In October 1907, as panic spread throughout American banking and financial markets, J.P. Morgan began to organize a series of emergency lending facilities. The different loans ultimately arranged by Morgan over the following weeks provided desperately needed liquidity to a range of different institutions and markets, helping to contain the crisis. In the absence of a central bank, Morgan personally acted to fill the void in American financial markets and assumed the role of lender of last resort. Wall Street traders called him “Jupiter.”

How is it that a private banker could function as a de facto central bank in a crisis? What led Morgan to seek out this role? John Moen and Mary Tone Rogers’ Before the Fed: J.P. Morgan, America’s Lender of Last Resort explores these questions. Drawing on a wide range of sources, the book presents a detailed account of Morgan’s actions during the financial crises that occurred over his professional career. The chronology of crises presented in the book traces out the events that likely shaped Morgan’s actions in 1907, and follows his evolution from a junior banker following in the footsteps of his father to America’s most powerful financier.

American financial markets were quite prone to panics over Morgan’s lifetime (1837–1913). By the time he reached middle age, Morgan had lived through many financial crises and observed how the senior bankers around him responded. Morgan’s early career was spent working with sophisticated and well-connected senior partners, who were able to take measures to strengthen their firms’ balance sheets when panics seemed likely, and also participated in some loans arranged to rescue firms that came under pressure. By the time of the 1890 Barings crisis, Morgan himself organized a loan from large banks to relieve a failing commercial bank in New York, and his firm participated in the loan guarantee for the rescue of Barings organized by the Bank of England. From that point on, Morgan helped organize or participated in a number of significant financial rescues when markets came under pressure, and also helped arrange to raise funds for the US Treasury to increase its gold reserves in the mid-1890s.

The book culminates in a detailed description of Morgan’s many different efforts aimed at containing the Panic of 1907. Drawing on the authors’ earlier work on the crisis, the book discusses fourteen distinct domestic and international lending efforts coordinated by Morgan in 1907, and another series of efforts to recapitalize several firms (including his own) in 1908. The chapters on the panic describe a number of different transactions that have received little attention in the literature, and constitute one of the most valuable contributions of the book. Another valuable contribution is the book’s discussion of some lesser-known business failures and incipient panics over the years that never developed into full-blown crises, possibly due to lending efforts coordinated by Morgan that prevented the spread of contagion.

Especially in 1907, Morgan’s actions solved a collective action problem, marshaling the resources of the financial system to provide liquidity where it was needed, and in some cases inducing financial institutions to fund transactions that were privately costly in order to achieve a collective benefit. Lending scarce resources to a struggling competitor is never an attractive proposition, but the book describes the various tactics Morgan used to persuade financial institutions to overcome their reluctance and contribute to his lending facilities. Yet Morgan’s actions also sometimes personally benefitted his firm or its clients, and his actions were motivated by a blend of public and private concerns. These issues are discussed by the authors, although they are not a major focus of the book.

Overall, this book presents a very clear account of what exactly Morgan did in response to crises—what processes were used, which people were involved, whose resources were lent, how the transactions were structured, and who received loans and who did not. In some cases, the details needed for a full accounting of specific transactions are not available in the historical record, but the authors have done the best they can with the surviving evidence. The question of how Morgan functioned as America’s de facto lender of last resort, especially in 1907, is quite thoroughly explored.

On the question of why it was J.P. Morgan and not some other banker who took on the role of crisis-fighter, the book points to a few different possible answers. The lessons imparted on Morgan by his father, the insights Morgan gained from repeated experience with crises, and the profit motive are emphasized, and the book also mentions that J.P. Morgan & Co.’s operations and connections grew so extensive that Morgan stood to gain more than most from maintaining financial stability. Yet other elite financiers of Morgan’s era had extensive connections, experience with crises, and stood to gain from financial stability—why didn’t one of them act to contain panics?

Part of the answer is that they actually did, with Morgan coordinating their efforts. Yet it may have also been the case that at least some of Morgan’s peers among elite financiers did not share in his desire to preserve stability. An interesting contrast with Morgan can be found in the financier Andrew Mellon (1855–1937). Although he was born about 20 years later, Mellon lived through most of the same panics as Morgan and apparently learned the opposite lessons from them: he believed economic crises were necessary to cleanse the economy of excesses. As Secretary of the Treasury and Ex Officio Chair of the Federal Reserve Board during the Great Depression, Mellon opposed most interventions aimed at fighting the downturn and stimulating economic activity (David Cannadine, Mellon: An American Life [Vancouver, 2008]). To be sure, the Great Depression occurred in a different era with different institutions and different ideas about financial policy, but the contrast between the two financiers highlights Morgan’s unique importance.