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It seems anomalous that America's most famous financier was a sworn foe of free markets. Yet it followed logically from the anarchy of late nineteenth-century railroads, with their rate wars, blackmail lines [Note: I think the comma between blackmail and lines is a typo], and lack of standardized gauges. To destroy competing lines, railroads could simply refust to transfer freight to roads that abutted theirs. From an engineering standpoint, Pierpont knew little about railroads. What he did know is that they required steady revenues to cover their fixed interest costs on bonds marketed in New York and London. In the mid-1880s, freight rates were declining sharply under the pressur of savage price-cutting.

For Pierpont, the leading symbol of railway monopoly, pure competition was never an option. Years later, he a said, "The American public seems unwilling to admit... that it has a choice between regulated legals agreements and unregulated extralegal agreements. We should have cast away more than 50 years ago the impossible doctrine of protection of the public by railway competition. As we shall see, the House of Morgan always favored government planning over private compilation, but private planning over either.

As the top manufacturer of crude steel, Carnegie decided to branch out into finished products, such as pipe and wire. As the head of the second largest steel group, Pierpont feared a replication of the railroad chaos with overbuilding and price wars. He growled that Carnegie would "demoralize" the entire industry through competition.

Backed by representatives of Barings and Brown Brothers, Pierpont offered the railroad presidents a deal: if they refrained from rate-cutting and cutthroat competition, the financiers would stop underwriting competing railways. It was a clever move, for while Wall Street accused railroads of irresponsible behavior, the railroads blamed Wall Street for floating too many securities and creating the overexpansion that led to price wars.

The populace might dread the power of Pierpont Morgan, but he paid his bills promptly, always stuck by his word, and was almost universally respected among businessmen. He also saw competition as a destructive, inefficient force and instinctively favored large-scale combination as the cure.

Where Pierpont's theorizing was largely nonexistent [partner, Goerge W.] Perkin's was sophisticated. He gave speeches and published pamphlets on every conceivable subject. He was an oddity at the world most cryptic bank. he preached a gospel of industrial cooperation, contending that small-scall business depressed wages and retarded technological advance. Not Wall Street, he said, but steam engines and telephones produced trusts. "What is the difference," he proclaimed, "between the US Steel Corporation, as it was organized by Mr. Morgan, and a Department of Steel as it might be organized by the Government?" He drew a parallel Pierpont wouldn't admit to--that trusts, with their centralized production and distribution, were a form of private socialism. And unlike Pierpont, he saw that they had acquired a public character, and he favored government licensing of interstate companies and extended worker benefits, including profit sharing, social insurance, and old-age pensions. This, he boasted, would be "socialism of the highest, best, and most ideal sort." Although Teddy Roosevelt sometimes wondered whether Perkins simply rationalized a selfish Morgan agenda, there was a striking likeness between their views.

That a Morgan partner should advocate socialism is not so startling. After all, Pierpont, starting with his Railway associations of the late 1880s, espoused industrial cooperation instead of competition. He like his capitalism neat, tidy, and under bankers' control... Perkins wasn't the only one in the Morgan camp to applaud moves toward a planned, integrated economy. Later on, Judge Elbert Gary of U.S. Steel, who held private dinners to fix prices in the steel industry, testified: "I would be very glad if we had some place where we could go, to a responsible governmental authority, and say to them, 'Here are our facts and figures, here is our property, here our cost of production; now you tell us what we have the right to do and what prices we have the right to charge.'"

As we shall see, the mortal attacks on the House of Morgan came not from socialists but from such trustbusters as Louis D. Brandeis, Felix Frankfurter, and William O. Douglas, who favored small economic units and sharp competition. This tradition would lambaste the Morgan Money Trust as the biggest and most dangerous trust of all. Because the House of Morgan preached socialism for the rich, it always had a partial affinity for those who preached it for the poor.