Creature From Jekyll Island by G. Edward

Institute, 1983), p. 49.

2. Derek Wilson, p. 176.

3. B. Gille, Histoire de la Maison Rothschild, Vol. 1,1965-1967, p. 581, cited by Derek Wilson, p. 181.

THE LONDON CONNECTION 415

Some historians have expressed amazement over the fact that the recommendation was never acted upon. Wilson says: 'This was the greatest opportunity the Rothschilds ever lost.'1 Those with a more skeptical bent are tempted to wonder if the opportunity really was lost or if it was merely taken in a more indirect fashion. It is significant that, precisely at this time, George Peabody was making a name for himself in London and had established a close relationship with Nathan Rothschild. Is it possible that the Peabody firm was given the nod from the Rothschild consortium to represent them in America? And is it possible that the plan included allowing Belmont to operate as a known Rothschild agent while using Peabody & Company as an unknown agent, thus, providing their own competition?

John Moody answers: 'The Rothschilds were content to remain a close ally of Morgan rather than a competitor as far as the American field was concerned.'2 Gabriel Kolko says: 'Morgan's activities in 1895-1896 in selling U.S. gold bonds in Europe were based on his alliance with the House of Rothschild.'3 Sereno Pratt says: 'These houses may, like J.P. Morgan & Company ... represent here the great firms and institutions of Europe, just as August Belmont & Company have long represented the Rothschilds.'4 And George Wheeler writes: 'Part of the reality of the day was an ugly resurgence of anti-Semitism.... Someone was needed as a cover.

Who better than J. Pierpont Morgan, a solid, Protestant exemplar of capitalism able to trace his family back to pre-Revolutionary times?'5

RISE OF THE HOUSE OF MORGAN

With these considerations as background, the meteoric rise of Morgan's star over London and Wall Street can be readily understood. It is no longer surprising, for example, that Peabody & Company was the sole American investment firm to receive a gigantic loan from the Bank of England during the U.S. panic of 1857, a loan which not only saved it from sinking, but made it 1. Derek Wilson, p. 182.

2. Moody, p. 27.

3. Kolko, Triumph, p. 142.

4. Sereno S. Pratt, The Work of Wall Street (New York: D. Appleton, 1916; rpt. New York: Arno Press, 1975), p. 349.

5. Wheeler, pp. 17-18, 42.

416

THE CREATURE FROM JEKYLL ISLAND

possible to seize and salvage many other ships that were then capsized on Wall Street.

Peabody had become active in the business of discounting acceptances, which is banker language for insuring commercial loans issued for the purchase of goods. This is how it works: The seller issues a bill with a stipulation that he must be paid at a future date, usually ninety days. When the buyer receives the bill, his bank writes the word 'accepted' across the face of it and adds the signature of an officer, making it a legally binding contract. In other words, the bank becomes a co-signer on the buyer's credit and guarantees payment even if the buyer should default.

Naturally, there is a price for this guarantee. That price is stated as a percentage of the total bill and it is either added to the amount paid by the buyer or deducted from the amount received by the seller. Actually there is a fee paid at both ends of the transaction, one to the seller's bank which receives the acceptance and pays out the money, and one to the issuing bank which assumes the liability of guaranteeing payment. The sale is said to be 'discounted' by the amount paid to the banks. And so it was that Peabody & Company had been active in the business of discounting acceptances, primarily between sellers in England and buyers in the United States.

MORGAN AND THE PANIC OF 1857

In the Wall Street panic of 1857, many U.S. buyers were unable to pay their bills, and Peabody and Morgan were expected to make good on their guarantees. Naturally, they didn't have the money, and the firm was facing certain bankruptcy unless the money could be obtained from somewhere. Stanley Jackson provides the details: The slump was catastrophic for Peabody & Co. It suddenly found itself committed to acceptances of ?2 million and with no h o p e of discharging even part of a stockpile of depreciating bonds on New York brokers and bankers, themselves now desperately short of ready funds. The firm was soon paying out thousands of pounds a day-Without raising a large temporary loan the partners would be forced to suspend business altogether.1

Ron Chernow, in