The Big Banker

(See Cover) // you would know the value of money, go and try to borrow some.

--Ben Franklin

Through the palm-decked lobbies of Miami Beach's best hotels this week strolled 6,000 men who know the value of money. For the delegates to the annual convention of the American Bankers Association, the subject came as natural as breathing. Among them there was a strong note of worry. Reason: money has become so tight that the situation has raised grave questions for the bankers--and for the U.S. How much higher will interest rates go? How long will the pinch last? Will money become so tight that it will"choke off the boom?

At Miami Beach there were opinions to fit every account. Said Louis E. Corrington Jr., president of Chicago's Southmoor Bank & Trust Co.: "Right now, money is the tightest I have ever seen it. It will be worse after the steel strike is over and companies start building inventories and go to the banks to borrow." Said Russell H. Eichman, vice president of Cleveland's Central National Bank: "If the steel strike requires a slowing up of auto sales, that in itself will automatically ease the tight money situation." Said Scott L. Moore, president of the American National Bank of Fort Lauderdale, Fla.: "I think the tight money situation will last another six to eight months. Right now merchants in my town are borrowing money for income tax purposes."

The man whose views were most eagerly sought is a tall (6 ft. i in.), slim (160 Ibs.), handsome New Yorker named Henry Clay Alexander. At 57, Alexander is chairman of Manhattan's Morgan Guaranty Trust Co. and perhaps the nation's most prestigious banker. He is heir to the famed tradition of the House of Morgan, which created huge industrial firms, bailed out whole governments and at the turn of the century all but controlled the financial destiny of the U.S. Morgan is still a name to conjure with. Its famed building at 23 Wall St. is known throughout the financial world as "The Corner." Said an international banker with an account at Alexander's bank: "When I cash a check abroad, they never look at my signature; they look at the name Morgan and cash it immediately."

Henry Alexander's prestige does not depend on tradition alone; it rests on what he has done to rescue the House of Morgan from decline and restore it once more to the first ranks of U.S. finance. Less than a year ago, J. P. Morgan & Co. was in tenth place among New York commercial banks and 28th in the U.S. It was hard pressed for enough money to lend its rapidly increasing number of customers. Then Alexander pulled off a coup that Wall Street dubbed "Jonah swallowing the whale." He worked out a merger with the much larger Guaranty Trust Co., became the head of the fifth largest U.S. bank.-Overnight his bank's capital funds jumped from $89 million to $512 million. Now Alexander is expanding his business and, as an adviser to the U.S.Treasury and a director of the Federal Reserve Bank of New York, is considered a spokesman for bankers on U.S. fiscal policy.

The Villain: Congress. Banker Alexander agrees with the general view that part of money's tightness--and the highest interest rates (5% and up) in 28 years--is the result of demand for credit spawned by the strong upsurge of the new boom. But it is also the result of fumbled fiscal policy. Who is to blame for that? Says Alexander: "The Administration's policy is good, and the Treasury is doing all it can.'' The real villain, he says, is Congress. It has refused to raise the 47% ceiling rate on long-term Treasury bonds, thus forced the Treasury to do its financing at competitive rates in the short-term market, to which private borrowers are turning in increasing numbers to get their money. The Treasury has thus sopped up billions--and within a year forced up the rates on short-term loans to nearly double their previous level (see chart). "The Secretary of the Treasury doesn't want a printing press [for money] in his office," says Alexander, "but the practical effect of the rate ceiling may be to put one there."

Alexander believes there may be more jiggling of rates when holiday financing steps up and the steel strike ends. But, he says hopefully, "there is a good likelihood that the worst pressure on rates is past. A sustained strong upward force is unlikely." He does not think that tight money will harm the boom: "The supply of money and credit is not exhausted. The banking system is heavily loaned, but not loaned up." He is not concerned about high money rates, points out that for long periods short-term rates wrere actually above long-term yields. Says he: "If we are to preserve our free economy, that has to be expected, and it is exactly the right medicine to forestall inflation. After 20 years of abnormally low rates, present rates are in the area of normal rates."

10-ft. Yacht. Despite the squeeze, hardly any banker is going to be beastly to a borrower. Reason: a great change has swept over U.S. banking. The banker whose thin lips seemed to be permanently fixed in a no has been succeeded by the banker with a neighborly twinkle in his eye. The soft sell has replaced the hard eye.

Nothing better symbolizes the change in bankers than the differences between Morgan Guaranty's Alexander and John Pierpont Morgan, the founder of the House of Morgan. Where Morgan was gruff and autocratic, with a fierce glare that could wither a man at 30 paces. Alexander is relaxed, cordial, full of a dry wit. He speaks with a Tennessee drawi. talks about mules as easily as about the national debt. While J. P. Morgan roamed the world in his 302-ft. yacht Corsair, Alexander's yacht is a loft. dinghy moored at his Cape Cod summer home. While Morgan traveled in private railway cars, Alexander gets about in a 1957 Chevrolet station wagon or a Corvette. While Morgan's hobby was spending millions for old masters. Alexander's chief delight is to get out in the country, climb onto a tractor to harrow or mow a field. He likes to polish his own shoes, buys his suits off the rack at Tripler's.

At his bank, the differences between the old and new are just as great. Once, the House of Morgan dealt only with the biggest customers, selected with great care, as if they were being privileged to join an exclusive club. The Morgan Guaranty still deals primarily with big customers, but it hunts them with all the relish of a pointer after quail. Alexander has 70 bright young men, his "bird dogs," who spend all their time hustling up new customers, keep them happy with everything from new or better ways to use their money to getting them theater tickets.

Alexander himself is Morgan Guaranty's chief bird dog. He moves through a constant round of meetings, receptions and official dinners with bankers, ambassadors, corporate presidents. He is constantly on the alert for the clue that will tell him where to find a potential customer, where to make a big new loan. His door is never closed to those who want to see him. In a recent week he met with the Belgian ambassador and the finance minister of Rhodesia and Nyasaland, played host to several distinguished British bankers, received half a dozen officers of corresponding banks. One customer summed him up: "Quick, pleasant, brilliant."

Attracting the Elite. Bird Dog Alexander has kept his bank on the path that has always been the specialty of both J. P. Morgan and Guaranty: catering to the top level of business, finance and government. Morgan Guaranty is the biggest U.S. bank that is strictly "wholesale"-and one of the few wholesale banks left. Says Alexander:"We don't want to be just another big bank. We want to be a special kind of bank, where all the expertness that American business wants can be found."

Alexander's "special kind of bank" has attracted the biggest lights of the financial firmament. More than half of the top 500 U.S. corporations--including such giants as General Electric, General Motors and Standard Oil (New Jersey)--bank with Morgan Guaranty. The U.S. Government leans on Morgan Guaranty as one of the principal dealers in government securities. The bank annually sends out more than 9,200,000 dividend checks worth $1 billion for corporations, takes care of investing $6.5 billion in trust funds. Morgan Guaranty runs pension funds for such big corporations as Johns-Manville, Kennecott Copper, Philip Morris, the New York Times. It runs them well. Alexander's current appraisal of the stock market is one of caution; the bank is now putting only one-third of new money into stocks, compared with its normal 50%.

The corporate giants are attracted to

Morgan Guaranty by the custom services and ingenuity in solving financial problems that have become the firm's trademark. Many businessmen agree that Morgan's service is unexcelled. It will do everything from solving the complex problem of establishing the market values of new shares--even though the companies have no established value--to working out a novel method of financing freight cars or oil tankers. After being turned down by several banks, a group of utilities that wanted to finance an atomic reactor turned to Morgan; in a few days, the bank set up the plan to do the job. When General Electric asked Morgan Guaranty to buy up the shares of an affiliate abroad, the bank doggedly pursued one widow from city to city all over Europe until she finally sold her shares.

Over and above its stable of keen financial brains, the bank has one great advantage over almost all others. Through its long history, it established, financed or otherwise contributed to the success of dozens of U.S. corporate giants. Having benefited from the financial brains of the bank, many a corporation would think of going nowhere else. Said one loyal customer: "Memories are long in the banking world."

Power & Ruthlessness. The history of the House of Morgan is almost the story of U.S. banking. Founder J. Pierpont Morgan was a great builder and dreamer who helped build the U.S.--and grew so powerful that he helped run it. Morgan left his father's London banking firm at 20 to try his own luck on Wall Street. After acting as agent for his father's firm, he went into business for himself under the name of J. Pierpont Morgan & Co. He performed dazzling feats of finance one after another. His method was to buy control of banks and other financial institutions, use them to seize a dominating role in corporations, then reorganize, merge and centralize the corporations in a process that became known as "Morganization."

Morgan won control of some 50% of the railroad mileage of the U.S., merged the roads so efficiently that they were soon earning $300 million a year. He helped put together such later industrial giants as General Electric, merged several companies to form U.S. Steel, with the steel works of Andrew Carnegie as its nucleus. When Carnegie scrawled the price he wanted on a scrap of paper ($447 million), Morgan characteristically glanced at it briefly, snapped: "I accept." At one time Morgan controlled six banks and trust companies, three life insurance companies, ten railroads and a cluster of huge corporations. He and his associates held 341 directorships in 112 com panies with total resources of $22 billion.

Morgan's fierce gaze, walrus mustache and bulbous red nose--which he once called "a part of the American business structure"--became known around the world, which he circled on three successive Corsairs, each one bigger than the last. His lofty manners and freewheeling business methods, such as watering the stock of his merged companies, became the target of both cartoonists and politicians. After he put together U.S. Steel, he issued a total of $1.3 billion in securities, also collected $150 million on the deal--though the tangible assets of the firm were only $682 million. When men stood in his way, he was ruthless: he forced the Philadelphia & Reading Railroad into receivership after its president remarked, "I would rather run a peanut stand than be dictated to by J. P. Morgan."

"Up the Hill." Morgan's power grew so great that President Cleveland turned to him for aid during the panic of 1893. When the Government's gold supply dropped to $42 million, Morgan stepped in with a group of friends and partners, raised $65 million in gold to save the Government's credit. During the Wall Street panic of 1907, the Government again needed Morgan's help. He coldly let bank after bank fold up. But when the big Trust Co. of America began to slide, Morgan acted decisively after sending his own men in to check its books. Said he: "This is the place to stop the trouble." He did--by keeping a group of bankers up all night in the white marble library adjoining his mansion on Madison Avenue, forcing them to put up enough money to support the Trust Co. and other weak concerns.

It was this very power that finally triggered a great public clamor against the "money trusts." From Teddy Roosevelt on, the U.S. Government waged a running battle to curb the power of the bankers through antitrust suits, political pressure and the creation of the Federal Reserve System. The U.S. economy had grown so big that control of money and finance could no longer be left in the hands of a few men. Before the Government could do much to curb his power, J. P. Morgan died in Rome in 1913. His last words: "I must go up the hill."

Princes of Privilege. The death of old J.P. marked the end of one-man rule in the House of Morgan. His son J.P. II took over, helped by a brilliant group of Morgan partners. When World War I broke out, the House of Morgan played a key role. It became fiscal agent for the British and French, bought them $3 billion worth of arms and supplies, and headed a syndicate that floated $1.5 billion in bonds in the U.S. to help pay for them.

When the market collapsed in 1929, Morgan tried to stop the panic as it had managed to do before. It headed a pool that put up a reputed $240 million to support the market. But the move had little effect. While Morgan's interests were relatively unscathed by the crash, the Depression spelled the end of concentrated banking power. The New Deal launched a campaign against "the princes of privilege." J. P. Morgan II was hauled down to Washington to appear before a whole series of investigations. Control of U.S. finance passed from Wall Street to Washington. Regulatory bodies were established, restrictive bills passed, the Federal Reserve strengthened. The Banking Act of 1933 forced Morgan to split off its investment-banking activities, and a group of partners left to form the separate investment house of Morgan, Stanley & Co.

From the Maelstrom. An era had ended, and many of the oldtime bankers had gone with it. For the new type of bank that emerged from the maelstrom, a new type of banker was needed. One of the new bankers was Henry Clay Alexander. He was not saddled with the marks of wealth, caste and privilege. He was born in humble circumstances, the son of a grain and feed merchant in Murfreesboro, Tenn. He did not attend the best Eastern prep schools, had worked his way through Vanderbilt University, saved enough to go on to Yale Law School. He had not been trained to be a banker, joined the Manhattan law firm of Davis, Polk, Wardwell, Gardiner & Reed as a promising trainee, did so well that he became a partner at 32.

One day he was sent to explain a legal problem to the younger J. P. Morgan. After he left, Morgan said: "I like that young man." Alexander's law firm assigned him to work as counsel for Morgan in the congressional investigations, and he became Morgan's chief counsel at the Nye munitions hearing, stayed by his side through his entire testimony. On Christmas Eve in 1938, Morgan summoned Alexander to his Wall Street office and invited him into partnership. After agonizing for more than a month about leaving the active practice of law, Alexander became a Morgan partner at 36.

One of his first jobs was to work out a plan to help the House of Morgan meet the new conditions. Its assets had fallen from $118.6 million in 1929 to $39.2 million in 1940, as steep inheritance and income taxes ate away its strength. To save the firm from faltering, Morgan and Alexander worked out a plan to incorporate the old partnership, make it a public bank. In 1940 the firm changed its name to J. P. Morgan & Co., Inc.

After Morgan's death in 1943, Henry Alexander went off to war as a vice chairman of the U.S. Strategic Bombing Survey in Europe, came back to begin his swift rise to the top. He became the protege of President George Whitney, who had foresightedly launched a recruiting drive for the young men who later became the bank's postwar bird dogs. Less than ten years after he joined the firm, Alexander was made executive vice president. Following in Whitney's footsteps, he moved up to the presidency in 1950, when Whitney became chairman, took over the firm in 1955, when Whitney retired to head the advisory board.

Mule Trader. Though his world is the money business, Alexander has never spent much time worrying about the material rewards of his work. "If a man does good work in his profession," he says, "his livelihood looks after itself." His duties at Morgan Guaranty pay him about $150,000 a year, but he spends it modestly. With his pretty wife, onetime Powers Model Janet Hutchinson, and his daughter, Janet, 9, who attends Spence School, he lives in a Manhattan apartment. It is hardly big enough when the rest of the family arrives home; they are sons Clay, 24, a medical student at Cornell New York hospital; Thomas, 22, a senior at Washington and Lee University; and David, who is in the Army. Alexander also keeps an unpretentious summer home made out of an old windmill at Chatham on Cape Cod.

A Jacksonian Democrat by birthright, Alexander is a registered Republican. To please his wife, an Episcopalian, he is also split on religion. "I am a Methodist in town," he says, "and an Episcopalian in the country." He is active in social and charitable drives, is a trustee of Vanderbilt University. He likes to get back to Tennessee twice a year, chat with hometown folks. Recently a farmer who did not know Alexander's occupation chatted with him for a while about mules, later told a friend: "He is the nicest mule trader I ever met."

Alexander loves to fish, hunt and play golf (in the low 905), belongs to the rugged Eastward-Ho! course at Chatham, the exclusive Links Club in Manhattan. Whatever free time he has he likes to spend at home, relaxes with music (Beethoven, Chopin, Bach) or TV (favorite program: Public Defender).

Great Adventure. Such occasions are all too infrequent. Henry Alexander's schedule is so jampacked that he has had only a week's vacation in the last year. He reaches his office at 9 a.m., at 9:45 a.m. meets with the bank's 30 top officers to discuss anything from an outbreak in the Middle East to the problems of a new client. The rest of his day is spent telephoning, meeting with officers on bank affairs, and making his round of personal contacts as the bank's chief emissary. Alexander gives his officers wide latitude in making decisions, in line with Morgan's partnership tradition, but he is often called on to make spot decisions, approve or reject a project before it gets too far.

Alexander also devotes much of his time to the five companies on whose boards he serves. The directorships are no sinecures; he often lugs home for the weekend a briefcase stuffed with memos. "He reads 'em, too," says General Motors

Chairman Fred Donner. "That is part of Alexander's value on our board. He does his homework, then comes into meetings with ideas." Alexander considers banking a great adventure. Says he: "The range of men and interests one gets in banking is about as great as any I know. You deal with the whole range of affairs: industry, economic activity, production, distribution, consumption, and the always fascinating and elusive subject of money."

Staying on Course. Today, banking has become more adventurous than ever. Like Morgan Guaranty, most large New York banks always specialized in wholesale banking. Their deposits came mainly from corporations, their big customers. But the great growth of the U.S. economy and middle-class wealth brought fresh funds pouring into regional banks all over the U.S. Corporations that once preferred to bank in New York in the days of centralization now often prefer to bank around the country in the day of decentralization. New York is still the nation's financial center, but its crown is slipping. The New York commercial banks' share of commercial bank deposits in the U.S. dropped from 24.8% in 1942 to 14.8% in 1958.

To protect themselves against the shift, such New York commercial banks as First National City Bank, Chase Manhattan and Manufacturers Trust have joined in wooing the consumer, offering hundreds of retail services. Bankers Trust once insisted on a minimum account of $5,000, now has dropped the rule. Standing almost alone against this trend, Morgan Guaranty has preferred to get the capital it needed by merging with Guaranty Trust Co., whose conservative policies stored up a large stock of capital.

Southpaw Checks. While Morgan Guaranty contentedly sticks to its course, the plain U.S. citizen all over the U.S. is being loved, flattered, pampered and wooed by the nation's banks. New ones are being built in strikingly modernistic designs to dazzle his eyes. Seattle First National Bank's new branch at Bellevue looks like a glass and steel cage. Other banks offer soft lights, pastel shades, upholstered chairs, low counters for children, even piped music to save by. The trend has reached such a point that the Colorado National Bank, housed in a traditional building, advertises itself in self-defense as "the bank that looks like a bank."

Banks have pursued the potential customer to the suburbs in a tremendous explosion of branch banking; there are now more than 9,000 branch offices in the U.S. Drive-in banks are common; there are also banks in airports, subways, train stations--even sail-in banks for yachtsmen. The banks that are concentrating on family banking offer a bewildering array of services: credit cards, savings plans for vacations, honeymoons, college. Banks now sell airline tickets, provide TV sets in the lobby at World Series time, handle auto-license renewals, lend umbrellas on rainy days, even print up "southpaw" checkbooks for lefthanded depositors.

Because of these startling changes in a once remote profession, a new type of banker has grown up across the country. Mills B. Lane Jr., 47, the energetic president of Atlanta's Citizens & Southern National Bank, wears loafers and loud sport coats, built a $100,000 traveling model town to show how banking affects the community. Fidelity-Philadelphia Trust Co. has been transformed from a carriage-trade bank into a thriving (25 offices), consumer-oriented operation by President Howard C. Petersen, 49, a Main "Liner whose jacket is usually open, his tie askew. In conservative Boston, President Roger C. Damon, 53, of the First National Bank, devised the widely copied "line of credit" system, which allows a borrower to cash checks indefinitely against a specified loan, so long as he continues paying back. The heads of the big banks have simply made them bigger. In California, President S. Clark Beise, 61, of the Bank of America, has cashed in handsomely on the postwar boom by hiking the bank's branches to 658, offering more than 50 special services, from credit cards to coupon counting. Harold H. Helm, 58, chairman of the newly merged Chemical Bank New York Trust Co., has chalked up outstanding gains in recent months by aggressively seeking the little man's business.

52 Million Accounts. The efforts of such men have done wondrous work. More than 52 million Americans now have checking accounts, and 90% of their bills are paid by check. During the last five years, more than 20 million new bank accounts have been opened. Commercial bank loans to consumers have gone from $10.9 billion to about $17.8 billion in five years.

Big banker Henry Alexander watches all of this carefully from the upper levels, believes that most of it is to the good. The more prosperous the consumer becomes, the more prosperous will be the corporate clients he serves, and the bigger he will grow. He thinks that consumer credit may be riding a little high, but he notes, on the other hand, that consumers have become "like corporations"; they keep their savings in the bank, take out loans to buy what they need. Morgan Guaranty makes its own contribution to consumer credit by lending to such important consumer-finance organizations as G.M.A.C., Household Finance and C.I.T.

While consumer banking expands, Morgan continues to grow at its level. It is already too big for its offices. The famed Morgan corner at Wall and Broad Streets has become practically a branch bank; Henry Alexander has moved to the more spacious Guaranty quarters, and most of his officers have gone with him. Since neither bank is big enough to hold the combined staff, plans are being considered to expand the old Morgan building or tear it down, perhaps to build a modern office building on the site. The bank is also considering plans to open two new offices in burgeoning midtown Manhattan, another office in London.

As population grows, as living standards rise, as production, commerce, distribution and consumption increase, Morgan Guaranty confidently expects a commensurate growth in the big accounts that are its big business. With his bird dogs always at the scent, Big Banker Alexander will always be looking for opportunities to help pull customers up to Morgan size. Says he: "One of our first functions is to make the little ones big."

-The first four, based on deposits: Bank of America, Chase Manhattan Bank, First National City Bank of New York, Chemical Bank New York Trust.

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