The House of Morgan

  Showing their new subordination to corporate clients, many Wall Street banks moved their headquarters to midtown. Now past were the days when supercilious bankers expected company chairmen to troop to them. Between 1950 and 1965, hardly any new construction occurred on Wall Street. Chase, a large downtown landlord, feared property values might fall. To protect the bank’s interests and restore faith in Wall Street, John J. McCloy and David Rockefeller worked out a deal with real estate mogul William Zeckendorf to create Chase Manhattan Plaza, one block from Wall Street.

  As part of this package, Chase had to find a buyer for its thirty-eight-story tower at 15 Broad Street. The natural buyer was the adjoining House of Morgan. When Zeckendorf broached the subject with Alexander in 1954, they had a highly revealing conversation:

  “We’re not real-estate people,” Alexander said. “We already have this beautiful little corner here. We play a special role in finance; we are not big, but we are powerful and influential, we have relationships. Furthermore, we don’t want to be big and don’t need the space.”

  “Henry,” said Zeckendorf, “you’re going to get married.”

  “What?”

  “Someday you are going to merge with another bank, a big one. When you do, this property will be in the nature of a dowry coming with a bride; you will be able to make a better deal with your partner.”

  “Morgan will never merge.”

  “Well, that’s just my prediction.”13

  Zeckendorf would later remind Alexander of this talk.

  Bankers who had survived the Depression shied away from property speculation, and Alexander bargained fiercely for 15 Broad. He got it for $21.25 million with a 3’/2-percent mortgage—terms so unfavorable for Chase that it later bought out the mortgage. Fifteen Broad was then joined internally to 23 Wall, which became the larger building’s triumphal entryway. The flamboyant Zeckendorf used the deal to conquer Morgan’s aversion to real estate lending and ended up getting loans from the bank. He later told of how a journalist he met while flying back to New York from a trip had coaxed him into stopping en route to attend a wedding at a nudist camp. By the time he arrived at a 23 Wall meeting, press photos had appeared of him with the wedding revelers. He thought this publicity might end his relationship with the decorous Morgans. Instead, every high officer, including Henry Alexander and George Whitney, turned out to hear the juicy details.

  Many Morgan people opposed a merger because they liked working in a small, paternalistic bank with terrific perks; they thought a merger would cheapen the genuine article. There was a deeper dilemma: if the bank merged with a bigger bank to increase capital—the only sensible reason for doing so—it would become the junior partner, and J. P. Morgan and Company would effectively cease to exist. Finally, though, a decision would have to be reached. But even in late 1958, Alexander was still bluffing about the bank’s self-sufficiency: “Some mergers are a good thing. But while I wouldn’t say it can’t happen here, we have no desire to merge. We’ve been doing very well, thank you, sticking to our last.”14 He told people, “We don’t have the urge to merge.”

  Henry Alexander solved the problem with brilliance and extraordinary luck. Around the corner at 140 Broadway stood the fat, sleepy, dowdy Guaranty Trust. Long on capital and short on talent, it was the mirror image of Morgans. Its huge lending limit was larger than that of all the Chicago Loop banks combined. A former Money Truster, it had been a Morgan ward after its disastrous sugar lending in the early 1920s. After merging in 1929 with the National Bank of Commerce—once known as Pierpont Morgan’s bank—it became New York’s second largest bank. In the 1930s, George Whitney chaired its trust committee and Tom Lamont its executive committee. It was a blue-chip bank with almost all of America’s top-one-hundred companies as customers. “We used to think of Morgans as a nice small bank,” remarked Guido Ver-beck, then a Guaranty officer. “Because of their lending limits, when they participated in large loans, they could only take a small share and they were very worried about it.”15

  Guaranty’s chairman was J. Luther Cleveland. An old-school banker, he had rimless spectacles, neatly brushed hair, and a somber mien. Curt and humorless, he tried to run the whole bank, and his autocratic style prompted an exodus of talented people. He was the imperious Mr. Cleveland to subordinates, and grown men quailed in his presence. His own son would pop up like a jack-in-the-box when he entered the room. Cleveland would let visitors wait in his outer office, then grill them when they came inside. Despite shareholder discontent and sluggish business, he snorted at the idea of branch offices and small checking accounts.

  J. Luther Cleveland was an expert practitioner of relationship banking. He sat in a gloomy office, a dark, sleep-inducing room, attending to a single document on his desk. “It was a list of ten names,” recalled A. Bruce Brackenridge, then with Guaranty and later a group executive at Morgan Guaranty. “These were ten very important clients to the bank. He made sure that he called them periodically to let them know he was interested in their business.”16 A former Oklahoma oil banker, Cleveland had a powerful array of oil clients, including Cities Service and Aramco, the four-member consortium (today’s Exxon, Mobil, Texaco, and Chevron) with exclusive rights to pump Saudi Arabian oil on very sweet terms. To stay on good terms with his board, he played poker with the directors. One oil director even packed a rare $10-thousand bill in his wallet, always ready for a quick game. The whole operation, ex-employees allege, was riddled with cronyism. “The only loan I ever saw Cleveland approve was a stock option loan to a crony of his,” said a Guaranty banker. “It was later criticized by bank examiners.” Adding to Guaranty’s troubles was a paralyzing conservatism left over from the sugar debacle. “It was more important not to lose money than to make money,” remarked Frank Rosenbach, then a Guaranty credit analyst.17

  Eventually Cleveland’s monstrous ego precipitated a board rebellion. When a director asked who could replace him, Cleveland thundered, “Nobody!” So the board opened merger talks with Henry Alexander in order to dump Cleveland. The last straw came when Ford Motor, dismayed by Guaranty’s handling of its pension fund, switched the fund to Morgans. The board told Cleveland he couldn’t be doing a very good job if he couldn’t keep his largest account. At first, Guaranty’s board came to 23 Wall with a proposal for a new bank called Guaranty Morgan—an insufferable thought to Alexander. A year later, in December 1958, with mounting frustration over Cleveland, the board swallowed hard and consented to Morgan Guaranty. When the autocratic Cleveland assembled his vice-presidents to break the news, it was the only meeting of the bank’s officers anyone could remember having ever taken place.

  In taking over a bank four times the size of J. P. Morgan and Company, the press likened Morgans to Jonah swallowing the whale. Alexander had engineered the dream deal. Guaranty was strong in railroads and public utilities. While J. P. Morgan was the lead bank for U.S. Steel, Guaranty had Bethlehem Steel. While Morgan had Kennecott Copper, Guaranty had Anaconda. While Morgan was peerless in the northeastern United States and Western Europe, Guaranty was well-connected in the South, the oil patch, the Middle East, and Eastern Europe. It had historic branches in London, Paris, and Brussels, having been the U.S. Treasury’s agent in Europe during World War I. Guaranty had provided financing for Thomas Watson’s IBM in the 1920s, and several of its executives had grown rich investing in the company. It held more American Express deposits than any other bank. And it claimed the account of Huntington Hartford and the A&P. What a prize!

  On Wall Street, people said that Guaranty had really merged with Henry Alexander. When Bill Zeckendorf c