Fighting the Fat Cats

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All of that was fine to men like Rockefeller. "The day of combination is here to stay," he once said. "Individualism is gone. Never to return." He hadn't reckoned on Roosevelt. Five months into his presidency, T.R. took Wall Street by surprise. He launched an antitrust suit that demanded the breakup of Northern Securities, a holding company organized to consolidate three railroads in the Pacific Northwest. By targeting that company, Roosevelt had also chosen to move against the man who epitomized the empire of money, New York financier J. Pierpont Morgan.

Beefy, saturnine and phenomenally wealthy, with a plump red nose caused by the skin disease rhinophyma, Morgan held immense power over the U.S. economy. In a day when there was no Federal Reserve to control the money supply or tweak interest rates, he operated at times as the nation's one-man central bank. By withdrawing his approval from a shaky deal, he could cause a panic. By pouring millions into tottering banks, he could end one. He did more than assemble capital for new ventures. He took over mismanaged companies, installed his own men and supervised operations. As he exercised his godly powers, he could not abide interference. Jean Strouse, one of his most thorough biographers, has cast doubt on whether he actually spoke the words that have been endlessly attributed to him: "I owe the public nothing." But if he didn't say them, he should have. As a summary of his lifelong outlook, they could hardly be bettered.

Like Rockefeller and Andrew Carnegie, Morgan believed in free enterprise but had seen enough of unbridled competition. For much of his career, he had assembled financing for the railways whose stupendous growth had revolutionized the U.S. after the Civil War. Boom and bust, duplicated routes, desperate price cutting and collapsed enterprises--the bumpy realities of the railroad business left Morgan with a horror of economic disorder. Profits required stability. Stability required concentration. Concentration meant trusts.

As it happens, Roosevelt's outlook was not entirely different. He didn't dispute the benefits of large-scale capitalism, and he thought of huge enterprises as an inevitable development of the industrial age. He understood the idea of economies of scale. Wisconsin Senator Robert La Follette and William Jennings Bryan, the perennial standard bearer for the common man, might have wanted to dismantle everything bigger than a hardware store. What Roosevelt wanted was simply to regulate the big outfits. For starters, he wanted to compel them to open their books. Quarterly reporting in the corporate world was still a novelty and always voluntary. He wanted the government to see into companies' workings so it could judge which combinations were tolerable and which were illegal restraints of trade. "We draw the line against misconduct," he said. "Not against wealth."

In his business affairs, Morgan was a man accustomed to handling things personally. One of his biggest objections to the way Roosevelt had sprung the Northern Securities suit was that the President had not quietly tipped him in advance. Large sums of borrowed money were at stake, and the abrupt attack by the Justice Department had rattled the markets. In Morgan style, he went personally to Washington to meet with Roosevelt and Attorney General Philander Knox.