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At No. 23 Wall Street (two blocks down from Trinity Church and Broadway) is a low classical building, overshadowed by skyscrapers. It might be the swankest bank in a small town. Few have ever mounted the little steps leading to its heavy glass doors without some sort of mental twitter.
Last week, however, the whole U. S. rushed in to rubber. The plainclothes man in a grey fedora hat who watches eternally in the vestibule could not stop it, for entry was being made not through the portal on Wall Street but through the Senate Office Building at Washington. Ferdinand Pecora, onetime Sicilian immigrant, now a grey-haired, swarthy Manhattan lawyer, was cicerone—paid $255 a month for the job. A handful of U. S. Senators were official sightseers. The world trooped in after them. After that visit, men could make out a fairly complete picture of the business of Morgan:
The Business of Morgan & Co. consists of three chief parts: 1) banking, 2) commissions on Stock Exchange transactions. 3) wholesaling securities. On the stand Mr. Morgan said, "I think the larger part of our business is ... the straight banking business."
Senator Couzens: Your underwritings are a minor part of your business?
Mr. Morgan: I would say the least profitable part. And in volume I should say the least, yes.
Senator Couzens: The lesser part?
Mr. Morgan: Yes.
"Straight Banking," This testimony was a surprise to those who supposed that Morgan Partners would not waste their time on the routine of straight banking when they had so unique a franchise to indulge in romantically profitable "deals."
"Straight banking" is to take in deposits at say 1% interest, and loan or invest the deposits with safety at a higher rate.
The amount deposited in Morgan's at the end of 1929 was $492,000,000. Against this the firm had $59,000,000 in cash, $79,000,000 in call loans, $165,000,000 in U. S. Government securities (not to mention 60-odd millions each in municipal bonds, stocks, time and demand loans). It was extremely liquid. It was even more liquid in 1932: Against $340,000,000 of deposits it had $34,000,000 in cash, $7,000,000 in call loans, $225,000,000 in Government bonds.
But the "straight banking" of Morgan & Co. is not the same as "ordinary banking." The deposits in Morgan & Co. differ from the deposits in most banks. They are fewer and bigger. Few are the deposits of individuals, many of great corporations and foreign governments, with balances of more than $1,000,000.
Even more greatly do the firm's loans differ from those of ordinary "straight banking." Morgan & Co. does not lend working capital to the cloak & suit industry or make the ordinary bank's small loans to businessmen. It is more apt to advance some millions to a foreign government or to capitalists or corporations who may use the money to swing deals. With this goes other business: in acceptances, in letters of credit, in buying and selling foreign exchange for clients, and such commissions as the $500,000 Morgan collected for "syndicating" among banks a line of $200,000,000 credit to Great Britain.