A Private Bank at War: J.P Morgan & Co. and France, 1914-1918.

This article examines the relationship between J.P. Morgan & Co. and France during the First World War. It argues that the dealings between the French government and the partners of J.P. Morgan & Co. from 1914 to 1918 were characterized by personal difficulties between successive French representatives and the partners of J.P. Morgan & Co. Contributing to a strained relationship was the place of Morgan, Harjes, the French affiliate of J.P. Morgan & Co., within the House of Morgan. Herman Harjes, the senior partner in Morgan, Harjes, though a proponent of Franco-American amity, became disenchanted with his New York partners as the war continued. The feeling was shared by those in New York, who reevaluated the role of Morgan, Harjes within the House of Morgan--until the French affiliate's eventual disappearance in 1926. While sympathetic to France, and instrumental in sustaining French credit during the war, the partners of J.P. Morgan & Co. conceived of the Allied cause as the British cause, a perspective that led them to rebuff calls for greater Franco-American financial cooperation.

The role played by the House of Morgan--consisting of J.P. Morgan & Co. in New York, Morgan Grenfell & Co. in London, Drexel & Go. in Philadelphia, and Morgan, Harjes in Paris--during World War I is well known. From August 1914 to April 1917, while the United States was neutral, the Morgan banks worked assiduously to further the Allied cause. Once it was apparent that the war was not going to end imminently, a formal relationship was established linking the House of Morgan and two of the principal Allies. In January 1915, J.P. Morgan & Go. was appointed the British government's purchasing agent in the U.S.; some months later, in May 1915, they assumed the same position for the French government. Acting through its Export Department, J.P. Morgan & Co. coordinated the purchasing requirements of the Allies in the United States, a task that became progressively larger as the scope of Allied buying increased. [1]

While J.P. Morgan & Co. was never designated Allied financial agent in the United States, the bank floated loans for Britain and France, handled foreign exchange operations, and advised British and French officials. J.P. Morgan & Co. developed a cordial relationship with Britain, but its dealings with France became strained over the course of the war. Once the U.S. entered the war as an associated belligerent, easing the acute dollar shortage facing the Allies, J.P. Morgan & Co. gradually withdrew from its former role. By 1918, the firm's work was confined to the liquidation of unsettled matters. As the war came to a close, it was apparent that the conflict had benefited the United States financially. Pre-war a debtor nation, the U.S. emerged as the strongest financial power in the world. J.P. Morgan & Co., the dominant Wall Street bank, was especially favored by this outcome.

Since its rise to prominence in the last quarter of the nineteenth century, the bank has attracted the attention of essayists, polemicists, Senate commissions, and historians. Much of this attention derived from three developments: first, Pierpont Morgan's role in the transformation of American finance and industry in the decades before World War I; second, the aforementioned involvement with the Allies, which led to charges that the bank, along with other financial institutions, conspired to maneuver the U.S. into the war on the Allied side to rescue its loans; and finally, the bank's role in postwar European reconstruction, which has attracted the attention of scholars interested in both the failure of stabilization and in Anglo-American rivalry.

The resulting historiography is lengthy but has omissions. There is no scholarly monograph devoted solely to the history of J.P. Morgan & Co. after 1913, and in particular to its relations with France. [2] Ron Chernow's The House of Morgan, a sweeping, popular history, discusses World War I in only one chapter, since the book is concerned with tracing the evolution of the modern bank in its entirety. [3] Vincent Carosso's The Morgans: Private International Bankers, 1854-1913, an exhaustive work, draws upon the full range of archival material, but ends with the death of Pierpont Morgan in 1913. [4]

Kathleen Burk has written important studies on Morgan Grenfell & Co. and on the Anglo-American financial relationship from 1914 to 1918. [5] Morgan Crenfell, 1838-1988 (1989), which covers the long history of the firm, mentions World War I briefly. Britain, America and the Sinews of War (1985), while dealing extensively with J.P. Morgan & Co. and Britain, does so in the framework of Anglo-American diplomacy. Likewise, Burk's 1988 article on the House of Morgan at war rests on Anglo-American archival research and does not incorporate any French material. [6] Priscilla Roberts has written an article on the quixotic figure of Willard D. Straight, a Morgan employee in 1914-1915. [7] As Roberts put it recently, these works stress the "Anglo-American theme." [8]

Examinations of the wartime relationship between France and J.P. Morgan & Co. have remained almost entirely the province of historians based in France, from Pierre Renouvin's article in the 1950s, through the work of Andr[acute{e}] Kaspi, Yves-Henri Nouailhat, and Georges-Henri Soutou. [9] With the exception of Soutou, this literature is written from a French archival perspective, coloring the portrait that has emerged. This has resulted partly from limitations of archival access and partly from a desire to explore how French policies were shaped by interaction with the Morgan bank, rather than considering how the relationship affected the bank as well. In fairness, none of this work was explicitly concerned with J.P. Morgan & Co. and France, instead delving into broader issues of Franco-American relations or, in Soutou's case, the question of the economic war aims of Germany, France, the United Kingdom, and the United States.

The wartime experience, which is often interpreted as broadening the outlook of the partners of J.P. Morgan & Co. and thus contributing to an internationalist perspective, was actually more ambiguous--a theme which is reflected in the work of Dan P. Silverman. Silverman has argued that what transpired early in 1919 was the transformation of the wartime Allied financial coalition into "a wavering but nonetheless clear Anglo-American financial entente in which the French found themselves the chief victim." Thomas W. Lamont, a leading Morgan partner, was party to this change. [10] At the same time the Morgan partners shared a "spiritual kinship" with France, Silverman asserts. [11] While this argument captures the fluid, complex nature of the relationship between J.P. Morgan & Co. and France, it overstates the degree to which developments in 1919 were novel. The war fostered a more insular Morgan partnership, less open to views that ran counter to its dominant Anglo-American culture. It was during the conflict that the partners of J.P. Morgan & Co. decided that their future prosperity lay in closer ties with Great Britain, despite sympathy for France, opposition from within the House of Morgan to this choice, and the desire of the French government for a continuation of wartime Franco-American cooperation.

Morgan, Harjes and the House of Morgan

While the existence of Morgan, Harjes demonstrated that the House of Morgan endeavored to cultivate business beyond the confines of New York and London, the Paris affiliate of the firm had been acquired more as a product of happenstance than conscious planning. When J. Pierpont Morgan had merged his operations in the U.S. in 1871 with Drexel & Co. to form Morgan, Drexel--the precursor to J.P. Morgan & Co.--the associated Drexel firm of Drexel, Harjes was absorbed. The participation of Morgan, Drexel in the syndicate, which allowed the French government to discharge its obligations to Germany following defeat in the Franco-Prussian War in 1870-71, was a coup; though Morgan, Harjes remained the smallest branch of the House of Morgan. Of the four firms constituting the House of Morgan in 1914, J.P. Morgan & Co. in New York and Morgan Grenfell & Co. in London were the best-capitalized, generated the greatest volume of business, and were responsible for the bulk of the House of Morgan's profits. There were more partners in New York and London than there were in Paris. In 1913 Morgan, Harjes had two resident partners, while Morgan Grenfell had three and J.P. Morgan & Co. in New York had ten. [12]

For much of its pre-war history, Morgan, Harjes was a small, complacent organization. This changed in 1908 when H. Herman Harjes succeeded his father John H. Harjes as the senior partner in the firm. Harjes, who was born in Paris in 1875, was privately educated in England and the U.S. and briefly worked for J.P. Morgan & Co. in New York. [13] He was a dynamic businessman with close ties to the French financial and political elite. At his prompting, Morgan, Harjes became a more aggressive, less insular institution. Harjes sought to take advantage of Paris' stature as a European financial center. Blessed with abundant capital, but lacking the intricate network of accepting houses, discount houses, and bill brokers that allowed the City of London to dominate the financing of global trade, the leading Parisian banking institutions tended to concentrate on loans within Europe, an inclination which was encouraged by successive French governments seeking to supplement French diplomacy with French money. [14] In kee ping with this general orientation, Harjes expanded Morgan, Harjes' European presence.

Harjes combined business acumen with a deep-seated love of France and a firm conviction that Franco-American concord was in the interests of both France and the United States. A leading figure in the American community in Paris, Harjes and his wife were founding members of the American Hospital in Paris. After the outbreak of the war, he acted as the head of the American Relief Clearing House, an agency devoted to coordinating American contributions of money and goods to France. Until 1917, Harjes was the official representative of the American Red Cross in Paris. He and his wife were also pioneers in providing ambulance services, Which were staffed by young American volunteers. In the fall of 1914 Harjes not only established the first organized American ambulance service but also a hospital to which the wounded were brought. Over time, the Harjes' ambulance sections were merged into the American Red Cross apparatus, while the hospital had a short life span, closing early in 1915 as medical facilities improved behind the front. [15] These services were appreciated by the French government, which awarded Hales the Legion of Honor after the war. Underpinning these activities was a fervent belief in a Franco-American community. In a letter to his sons shortly before his death in 1926, he urged them to become partners in Morgan, Harjes: "I hope that you will beat me at it and that thanks to your efforts the business will become even more prosperous, more truly representative of Franco-American finance than I was able to make it." [16]

The regret expressed in these words was well founded. Vincent Carosso has observed that "No American private banking house was more deeply rooted in the traditions of London's merchant bankers, its transatlantic connection more firmly entrenched, than the Morgan firm." [17] While Harjes harbored dreams of closer Franco-American ties, the New York partners were more interested in working with London. With the death of J. Pierpont Morgan in 1913, J.P. Morgan, Jr., (hereafter Jack Morgan) became head of the House of Morgan. Jack Morgan was less Continental and more British in his enthusiasms than his father had been, though like his father he spoke French and German. Jack Morgan was fond of France; he served …