George Whitney (banker)
American banker and financier (1885–1963)
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George Whitney (October 9, 1885 – July 22, 1963) was an American banker and financier who served as president and later chairman of J.P. Morgan & Co. He entered the House of Morgan in 1915, became a partner in 1919, and emerged during the interwar period as one of its principal investment bankers. When the private partnership was converted into a state-chartered corporation in 1940, Whitney became its first president. He succeeded Russell Cornell Leffingwell as chairman in 1950 and remained the firm's senior executive until his retirement in 1955.
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Harvard College (AB)
George Whitney | |
|---|---|
Whitney in 1936 | |
| Born | October 9, 1885 Boston, Massachusetts, U.S. |
| Died | July 22, 1963 (aged 77) Manhattan, New York City, U.S. |
| Education | Groton School Harvard College (AB) |
| Occupations | Banker, financier |
| Office | Chairman of J.P. Morgan & Co. |
| Spouse |
Martha Beatrix Bacon
(m. 1914) |
| Children | 4 |
| Relatives | Richard Whitney (brother) Robert Bacon (father-in-law) |
Whitney participated in international and corporate financing, served on the boards of several major American corporations, and represented J.P. Morgan during the Pecora hearings, the Nye Committee investigation, and congressional inquiries into railroad finance. His tenure encompassed the firm's transformation from a private investment-banking partnership into a regulated commercial bank following the Banking Act of 1933, as well as the development of the generation of bankers who subsequently built Morgan Guaranty Trust Company.
Outside banking, Whitney was president and chairman of the Markle Foundation, where he helped establish a major program supporting young leaders in academic medicine. Earlier in life, he was a nationally ranked athlete and won the United States squash-tennis championship in 1913.
Early life and education
Whitney was born in Boston, Massachusetts, on October 9, 1885, the son of George Whitney and Elizabeth Whitney. His father was a Boston banker who served as president of the National Union Bank and lived in the city's Back Bay.[1][2] His younger brother, Richard Whitney, later became president of the New York Stock Exchange.
Whitney attended Groton School before entering Harvard College. He graduated from Harvard with the class of 1907. During his senior year, he managed the university crew.[1][3]
National championship
An accomplished racquet-sports player, Whitney won the United States national championship in squash tennis in 1913. Harvard's class report noted that he had omitted the achievement from his own account of his activities, while later histories of the sport list him between two-time champion Alfred Stillman and Eric S. Winston.[1][4]
Early banking career
Immediately after graduating from Harvard, Whitney joined the Boston investment bank Kidder, Peabody & Co., where he worked for two years. In August 1909, he moved to New York City and entered the bond department of Redmond & Co. After slightly more than a year there, he formed the brokerage firm Markoe, Morgan & Whitney with Harvard classmates S. C. Markoe and Charles Morgan.[1]
Whitney's training at Kidder, Peabody was characteristic of the apprenticeship system through which several leading early-20th-century investment bankers learned the securities business. Financial historian Vincent P. Carosso identified Whitney among the notable bankers who began their careers in Kidder, Peabody's offices before moving into positions of national influence.[5]
On June 2, 1914, Whitney married Martha Beatrix Bacon, the only daughter of former United States Secretary of State and ambassador to France Robert Bacon, who had himself been a partner of J.P. Morgan. The marriage connected Whitney to a family already closely associated with the Morgan organization. George and Martha Whitney had four children.[6]
J.P. Morgan
Entry into the firm
Whitney joined J.P. Morgan & Co. in 1915. Historian Martin Horn described his recruitment as part of the development of the senior group that assisted J. P. Morgan Jr., Thomas W. Lamont, and later Russell Cornell Leffingwell in managing the firm's corporate and international banking business. Whitney was admitted to the partnership in 1919.[7][5]
The Morgan partnership operated as a combined commercial and investment bank. It accepted deposits, conducted domestic and foreign-exchange business, issued letters of credit, arranged securities offerings, and advised corporations and governments. It was not formally divided into departments, and Whitney was among the partners directly involved in its investment-banking work.[8]
During the 1920s, Whitney became one of the firm's senior bankers. A 1928 account in The Harvard Crimson identified him as a director of General Motors, Guaranty Trust Company of New York, and other major corporations.[3] He also sat on the board of the Pullman Company, alongside figures including J. P. Morgan Jr., Richard B. Mellon, George Fisher Baker, Alfred P. Sloan, and Harold Stirling Vanderbilt.[9]
Whitney represented Morgan interests on the General Motors board and its policy committee during a period in which bankers and members of the Du Pont family exercised substantial influence over the corporation's financial policy. General Motors' 1932 annual report listed him as a director, while a later federal antitrust decision identified him as the outside banker serving on the company's nine-member policy committee.[10][11]
International finance and the Depression
Whitney participated in the firm's interwar international-finance work. In 1929, he joined J. P. Morgan Jr. and Morgan Grenfell partner Charles F. Whigham in discussions with German central banker Hjalmar Schacht concerning the possibility of additional German borrowing. The talks occurred during the broader negotiations over the Young Plan, German reparations, and the creation of the Bank for International Settlements.[12]
The Morgan partners did not foresee the severity of the economic collapse that followed the Wall Street Crash of 1929. Although Whitney's brother Richard became publicly associated with the unsuccessful attempt by leading banks to stabilize the stock market on October 24, George Whitney's more consequential public role came through the investigations of banking practices that followed the crash.[12]
In May 1933, Whitney testified for several days before the Senate Committee on Banking and Currency during the investigation led by counsel Ferdinand Pecora. Contemporary coverage described Whitney, rather than J. P. Morgan Jr., as the witness who supplied many of the detailed explanations of the firm's private-banking and securities operations.[13]
Whitney was questioned about the firm's financial condition, its securities offerings, and its practice of privately offering securities to selected clients and prominent individuals. The hearings examined offerings connected with the Alleghany Corporation, Standard Brands, and United Corporation, including the prices paid by the Morgan partnership and by favored subscribers. Whitney explained that the firm did not maintain a single permanent list of favored clients, although the committee documented multiple lists prepared for individual offerings.[14][15]
The Banking Act of 1933, including its Glass–Steagall provisions, required the separation of deposit banking from securities underwriting. J.P. Morgan elected to remain a commercial deposit bank and effectively stopped conducting investment-banking business after the act's passage. In 1935, several partners and employees, including Harold Stanley, Henry S. Morgan, and William Ewing, left to form Morgan Stanley. Whitney remained with J.P. Morgan and helped guide its conversion into a commercial-banking institution.[8][16]
Whitney continued to serve as one of the firm's principal representatives in Washington. On December 18, 1936, he appeared before the Senate Committee on Interstate Commerce during its inquiry into railroad financing and was questioned by committee chairman Burton K. Wheeler.[17] He also appeared with Morgan, Lamont, and Leffingwell during congressional investigations into the financing of the Allied powers and the American munitions industry during World War I.[18]
Richard Whitney scandal
Whitney's career was complicated by the 1938 collapse of his brother Richard's brokerage firm. Richard had accumulated heavy debts through speculative investments and improperly used securities belonging to clients and institutions, including the New York Stock Exchange Gratuity Fund, as collateral for loans.
In November 1937, after Richard disclosed that securities from the gratuity fund were missing, George Whitney approached Thomas W. Lamont for assistance. Whitney borrowed $1,082,000 from Lamont and used the money to enable Richard to replace the securities. George and Lamont did not immediately inform the exchange or regulatory authorities of what they had learned.[19]
Following Richard's arrest and conviction, the Securities and Exchange Commission criticized George Whitney and Lamont for failing to report the misconduct when they first became aware of it. J.P. Morgan & Co. disputed the criticism, stating that George had learned of the missing securities only when the gratuity-fund trustees demanded their return and that he had acted immediately to supply the money needed for restitution.[20]
The episode damaged the public reputation of the Morgan circle, but contemporary and later accounts distinguished George Whitney's conduct from his brother's embezzlement. George contributed to the repayment of the funds Richard had taken and remained a senior Morgan partner.[21]
President of J.P. Morgan & Co.
By the late 1930s, the combination of Glass–Steagall, the Depression, the Richard Whitney affair, and the decline of the old partnership model had forced J.P. Morgan to reconsider its organization. Although Whitney was not sympathetic to many of President Franklin D. Roosevelt's domestic policies, he and the other partners supported assistance to Britain and France as war approached. The firm stopped short of advocating direct American entry into the conflict before Pearl Harbor.[22]
On March 29, 1940, the New York State superintendent of banks authorized the newly formed J.P. Morgan & Co. Incorporated to conduct business as a trust company. At a directors' meeting the following day, the corporation acquired the assets and assumed the liabilities of the old partnership. The thirteen partners became the initial directors, and Whitney was selected as the corporation's first president.[23]
Whitney presided over the bank through most of World War II and the first five postwar years. As president, he began a recruitment program for younger bankers who could develop new business after the war. Among the principal beneficiaries was Henry C. Alexander, whom Whitney promoted and prepared for senior leadership.[24]
The bank's 1945 annual report, signed by Whitney, addressed postwar production, employment, international trade, pensions, and the restoration of Morgan's Paris operation. It reported that Morgan & Cie. Incorporated had succeeded to the business of the old Paris partnership on May 31, 1945. Whitney simultaneously served as chairman of the executive committee of Morgan & Cie., while Thomas W. Lamont chaired its board.
In correspondence with Federal Reserve chairman Marriner S. Eccles, Whitney argued that government deficit spending had not by itself achieved full production and employment during the 1930s. Eccles disagreed with the implication but welcomed the bank's acknowledgment that a healthy foreign-trade system required the United States to import as well as export goods and services.
Chairman of J.P. Morgan & Co.
In November 1950, Whitney became chairman of J.P. Morgan & Co., succeeding Russell Leffingwell, who moved to the position of vice chairman. Henry Alexander succeeded Whitney as president. Contemporary reporting noted that Alexander had served for nearly two years as executive vice president before the transition.[25]
Whitney also served as president of the New York Clearing House Association. In that capacity, he represented the city's major commercial banks at meetings of the American Bankers Association and discussions concerning trust administration, inflation, government securities, and monetary policy.[26]
During the inflation associated with the Korean War, Whitney took part in the federal government's Voluntary Credit Restraint Program. He represented commercial banks in consultations intended to discourage credit expansion for speculative inventories and nonessential activities without imposing comprehensive statutory credit controls.[27]
Whitney retired as chairman in 1955 and was succeeded by Alexander. He thereafter headed the bank's advisory board. Under Alexander, the business-development strategy begun during Whitney's presidency was expanded, culminating in the 1959 merger of J.P. Morgan & Co. and Guaranty Trust Company to form Morgan Guaranty Trust Company.[24] At the time of his death, Whitney was chairman of Morgan Guaranty's directors' advisory council.[28]
Philanthropy and public service
Whitney succeeded Thomas W. Lamont as president of the Markle Foundation in 1948. During his presidency, the foundation concentrated its resources on medical education and the development of younger academic physicians. He worked closely with executive director John McFarlane Russell on the Markle Scholars-in-Medicine program, personally interviewing nominees and encouraging cooperation among participating scholars and medical schools.[29] The scholars program ultimately supported 506 medical educators at 91 American medical schools with more than $16 million in grants. Whitney served as the foundation's president through 1959 and as chairman from 1960 until his death in 1963.[29]
Whitney additionally served as a trustee or director of educational, scientific, and philanthropic organizations, including organizations associated with medical research and retirement security. A history of TIAA identified him among the bankers, educators, and public officials who served on the organization's governing board during its early development.[30]
Personal life
George and Martha Whitney maintained residences in Manhattan and on Long Island. Around 1915, they commissioned Delano & Aldrich to design Home Acres on property adjoining the Bacon family estate at Old Westbury, New York.[6][31]
Their four children were George Whitney Jr., Robert Bacon Whitney, Martha Phyllis Whitney, and Elizabeth Beatrice Whitney.[32]
Death
Whitney died of pulmonary emphysema at Doctors Hospital in Manhattan on July 22, 1963, after a brief illness. He was 77.[33][34]
Legacy
His career marked the transition between two eras of Morgan banking. He had entered the firm when it was a private partnership that combined deposit banking, securities underwriting, international finance, and corporate directorships. As its first corporate president and later chairman, he helped convert it into a modern commercial bank and recruited the executives who subsequently expanded it into Morgan Guaranty. Time characterized him after his death as a knowledgeable interwar Morgan partner and the first president of the incorporated bank, crediting his postwar diversification program with helping prepare the way for the 1959 merger.[33]