The House of Morgan

The House of Morgan

Sixty years before Leona Helmsley, J.P. Morgan says that only the little people have to pay taxes.


Sixty years before Leona Helmsley, J.P. Morgan says that only the little people have to pay taxes.

Since the date is approaching when many of us must pay the June installment on our 1932 income taxes, or go to jail, it may be interesting and timely to review the cases of two citizens who will pay no income tax this year, and paid none during the last two years. Case Number One is a coal miner, living in a squalid village in southern Illinois. In none of the last three years has his income equaled $600. He is a widower with five children. They occupy a three-room frame shanty on a company “street” which is a mudhole after every rain. The mother is dead. Two months before the sixth child was due to arrive, she made the mistake of trying to do the family washing with water which she carried from the community hydrant, four blocks distant. She had a sixty-dollar funeral. The miner owes the company store more than $200. He is hopeful that things will improve under Mr. Roosevelt, and that the black damp won’t get him before the children are old enough to look out for themselves.

Case Number Two is J. Pierpont Morgan, head of the private banking firm of JP Morgan and Company, which at the beginning of the present year owned unimpaired assets worth $53,194,000. Mr. Morgan has homes at 231 Madison Avenue, New York; Glen Cove, Long Island; 12 Grosvenor Square, London; Watford, England; and owns a shooting box in Scotland. He spends considerable time each year on his famous yacht, Corsair, which is reported to have cost $4,000,000. I have never seen any figures on what it costs to keep her in commission. Mr. Morgan is a member of the following clubs: Union, Knickerbocker, Harvard, Metropolitan, New York Yacht, Racquet and Tennis, Century, and University (New York); Athenaeum, Garrick, and Whites (London); Somerset (Boston) and Metropolitan (Washington). Honorary degrees have been bestowed on him by Harvard, Oxford (England), Princeton, Cambridge (England), and New York University; and he possesses the following decorations: Legion of Honor (France), Order of Leopold II (Belgium), Order of the Crown (Italy), and First Order of the Sacred Treasure (Japan). He is a director in seven of the world’s largest corporations, and is generally regarded as the most powerful banker in the world. Great industrialists, great bankers, distinguished jurists, and at least one President of the United States have been recipients of his favors. It is easily seen, therefore, that his situation in life is quite different from that of the coal miner. But in one respect both are in the same boat — neither paid any federal income tax in this country during the last three years — although it should be stated in justice to Mr. Morgan that he paid in England in all three. No doubt that is why he admires and imitates the English, even to the point of referring to the office manager of Morgan and Company as “my clark.”

Disclosure before the Senate Banking and Currency Committee that Morgan and his nineteen partners, including such celebrities as Thomas Lamont and E. T. Stotesbury, paid no federal income taxes in this country for 1931 and 1932, and that those who paid for 1930 contributed the paltry total of $48,000, has excited tremendous surprise and no little indignation, to judge from the newspaper headlines and the private comments of one’s fellow taxpayers. The revelation was no surprise to me. It confirmed precisely the opinion which I have had about Morgan and all his tribe ever since I have been old enough to read and reflect. For them to seize upon the “capital-losses” provision of the existing law for the purpose of withholding contributions to the support of the government under which they have prospered so greatly, was as natural as for a hog to snap up an ear of corn. Nor was there anything to amaze the judicious in the discovery that high government officials had repeatedly accepted Morgan’s largess. The trick of putting such officials under obligation is one which the big bankers have practiced from time immemorial. Doesn’t everyone realize by now that we entered the World War mainly because Morgan and Company had bet on the Allies, and were in danger of losing? Is there any mystery as to why the marines were dispatched against Haiti, Santo Domingo, and Nicaragua when those countries defaulted, or threatened to default, on their debt payments to American banks?

However, I do resent, and that most bitterly, the cynical and uncalled-for imputation of Senator Carter Glass that every American citizen who makes out an income-tax return is dominated solely by an ambition to chisel the Treasury out of every cent possible. Let the honorable gentleman — who is so prone to judge the honor of others — speak for himself in the matter. This reporter could have taken stock losses in the last two years that would have cut his tax in half. It would have been legal, no doubt, but on the moral side it would have been a plain case of cheating the government. This reporter did not resort to it, and knows plenty of other reporters who did not. We have our faults. Some of us lose more than we can afford at golf, bridge, or poker; some indulge an extravagant passion for old furniture or rare editions; still others punish their livers unbearably with poor rye, bad Scotch, and worse gin; but it is manifestly unjust, if not libelous, to name us in the same breath with Morgan, Lamont, Stotesbury, Mitchell, and that gang. I am reminded, incidentally, of the severe lecture which Mr. Lamont read to the Senate Finance Committee eighteen months ago on the deficiencies of Congress. He was thoroughly dissatisfied with the manner in which the country was being governed. In the light of facts recently brought to light it would appear that he might have done better to leave criticism of the government to those of us who pay the costs.

It is difficult to say which is the more scandalous — the practices of the Morgan crowd, as disclosed by the inquiry, or the efforts of Senators Glass, Bulkley, and other members of the committee to prevent their disclosure. One would suppose that Morgan was amply represented in the person of John W. Davis, but every conceivable device — some of them incredibly petty and mean — has been employed by certain members of the committee to hamstring Ferdinand Pecora’s conduct of the investigation. But for his unflagging industry, patience, and pertinacity, and the wrathful insistence of Senator Jim Couzens, virtually none of the known scandals would have come to light. Just how much the obstructionists have succeeded in suppressing, we can only guess. As compensation for his herculean labors, Pecora is receiving from a grateful government the handsome salary of $225 a month, and to obtain accountants for the necessary examinations he has been compelled to appeal to personal friends to work at approximately one-fourth of their regular rate of pay.

It has been shown that the Morgan firm had a certain selected list of “clients” to whom it sold stocks at figures substantially under the market price. In the case of the Alleghany Corporation, these fair-haired boys got the stock at 20, when the market was 35. Thus, if 1,000 shares were allotted to a certain individual, it simply amounted to making him a cash gift of $15,000 if he elected to sell the stock next day. Such a gift to a government official by a firm constantly seeking government favors certainly was moral bribery, although I suppose a court would hold it legal, especially if the presiding judge had received a similar gift. Please note that the motion to make these lists public was carried in the committee by a vote of six to five. In view of the fact that Senator McAdoo’s name was on one of the lists, and considering that he is a member of the committee, it would be instructive to know how he voted. The presence of the name of my old friend Mr. Justice Owen Roberts, of the United States Supreme Court, grieves me profoundly. To be sure, the amount of stock allotted to him was small, and the allotment was made long before he went on the bench, but it is disappointing to learn that he would accept such a favor from such an outfit. To find the names of Secretary Woodin, Owen D. Young, John J. Raskob, and the late Calvin Coolidge there is perfectly natural. It is equally natural to find the front pages of the Hearst papers smeared with the drool of Edwin C. Hill, celebrated sob sister of the radio, who modestly likens the thick-necked Morgan to Lorenzo the Magnificent, paints Pecora as a snarling “timber wolf,” and declares that the examination of Morgan suggests the efforts of a high-school class to question Einstein about the solar system — although the actual news accounts convey the impression that the examination has been fairly successful. But don’t judge the rest of us by Hill — he is very carefully looking out for himself.

While we admire Pecora’s brilliant work, we should also remember that it was made possible primarily by President Roosevelt’s request that the inquiry proceed. Nor let us forget that many of the most shocking facts thus made public were known to officials of the Coolidge and Hoover Administrations. Is it any wonder that old Andy Mellon squalled like a panther at every suggestion that income-tax payments be made public? Is it any wonder that Ogden Mills became purple over such attempts to “pry into private affairs”? They knew where the cat was buried, and whose cat it was. My strictures on public men and affairs during the last six or seven years have occasionally been imputed to an unduly suspicious nature. Before the present Administration finishes digging up the dirt left by its predecessors, I surmise that the same critics will be denouncing me for not having told just how rotten the situation was. The answer is that the stuff was there, but it was very, very hard to lay hands on it. One always knows when a skunk is around, but it is not always possible to get a shot at it.

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