of 1895 that ultimately yielded about 12 %.
The most expensive loans were created when there was almost no time to do any risk mitigation. In those cases, such as when syndicates auctioned liquidity at the New York Stock Exchange Money Post, and related collateral was in the throes of a fire sale, it was priced at exorbitantly high levels, up to 60 % in 1907. Even though higher rates charged for last resort loans were likely intended to compensate investors for higher risk, profits were not guaranteed.
Gains and Losses
While many of the last resort loans organized over his 50 active years in the arena produced modest gains or losses, there were some outliers. The House of Morgan, led by J. S. Morgan & Co. in London, recorded a massive profit of $ 5 million on its syndicated loan to France to fight the Franco Prussian War in 1870-1871. Even though France lost the conflict, it honored its sovereign debt obligations, an outcome that was not widely expected at the time of the crisis. Then the Morgan syndicate earned about $ 2 million on the 1895 US Treasury Gold loan, aided by the hard bargain driven by the British syndicate member who supplied the sought-after gold, Lord Nathaniel Rothschild. He insisted on paying the United States less for the bonds than what Morgan had wanted to pay. Another contribution to the success of Morgan’ s 1895 loan was likely his inclusion of expert gold shippers in the American syndicate, a key distinction between Morgan’ s syndicate and both public debt offerings designed by President Grover Cleveland in 1894 to replenish the US Treasury’ s gold balances. The unsuccessful 1894 attempts were organized as auctions to the public without specifically including subject matter experts. Comparing Morgan’ s proportion of 15 % expert gold shippers in his 1895 loan to the 5 % proportion of gold shippers included in the first two dissatisfying loans, one can see how Morgan’ s business practices might have provided a much more effective outcome for the country than the politicians’ transaction designs.
While the French and US Treasury bailouts were notable successes for the Morgans, their firm recorded substantial losses on other bailouts, including $ 400,000 on the syndicated loan to National Cordage of 1893 and about the same loss amount on the loan to Sovereign Bank of Canada
Cornell University Library
Portrait of Grover Cleveland, 1882. One contribution to the success of Morgan’ s 1895 loan was likely his inclusion of expert gold shippers in the American syndicate, a key distinction between his syndicate and both public debt offerings designed by President Grover Cleveland in 1894 to replenish the US Treasury’ s gold balances.
in 1907. Indeed, the Morgans recorded staggering losses for the year of the Panic of 1907. After organizing the syndicates to auction cash at the New York Money Post early in the Panic, Morgan subsequently created two deals by novel uses of Clearing House loan certificates: one to keep afloat a too-connected-to-fail brokerage house and one to extend a short-term loan to the City of New York which was in jeopardy of missing payroll.
But it was the $ 20 million syndicated loan to bail out the trust companies, shadow banks experiencing runs that were upstart rivals to the commercial banks, that generated the biggest headaches for Morgan. Not only did he have to resort to using an ultimatum to convince the trust company presidents to come together to save two of their own, but he experienced more retractions of committed funds from syndicate members than in any of his prior last resort loan syndications. First, the trust companies were unable to source the $ 20 million among themselves as they had promised Morgan they would, raising only $ 14 million. Next, when Morgan had assembled a $ 6 million supplemental syndicate of banks to meet the trust company shortfall, four of those syndicate members got cold feet and temporarily backed out. Morgan had to inject a half million dollars of his own firm’ s funds to the supplemental syndicate, having mostly avoided tapping his firm’ s liquidity up to that point in the panic. Finally, adding insult to injury, the combined Trust Company syndicates took almost a full year to pay off, a costly administrative burden unlike most other crisis loans that were paid off within 90 days.
But none of those transactions on their own seem to have explained the staggering loss the firm recorded in 1907: $ 21,500,000. It wiped out almost all his firm’ s earnings recorded from the previous three years. How his loss was determined is not exactly clear, as accounting principles were not well defined compared to today. It may have been only unrealized losses on his holdings. In any case, it took several years for Morgan to recapitalize his firm through assessments on partners, enlistment of a new million-dollar partner, as well as adoption of a new syndication process, relying on steady commitments from two big commercial banks rather than customizing syndicate membership to the extent he did before the crisis.
Over time, restoring financial stability may have become increasingly costly for Morgan as the financial system became increasingly complex. Even so, the essence of his approach— surrounding a strong leader with competent associates willing to improvise— has endured through the Federal Reserve era. No matter the institutional framework, strong leadership will likely remain critical to maintaining financial stability in the future.
Jon Moen is professor of economics in the Department of Economics at the University of Mississippi. Mary Tone Rodgers is a 30-year Wall Street veteran and serves as adjunct professor in the MBA program at the State University of New York at Oswego, recently earning the Chancellor’ s Award for Excellence in Teaching. They are the authors of Before the Fed: J. P. Morgan, America’ s Lender of Last Resort( Cambridge University Press, 2025), from which this article directly borrows.
www. MoAF. org | Winter 2026 | FINANCIAL HISTORY 31