This chapter, devoted to the events of 1929–30, opens three chapters – Chapters 3–5 – which analyse collectively the Morgan role in the coming and development of the Depression between 1929 and 1933. Chapter 3 has as its centrepiece the Morgan effort to end what the partners saw as postwar economic warfare that was undermining European and, by extension, American prosperity. The concrete form that this took was the Young Plan (1929) that revised reparation as well as the establishment of the Bank for International Settlements, conceived as a forum to allow central banks to overcome pressing international questions. The Wall Street Crash, which surprised the Morgan partners – they did not see it coming – was, in the Morgan view, ephemeral. This stance helps us understand why Wall Street was slow to appreciate the downturn. The chapter argues that there was division among the Morgan partners as 1930 progressed on the state of the American and global economy. Leffingwell, the partnership economist, was pessimistic by the summer of 1930. In contrast Lamont continued to evince an optimistic outlook, driven in part by his desire to remain in step with the Hoover administration.

The years between 1937 and 1940 were dominated by two themes: the future of the bank and the move to war. With their investment business gone, the partners retreated into inertia, an inclination deepened by the sharp contraction of 193–38. Against Wall Street opinion, and Federal Reserve Board policy, the partners argued that tightening monetary policy was unsound. As the recession deepened, the White House reached out to J.P. Morgan & Co. This feeler ended in disharmony. When it did, confronted with the subsequent death of their partner Charles Steele, the partners decided that survival required incorporating. Making this decision easier was the European war. J.P. Morgan & Co. was of modest consequence as war loomed. Supporters of appeasement, the partners tried to help France in the late 1930s but their timidity was marked enough that the French had recourse to others. Across the Channel, Neville Chamberlain’s government ignored the Morgan partners. With war, the Morgan partners moved closer in their embrace of Roosevelt. Ardent supporters of Britain and France, J.P. Morgan & Co. was not in the interventionist camp. They argued for aid to the Western democracies but not American belligerency, a posture that aligned with the president.

What role did J.P. Morgan & Co. play at home and abroad in the 1920s? Answering this question is at the core of Chapter 2. Progressivism saw in the Morgan bank the directing agency of the Money Trust, wielding tremendous power in American life. Power there was, but the chapter argues that notions of a Money Trust directed by the Corner are without foundation. Reality, however, did not matter; what mattered for many Americans was belief in hidden, untrammelled authority. Through the postwar decade the Progressive critique was dampened by prosperity. The chapter argues that, while the Morgan bank was the most important financial institution in American life, its influence was tempered by challengers and by structural changes that were remaking American banking in the 1920s. If Morgan supremacy was under assault, Morgan authority was buttressed by close ties with the victors of World War I, Britain and France. This identification was apparent in the firm’s willingness to participate in the task of assisting postwar European reconstruction, especially Western European redevelopment. The outcome was sustained Morgan involvement in issues such as reparations, war debts, and economic reconstruction in concert with central banks and governments.