Market Curiosity: Exploring Markets And Systems

December 14, 2010

Talk about JPM, gold, debt? An ironic source

Filed under: Just Watching — Tags: , , — Jeff Fitzmyers @ 1:57 pm

“Finally, in what has become the most famous exchange in the [House Banking and Currency subcommittee 1912 “money trust”] hearings’ thousands of pages of testimony, the two men returned to the question of controlling money and credit.

[Samuel] Untermyer: [vocal critic of the “money trust”, committee counsel] said, “The basis of banking is credit, is it not?”
[JP] Morgan: “Not always. That is an evidence of banking, but it is not the money itself. Money is gold, and nothing else.”

(There was in 1912 a significant difference between actual metal coin and loans represented by paper (banknotes, bonds, bills). When Morgan repeated yet again that money could not be controlled.)

Untermyer: Asked whether credit was not based on money — that is, did not the big New York banks issue loans to certain men and institutions “because it is believed that they have the money back of them?”
Morgan: No sir. It is because people believe in the man.”
Untermyer: “And he might not be worth anything?”
Morgan: With less than perfect regard for grammar: “He might not have anything. I have known a man to come into my office, and I have given him a check for a million dollars when they had not a cent in the world.”
Untermyer: “That is not business?”
Morgan: “Yes, unfortunately, it is. I do not think it is good business, though.”

Untermyer did not, apparently, think much of this answer, for he repeated his proposition: “Is not commercial credit based primarily on money or property?”
Morgan: “No sir; the first thing is character.”
Untermyer: “Before money or property?”
Morgan: “Before money or property or anything else. Money cannot buy it” — and he elaborated, after a few more questions — “because a man I do not trust could not get money from me on all the bonds in Christendom.”
Morgan: American Financier, by Jean Strouse

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