Morgan Guaranty Trust

Morgan Guaranty Trust Company of New York was formed on April 24, 1959 by the merger of J.P. Morgan & Co. Incorporated and the Guaranty Trust Company of New York. A Senate staff study of January 1978 recorded that J.P. Morgan held all of its stock and that in 1976 it was "among the top 5 stockvoters in almost one-half of the 130 companies in the study." After J.P. Morgan merged into Chase Manhattan Corporation on December 31, 2000, the bank was "succeeded through merger by JPMorgan Chase Bank."¹²³

Guaranty Trust and the Russian Account

On July 15, 1916 the Imperial Russian Government opened an account at the Guaranty Trust Company; on July 12, 1917 the financial attache of the Russian Embassy deposited 5,000,000 dollars in it. When the Soviet government succeeded the Provisional Government in November 1917, about 5,000,000 dollars remained on deposit. On February 25, 1918 the bank applied the balance "as a credit against indebtedness alleged to be due to it by the Russian Government by reason of the latter's seizure of certain ruble deposit accounts of petitioner in Russian private banks." After the United States recognized the Soviet government on November 16, 1933 it took an assignment of such claims and sued the bank on September 21, 1934. In Guaranty Trust Co. of New York v. United States, 304 U.S. 126, decided on April 25, 1938 with John W. Davis arguing for the bank, the Supreme Court of the United States held that the New York six-year statute of limitations applied and reversed the Second Circuit.⁴

The Business Plot Hearings

In November 1934 the House Special Committee on Un-American Activities heard Major General Smedley Butler, who testified that Gerald MacGuire, a bond salesman at Grayson M.-P. Murphy & Co., 52 Broadway, had proposed that he lead a veterans' organization. Butler said MacGuire gave him two names as the source of the money: "Colonel Murphy, Grayson M.-P. Murphy, for whom he worked, was one." MacGuire told the committee that Murphy was "my boss." Murphy had been senior vice president of Guaranty Trust from 1915 to 1917 and again from 1919 to 1920, and in 1936 was treasurer of the American Liberty League, according to Who's Who in Commerce and Industry. The writer Antony C. Sutton described him as a director of the Guaranty Trust Company at the time of the hearings.⁵⁶

On November 24, 1934 the committee's statement said that it had "no evidence before it that would in the slightest degree warrant calling before it such men as John W. Davis, Gen. Hugh Johnson, General Harbord, Thomas W. Lamont, Admiral Sims, or Hanford MacNider."⁵ The reproduced release and testimony of the Business Plot hearings name Murphy as MacGuire's employer and as one of two sources of the money and do not mention the Guaranty Trust Company.⁵

The 1959 Merger

According to the international year books, the bank resulted "through the merger of J. P. Morgan & Co. Incorporated and Guaranty Trust Company of New York on 24 April 1959," with Henry C. Alexander as chairman in the early 1960s. Thomas S. Gates Jr., Secretary of the Navy from 1957 and Deputy Secretary and then Secretary of Defense under Dwight D. Eisenhower until January 1961, "returned to investment banking, working for the Morgan Guaranty Trust Company," before President Gerald Ford named him in 1976 Chief of the United States Liaison Office in Beijing.¹⁷

Draper's Accounts

Wickliffe Draper had been a client of Guaranty Trust since the 1930s. In 1940 the Pioneer Fund offered to establish annuities for the education of any child born that year to an officer of the United States Army Air Corps who had already fathered at least three children; according to the records of the fund's director John Marshall Harlan II, Draper arranged for an annuity to be established for each of the twelve children at Guaranty Trust.⁸

Mississippi, 1963 and 1964

After President John F. Kennedy's civil rights address of June 1963 the lawyer John C. Satterfield of Yazoo City, a past president of the American Bar Association, organized the Coordinating Committee for Fundamental American Freedoms in Washington, D.C.; the Mississippi State Sovereignty Commission, according to the state archives, "participated in the national campaign to prevent the passage of the 1964 Civil Rights Act, establishing and providing funds for" it.⁹ On July 22, 1963 Satterfield received the first private contribution, a 10,000 dollar Morgan Guaranty cashier's check drawn on Draper's accounts, which was deposited in a special account in the state treasury and logged in the commission's records as "Morgan Guaranty Trust Co." Contributions from Mississippi residents never exceeded 30,000 dollars. A surviving partner of Satterfield's firm said Satterfield referred obliquely to the source of the large money as "the Wall Street gang."⁸

On September 12, 1963 the bank's vice president Arthur W. Rossiter Jr. telegraphed Governor Ross Barnett that a client was "setting aside as an anonymous gift" stock valued at 100,000 dollars on the condition that "the fact and amount of the gift to be kept confidential." Barnett agreed the same day. After the shares were sold the gift totaled 98,612 dollars and was entered in the commission's records as "Donation from Morgan Guaranty Trust Company." Four months later Rossiter sent a second telegram announcing an additional 105,000 dollars. The money came from Draper's shares of Reynolds Tobacco, General Motors, Standard Oil of New Jersey and Addressograph-Multigraph; the bank sold the stock at Draper's direction, collected commissions on the sales and held the proceeds in what it called a temporary Sovereignty Commission account at Morgan Guaranty. In one letter Rossiter wrote: "This represents an anonymous gift to your Commission and the donor has specifically requested that the fact and the amount of the gift be kept strictly confidential."⁸

Nearly 215,000 dollars of the campaign's budget of about 300,000 dollars came through the bank. The committee bought advertisements in 500 daily and weekly newspapers and by April 1964 had distributed 1.4 million pamphlets and mailings. An internal memorandum by Satterfield said Americans had to be shown that the conditions of Black people in the United States resulted from "heredity . . . not discrimination," and named "the intelligence, criminality and immorality of the Negro."⁸ On June 2, 1964 a further 50,000 dollars from Draper arrived through the bank for a proposed permanent national organization. After the murders of James Chaney, Andrew Goodman and Michael Schwerner that summer the plan was dropped and the 50,000 dollars was returned to Draper's lawyer Harry Weyher, who deposited it in his firm's escrow account.⁸

The state treasurer at the time, William F. Winter, said that Wall Street firms charged higher interest rates on Mississippi bonds because of the state's reputation, and that a bond issue was canceled in 1965 for lack of bids on Wall Street.⁸

The Estate and the Pioneer Fund

When Draper died in 1972 the bank continued to manage his holdings while the will was sorted out, and five years later the assets were distributed: about 1 million dollars to family members, 3.3 million dollars to the Pioneer Fund and 1.7 million dollars to the Puritan Foundation, which listed Satterfield's law firm as its address. In 1978 the Puritan Foundation was merged into the Council School Foundation, which supported private schools for white students. In the late 1960s and 1970s Draper had sent dozens of checks to private academies opened for white families after public school integration. His will instructed the fund to use the bank for financial advice, and it did so for two decades. Douglas A. Blackmon reported in 1999, citing people familiar with the situation, that the bank closed the Pioneer Fund's asset management account after the controversy over The Bell Curve in 1994; the bank would not give details of why.⁸

The bank said that "racism is deplorable," that it did not "support institutions that further racist causes," and that it had given more than 3.3 million dollars of its own money to civil rights groups since the late 1960s. Its spokesman Joe Evangelisti said: "A thousand times a day, somebody sends money to an organization that 30 years later looks really terrible. We can't tell our customers how to spend their money." The managing director Hildy J. Simmons said: "As long as the receiving party is legal, we have no discretion," and, of Draper: "You can spend your money the way you want to." The files of the commission, sealed by the 1977 abolition act, were opened by a federal court order, most of them becoming available in the state archives' search room on March 17, 1998, and the Wall Street Journal reported the transfers on June 11, 1999.⁸⁹

Holdings and Interlocks in 1978

The Senate Committee on Governmental Affairs staff study, Interlocking Directorates Among the Major U.S. Corporations (January 1978), recorded that "J. P. Morgan holds 100 percent control of Morgan Guaranty Trust Co. of New York, which is the Nation's largest holder of voting stock in U.S. corporations." It described J.P. Morgan as the "parent of the Nation's largest institutional investor." The study counted indirect interlocks through shared boards: Citicorp's directors met J.P. Morgan's directors 30 times on 19 other boards and those of Chase Manhattan Bank 17 times on 9 boards. J.P. Morgan was directly interlocked with General Motors three times and with Ford once.²

J.P. Morgan in 1994

In its annual report for 1994 J.P. Morgan stated that it was "a primary dealer in government securities of the United States and all other Group of Seven industrial nations," that its sales and trading clients and counterparties included "corporations, central banks, governments and their agencies," and that the assets it managed had grown in 1994 to 150 billion dollars. Its equity portfolio "exceeds $1 billion in value and includes securities of 90 companies"; the largest gain came from Columbia/HCA stock acquired in 1989 "in connection with our role in the leveraged acquisition of Hospital Corporation of America by its management."¹⁰

The Board in 2000

The proxy statement for the annual meeting of April 12, 2000 nominated 15 directors of J.P. Morgan & Co., each "also a director of Morgan Guaranty Trust Company of New York." They included the chairman Douglas A. Warner III, a director of General Electric and Anheuser-Busch and a member of the Board of Counselors of Bechtel Group; Riley P. Bechtel, chairman and chief executive of Bechtel Group and a member of the Trilateral Commission; John A. Krol, retired chairman of E.I. du Pont de Nemours and Company and a member of the advisory board of Bechtel Corporation; Lee R. Raymond, chairman of Exxon Mobil Corporation, a member of the Council on Foreign Relations and the Trilateral Commission, director since 1987; James R. Houghton of Corning and a director of Exxon Mobil and Metropolitan Life Insurance Company; Martin Feldstein, also a director of Columbia/HCA, and Ellen V. Futter, who with Feldstein sat on the board of American International Group and was a member of the Council on Foreign Relations; Hanna H. Gray, a director since 1976; and Paul A. Allaire of Xerox, also a member of the Council on Foreign Relations. The proxy listed Corning, DuPont, Exxon Mobil, Honeywell, Maytag, Phelps Dodge and Xerox as organizations whose officers sat on the board and with which J.P. Morgan had transactions in the ordinary course.¹¹

Sumitomo Copper Litigation

In August 1999 Sumitomo Corporation sued J.P. Morgan & Co. Incorporated, Morgan Guaranty Trust Company of New York "and a former J.P. Morgan employee" in the Southern District of New York, alleging that from 1993 to 1996 Morgan had assisted a Sumitomo employee in copper trading.¹²

The Chase Merger

On December 31, 2000 J.P. Morgan & Co. Incorporated "merged with and into The Chase Manhattan Corporation," which was renamed J.P. Morgan Chase & Co.; a merger charge of 1.25 billion dollars was recorded that day. The bank itself was succeeded by JPMorgan Chase Bank.³