The banking industry is surrounded by so many conspiracies that sometimes its quite difficult
to separate facts from fiction, starting from Rothschilds banking dynasty
to JP morgan.
If the Rothschilds banking empire has shrunk dramatically in recent decades, JP morgan’s
banking empire only expanded to the point, as of 2019, it has $3 ($2.988) trillion dollars
in assets under management, while its investment and corporate arm holds 25.45 trillion dollars
in assets under custody.
In fact, It was JP Morgan himself who pushed the government to create the federal reserve,
the center of all modern conspiracies. For over a hundred years, JP Morgan has been in
the centre of american banking.
In this video, we are going to look at how JP morgan created the worlds largest bank
and How he ended up also convincing the government to create the FED.
It all started in 1837 in Hartford, Connecticut where John Pierpont Morgan was born.
John joined the banking business just when he hit 20, after coming back from Europe,
in 1857. Following his father's footsteps. His father J. S. Morgan had already established
the merchant banking firm, Peabody, Morgan & Co.
Back then the United States wasn’t the superpower that it is today, it was more like an emerging
market, so the Europeans were investing heavily in United states since returns were quite
high, especially in the railroad, it was like the internet of that time, everyone thought
that the railroads are the future and no one would dare to miss this opportunity.
But Morgan was smart enough not to invest his money because he knew that it was turning
into a bubble and everything would crash at any moment as we will later see in this video,
however that didn’t stop him from funneling European investments through American companies
into the railroad. He even got personally involved in the development and management
of the railroads across the nation.
Morgan was a big believer in Big Corporations because, they enable economies of scale, and
make them more competitive.
so his vision was to always merge multiple small businesses and turn them into a conglomerate.
In 1890 he took control of J.S. Morgan & Co., his vision was to buy Carnegie steel business
and merge it with several other steel, coal, mining and shipping firms. And formed the
United States Steel Corporation. It became the first billion-dollar company in the world
with a market cap of 1.4 Billion dollars. With economies of scale, they reduced their
cost and started competing globally against Europeans.
His influence was beyond Steel and Railroad although these two were the best 2 industries
of that time. He also played an important role and helped to merge Edison electric with
its competitors that ended up becoming General Electic.
His vision was always, the bigger the company, the bigger economies of scale it can achieve.
He also helped to create AT&T and multiple other companies.
It seems like it was JP Morgan who rooter the idea of the giant corporations in the
United States, but that’s exactly what made JP Morgan one of the most powerful banking
houses of the world by 1900, Morgan reorganized business's structures and
management to return them to profitability. His reputation as a banker also helped bring
investors on board to the businesses that he took over.
However, not everything was sunshine and rainbows, remember the crisis I told you about in the
beginning. Well, after multiple decades of dramatic growth,
the bubble finally burst and the stock market crashed like it always does. It ripped the
American economy, Even the major banks were on the verge of bankruptcy.
The banks tried to get their loans back, but the firms simply weren’t able to pay and
the United States didn’t have a central bank at that time to rescue them,
So, Morgan stepped in and saved the economy.
He pledged a large sum of his own money and convinced other major new york bankers to
do the same. If it wasn’t for him, the crises would have deepened.
But it also illustrated the vast influence of a single banker on the entire American
economy. That was a clear sign for the government to
step in and take over the money supply. what would happen if another crisis would
hit? relying on rich guys in new york isn’t always the best of the options!
That's when the US decided to create a central bank. and in 1913, the federal reserve was
born. Just a few months after JP Morgan passed away.
But that didn’t stop, JP Morgan Company from growing even bigger. It played an important
role in WW1. However, when the war came to an end, financial crises hit the world again.
The great depression lasted almost 10 years and the congress took any measures to save
the economy. And part of it was to pass the Banking act of 1933 that Separated the commercial
banks from investment banks, that forced JP Morgan & Co. To break up.
However, for JP morgan to become as big and powerful as its today, it had to merge with
multiple other banks through the century. The most notable of them is probably Chase
Manhatanna bank that was already a merger of 2 other big banks, Chase National Bank
and Bank of the Manhattan Company that was founded back in 1799, one of the oldest financial
institutions in the history of the united states.
Another bank that also creating a fierce competition was Chemical Bank Corporation, the name sounds
quite unusual for a bank. It was initially a chemical manufacturing company back when
it was founded in 1823, however just a year after that it got into the banking sector.
After more than a century, in the 1980s and 1990s, it was at the front of the industry.
Remember Chase Manhattan Bank, despite its successes, it was extremely weakened by a
real estate collapse so it merged with Chemical Bank in 1996 and become the biggest bank in
the entire nation.
The marriage of the biggest banks of America didn’t stop there, the competition was fierce,
and Chase Manhattan Bank had to find ways to compete with Goldman Sacks, Morgan Stanely,
So in December of 2000, the 2 giant financial institutions merged, Chase Manhattan and JP
Morgan to become the largest bank in America - JP Morgan Chase & Co.
It might seem like that would be the end of mergers and these banks would finally stop
expanding, however that wasn’t the case, in 2004, JP morgan purchased Chicago Based,
Bank One Corporation for 58 Billion dollars in stocks, Bringing on board Jamie Dimon who
would end up becoming the CEO and take the company to where it is now.
Despite the fact that JP Morgan was powerful enough to save the nation from the panic of
1907, The bank in its current structure is the result of the combination of several large
U.S. banks ( Chase Manhattan Bank, Bank One, Bear Stearns, Washington Mutual, Chemical
Bank, Manufacturing Hanover, First Chicago Bank, National Bank of Detroit, Texas Commerce
Bank, Providian Financial, Great Western Bank)
Like in 1907, the world was hit by another crisis, in 2008 the stock market crashed again,
but this time the crisis was much bigger. Companies went bankrupt one after another,
including conglomerates such as Lehman brothers. The fifth-largest bank in the US, Bear Stearns
lost almost half (47%) of its value and was on the verge of bankruptcy.
Unlike 1907, this time there was a central bank (federal reserve) to save the economy.
ANd JP Morgan Chase took full advantage of that. To prevent the collapse of such a giant
bank, the government rescued Bear Stearns by lending $29 billion to JPMorgan Chase to
buy the firm. The tried to purchase bank for around 230 million dollars valuing each share
at only 2 dollars, when it was valued above hundred bucks just before the crises, but
it didn’t work out, so they ended up paying 10 dollars a share.
And JP Morgan came out of the crises only stronger and Bigger!
JP Morgan isn’t without controversies. They were involved in multiple scandals. They paid
over 2 billion dollars in fines and legal settlements for their role in financing Enron
Corp fraudulent securities. In fact, they also ended up paying another 2.2 billion dollars
to settle a lawsuit filed by Enron Investors. The number of controversies and lawsuits that
it went through is beyond what we can possibly cover in this video.
But JPMorgan Chase is probably exactly how JP Morgan himself envisioned the company,
he was a big supporter of mergers and the company consistently merged or purchased other
banks to be where they are today.
And now its your turn, what do you think? Should banks be allowed to keep merging and
get bigger, or the government should intervene and limit banks.
Let me know down in the comments below.In anyways, as always hit that like button.
Thanks for watching and I will see you in the next one.