This was true but the rule had never been meant for use against members of the Morgan family. So even though the name of ‘Morgan’ was still used by the bank there was no place in it for the founder’s great great grandson.
The dynasty that Junius Spencer Morgan had dreamed of had not lasted into the fifth and sixth generations. The Morgan family has mostly done very well but the family’s control of the banks has completely ended. David Landes writes: ‘This ending is what happens when the founding family loses interest and control, and bureaucratic managers take charge.’
Important dates
1854 Junius Spencer Morgan becomes a banker
1864 Creation of J.S. Morgan and Company, based in London
1895 Creation of J.P. Morgan and Company, based in New York
1910 J.S. Morgan and Company is renamed Morgan, Grenfell and Company
1913 J.P. Morgan dies aged 75
1933 The ‘House of Morgan’ is forced to split into separate businesses: Morgan Grenfell, Morgan Stanley, and J.P. Morgan and Company.
1990 Morgan Grenfell is bought by Deutsche Bank.
1997 Morgan Stanley merges with Dean Witter Reynolds and Discover & Co.
2000 J.P. Morgan and Company is bought by Chase Manhattan
In this issue
Are you ready?
Score your readiness to pass the business to the next generation
Family Offices
Options for preserving wealth
Why join the family business?
Three views on the reason for joining the family business
First Steps to a Family Council
See the benefits of having a family council
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