Toward Rational Exuberance: The Evolution of the Modern Stock Market by B. Mark Smith

1

STEEL
“I ACCEPT.”
These words, spoken by John Pierpont Morgan in early 1901, would soon
reverberate throughout Wall Street. A piece of paper had just been handed
to Morgan by the energetic young president of Carnegie Steel, Charles
Schwab. Written on the paper was a number representing Andrew
Carnegie’s asking price for Carnegie Steel, the biggest producer of crude
steel in the world. After a quick glance, Morgan signaled his acceptance of
Carnegie’s terms. With that gesture he acquired the essential building block
for what would in a few weeks become the world’s largest industrial
corporation: United States Steel. In the rush of events that followed,
Morgan did not actually get around to instructing his attorneys to draw up
the contract with Carnegie for over a week. But it didn’t matter; both men
had given their word, and the deal was done.
U.S. Steel was a giant—or a monster, depending on one’s perspective.
With a capitalization of more than $1.4 billion, it dwarfed even the federal
government (with an annual budget of approximately $350 million and a
total national debt of slightly more than $1 billion). Senator Albert
Beveridge of Indiana hailed Morgan as “the greatest constructive financier
yet developed by mankind.” But even normally pro-business spokesmen
such as the editors of The Wall Street Journal acknowledged some
“uneasiness over the magnitude of the affair.” Others rendered harsher
verdicts. Henry Adams, financial gadfly and descendant of two Presidents,
stated bluntly, “Pierpont Morgan is apparently trying to swallow the sun.”
President Arthur T. Hadley of Yale, referring to the great “trusts,”
 like U.S.
Steel, that were controlled by a few imperious financiers, such as J. P.
Morgan, declared that if such business combinations were not “regulated by
public sentiment,” the country would have “an emperor in Washington
within 25 years.”

Toward Rational Exuberance: The Evolution of the Modern Stock Market by B. Mark Smith