Wall Street and the Ghost of J.P. Morgan

Sept. 29, 2008— -- Fear. Turmoil. A run on the bank.

It was not a pretty picture for Wall Street as panic set in and the country's leaders fought to keep the economy afloat.

But then J.P. Morgan swept in, poured money into the market and a recovery began.

No, we're not talking about the recent crisis hitting the nation, but the great Panic of 1893.

Back then, financier John Pierpont Morgan created a syndicate to loan the government gold to weather the storm. Then in 1907, Morgan stepped in again, working with John D. Rockefeller and those on Wall Street to inject millions of dollars into failing banks.

Now, more than 100 years later, it is once again the House of Morgan -- along with the government -- that is bailing out the financial system. First, in March, JP Morgan Chase bought out Bear Stearns, with the government backing the assets. Then last week, Morgan again swept in, this time buying Washington Mutual after government regulators seized the bank on the brink of failure.

If Morgan's ghost could look down on Wall Street today, the scene might seem all too familiar to him.

Jean Strouse, author of "Morgan, American Financier" and the director of the Dorothy and Lewis B. Cullman Center for Scholars and Writers at The New York Public Library, said that in 1893 Morgan did what the Treasury couldn't do -- he was responsible for raising the necessary gold.

"It made him, in a way, the government's banker for a time," Strouse said. "It also cast him into national prominence, not always in a good way. Lots of people very much resented that private banker had that much power. And they resented it even more after 1907 when he really was the lender of last resort."

By the end of the 19th Century, Morgan had become known, informally, as the country's central banker.

"After 1907, it was indisputable," Strouse said.

While today a bank with ties back to Morgan is, in some ways, saving two massive financial intuitions Strouse said this is a very different type of bailout. Back then, Wall Street was responsible for saving its own. Today, it's the government.