J. P. Morgan & Co. declare, in their letter to the Pujo Committee, that " practically all the railroad and industrial development of this country has taken place initially through the medium of the great banking houses." That statement is entirely unfounded in fact. On the contrary nearly every such contribution to our comfort and prosperity was "initiated" without their aid. The "great banking houses" came into relation with these enterprises, either after success had been attained, or upon "reorganization" after the possibility of success had been demonstrated, but the funds of the hardy pioneers, who had risked their all, were exhausted.

This is true of our early railroads, of our early street railways, and of the automobile; of the telegraph, the telephone and the wireless; of gas and oil; of harvesting machinery, and of our steel industry; of the textile, paper and shoe industries; and of nearly every other important branch of manufacture. The initiation of each of these enterprises may properly be characterized as "great transactions"; and the men who contributed the financial aid and business management necessary for their introduction are entitled to share, equally with inventors, in our gratitude for what has been accomplished. But the instances are extremely rare where the original financing of such enterprises was undertaken by investment bankers, great or small. It was usually done by some common business man, accustomed to taking risks; or by some well-to-do friend of the inventor or pioneer, who was influenced largely by considerations other than money-getting. Here and there you will find that banker-aid was given; but usually in those cases it was a small local banking concern, not a "great banking house" which helped to "initiate" the undertaking.

Railroads

We have come to associate the great bankers with railroads. But their part was not conspicuous in the early history of the Eastern railroads; and in the Middle West the experience was, to some extent, similar. The Boston & Maine Railroad owns and leases 2,215 miles of line; but it is a composite of about 166 separate railroad companies. The New Haven Railroad owns and leases 1,996 miles of line; but it is a composite of 112 separate railroad companies. The necessary capital to build these little roads was gathered together, partly through state, county or municipal aid; partly from business men or landholders who sought to advance their special interests; partly from investors; and partly from well-to-do public-spirited men, who wished to promote the welfare of their particular communities. About seventy-five years after the first of these railroads was built, J. P. Morgan & Co. became fiscal agent for all of them by creating the New Haven-Boston & Maine monopoly.

Steamships

The history of our steamship lines is similar. In 1807, Robert Fulton, with the financial aid of Robert R. Livingston, a judge and statesman - not a banker - demonstrated with the Claremont, that it was practicable to propel boats by steam. In 1833 the three Cunard brothers of Halifax and 232 other persons - stockholders of the Quebec and Halifax Steam Navigation Company - joined in supplying about $80,000 to build the Royal William, - the first steamer to cross the Atlantic. In 1902, many years after individual enterprises had developed practically all the great ocean lines, J. P. Morgan & Co. floated the International Mercantile Marine with its $52,744,000 of 4 1/2 bonds, now selling at about 60, and $100,000,000 of stock (preferred and common) on which no dividend has ever been paid. It was just sixty-two years after the first regular line of transatlantic steamers - The Cunard - was founded that Mr. Morgan organized the Shipping Trust.

Telegraph

The story of the telegraph is similar. The money for developing Morse's invention was supplied by his partner and co-worker, Alfred Vail. The initial line (from Washington to Baltimore) was built with an appropriation of $30,000 made by Congress in 1843. Sixty-six years later J. P. Morgan & Co. became bankers for the Western Union through financing its purchase by the American Telephone & Telegraph Company.

Harvesting Machinery

Next to railroads and steamships, harvesting machinery has probably been the most potent factor in the development of America; and most important of the harvesting machines was Cyrus H. McCormick's reaper. That made it possible to increase the grain harvest twenty- or thirty-fold. No investment banker had any part in introducing this great business man's invention.

McCormick was without means; but William Butler Ogden, a railroad builder, ex-Mayor and leading citizen of Chicago, supplied $25,000 with which the first factory was built there in 1847. Fifty-five years later, J. P. Morgan & Co. performed the service of combining the five great harvester companies, and received a commission of $3,000,000. The concerns then consolidated as the International Harvester Company, with a capital stock of $120,000,000, had, despite their huge assets and earning power, been previously capitalized, in the aggregate, at only $10,500,000 - strong evidence that in all the preceding years no investment banker had financed them. Indeed, McCormick was as able in business as in mechanical invention. Two years after Odgen paid him $25,000 for a half interest in the business, McCormick bought it back for $50,000; and thereafter, until his death in 1884, no one but members of the McCormick family had any interest in the business.

The Banker Era

It may be urged that railroads and steamships, the telegraph and harvesting machinery were introduced before the accumulation of investment capital had developed the investment banker, and before America's "great banking houses" had been established; and that, consequently, it would be fairer to inquire what services bankers had rendered in connection with later industrial development. The firm of J. P. Morgan & Co. is fifty-five years old; Kuhn, Loeb & Co. fifty-six years old; Lee, Higginson & Co. over fifty years; and Kidder, Peabody & Co. forty-eight years; and yet the investment banker seems to have had almost as little part in "initiating" the great improvements of the last half century, as did bankers in the earlier period.

Steel

The modern steel industry of America is forty-five years old. The "great bankers" had no part in initiating it. Andrew Carnegie, then already a man of large means, introduced the Bessemer process in 18G8. In the next thirty years our steel and iron industry increased greatly. By 1898 we had far outstripped all competitors.

America's production about equalled the aggregate of England and Germany. We had also reduced costs so much that Europe talked of the "American Peril." It was 1898, when J. P. Morgan & Co. took their first step in forming the Steel Trust, by organizing the Federal Steel Company. Then followed the combination of the tube mills into an $80,000,000 corporation, J. P. Morgan & Co. taking for their syndicate services $20,000,000 of common stock. About the same time the consolidation of the bridge and structural works, the tin plate, the sheet steel, the hoop and other mills followed; and finally, in 1901, the Steel Trust was formed, with a capitalization of $1,402,000,000. These combinations came thirty years after the steel industry had been "initiated".