By Daniel C . Munson
Investment banking is often thought of today as the simple raising of money through the issuance and marketing of securities . In the 19th and early 20th centuries , however , when managerial and engineering expertise were scarce resources , competent investment banking sometimes required organizing the technical and industrial effort involved .
J . P . Morgan , Sr . understood this . Morgan was the most important investment banker of his time , and many new ideas for industrial development crossed his desk . He knew from dint of experience that what separated good ideas from bad was not his assessment of the technology — he would have been the first to admit he was not a technologist — but the managerial and engineering competence of the people organizing the technical effort .
One such idea was the large-scale generation and transmission of power using natural water flow . The idea was compelling for New Yorkers : Niagara Falls , one of the world ’ s largest waterfalls , was located at the western edge of the state , and the potential energy released as the water cascaded downward was massive . “ As a site for the development of waterpower ,” wrote one promoter , “ the falls of Niagara stand without rival in all the world ” and occupy “ a truly strategic position upon one of the great trade routes of the continent .”
Morgan was optimistic about the general idea — since the 1880s he and his fellow residents of lower Manhattan had been using electric lights powered by coal-fired steam turbines at the nearby Pearl Street Power Station — but the nearest large city to Niagara Falls was Buffalo some 25 miles away , and the technical problems surrounding longer-range power transmission were filled with uncertainties .
One of these ideas for harnessing and transmitting the hydro power at Niagara
Left : Painting of Niagara Falls , 1899 .
Inset : Portrait of attorney and banker Edward Dean Adams , who J . P . Morgan brought in to run the project of harnessing electrical power from Niagara Falls .
Niagara Falls Power Company wheel pit design drawing for power house # 1 .
Falls was pitched to Morgan in the late 1880s . The prominent financier was enthusiastic , but monetarily non-committal . When asked about the source of his reticence , Morgan said , “ Your scheme is all right but you have no man to run it .”
“ Whom would you suggest ?” asked the ardent promoter .
“ Well , there is Adams . If you can get him , I ’ ll join you .”
Edward Dean Adams was a small , meticulous and cultured man working as an attorney and banker on Wall Street . A distant relative of two American presidents , Adams was unusual among Wall Streeters of the time in that he was an MIT-educated technologist , a practical and pragmatic man “ who knew how to make things happen and get things done .” Years later , Time magazine described Adams ’ reputation at the time in this way : “… he had already established among the
Library of Congress www . MoAF . org | Winter 2024 | FINANCIAL HISTORY 35