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January 22, 19U6.

Mr, George Hhitney, President,
J. P. Morgan & Co. Incorporated,
23 Hall Street,
Hew York City.
Dear Mr. Hhitney:
This ia to thank you for your note of January 16 enclosing
a copy of the letter to stockholders.
IShile I think I would not quarrel with most of the general
observations, it is unfortunate, it seems to me, to assume that the
failure to achieve high levels of production and employment in the
deoade of the 30' a is properly attributable to the fact that the
policy of deficit financing was not successfully carried through.
I would agree that it was inadequately and inexpertly managed, but
it was the one factor above all others that arrested the deflationary
tide. And whether we like it or not, the policy is bound to be
undertaken by whatever government is in power if we are unfortunate
enough to get into another severe deflation. I think it would be
more sensible to' try to work the policy out intelligently than to
attempt to dismiss it altogether.
On the other side of the ledger, however, I am glad to
see that in discussing foreign trade the letter emphasises that we
must "buy, as well as sell, goods and services abroad*ft there is
too much tendency to talk as if this were just a one-way street of
selling.




Sincerely yours.

M. S. Eccles,
Chairman.

P. MORG^IST & CO.
I NCO RPORATED

23 Wall Street
New York

GEORGE WHITNEY

, January 16, 1946

PRESIDENT

Hon. Marriner S. Eccles, Chairman,
Board of G-overnors of the Federal Reserve System,
Washington, D. C.
Dear Governor Secies:
I am sending you herewith, as a matter of
possible interest, our stockholders letter presented
at the annual meeting of J. P. Morgan & Co. Incorporated
today.
Sincerely yours,

Enclosure




J . P. MORGAN & CO.
INCORPORATE D

23 Wall Street
NewYork 8

HENRY C.ALEXANDER

^

Vy&uy ^/yC^rC/

VICE-PRESIDENT

January

- *

M« S. Eccles, Esq.,
Chairman,
Eoard of Governors of the
Federal Reserve System,
Washington, D.C.
Dear Mr, Eccles:
Mr. Whitney will be out of town for about a week
but, in his absence, I wish to acknowledge receipt of your
letter of January 2 2nd.
Y e are naturally much interested in your reaction
J
to our letter to stockholders and 1 know that Mr* Whitney
will much appreciate your interesting and thoughtful letter*




Sincerely,

25,

194

J . I*. MORGAN & CO.
INCORPORATED

23 Wall Street
New York

, February 6, 19lj.6

GEORGE WHITNEY
PRESIDENT

Hon.

Marrlner S. Eccles, Chairman,
Board of Governors of the Federal Reserve System,
Washington, D. C.

Dear Mr. Eccles:
I know Henry Alexander acknowledged your letter
of January 22nd in which you comment on our stockholders1
letter, which I sent you.
I am sorry if you got the impression that the
failure to obtain high levels of production and employment
in the 1930's was laid solely to unsuccessful management of
deficit financing.

That was certainly not my point of view.

I had in mind merely that deficit financing did not accomplish the purpose for which it was publicly intended, nor
can it in the future.

There are, of course, other factors

which more thoroughly control the lack of reemployment.
Sincerely yours,

c



J. P. MORGAN Sf CO.
Incorporated

%o Wall Street

Neiv Torh, January 16, 1946.

To the Stockholders of
J. P. Morgan Sf Co. Incorporated
As the year 1945 closed and the new year opens, thankfulness for the victory that the old year
brought is uppermost in the minds of all of us throughout the Nation. Our thoughts and sympathies go
to all who suffered personal loss or injury. We are grateful to all who served in OUT armed forces.
The Nation can well be proud of its achievements, of its military triumphs, of its unity of purpose
throughout the war, of the mobilization of its skills and resources, of the products of its industries, its
labor and its farms, and of the efforts of its people toward providing so much of the tremendous monetary
cost of so dreadful a conflict.
As the Nation turns to face the aftermath of war, both at home and throughout the world, the
future appears grim. Everywhere one hears of strife and misunderstanding among nations and between
groups within nations. The task of bringing this country back to prosperity in a peaceful world is
enormous, but with clear purpose, understanding and skill, it can be done. We should not, after the most
devastating war of all times, expect too much too fast, even in this country with its great material resources
and relative prosperity. We should not expect that there can spring forth an economy so perfectly functioning that all ills are forever banished. We should be able to expect, however, an orderly America,
opportunity for work, and a resumption of our economic and social progress. Above all, we should expect
that America will be kept the land of freedom and opportunity.
Full production and wide distribution of peace time goods will bring most of the results that are
sought—whether it is control of inflation and avoidance of deflation, good wages and good profits, greater
security and better living, or sounder budgets and less debts.
But the desired objectives can be reached only if our Government, with the great powers that the
people have temporarily granted to it, guides the economic and fiscal policies of the Nation in the direction
of growth and development and not of repression. They can not be reached if we are led to expect more
and more for less and less effort; if labor organizations or industrial organizations are to take purely
selfish positions that block the road to production and distribution; or if political leaders are unwilling
to face a reduction in government expenditures and are to assume that a policy of deficit financing can
succeed any better in the future than it did in the decade 1930-40. The result of these can be nothing but
the debasement of our currency and a lowering of the standard of living in the United States.
Nor can the objectives that the Nation seeks be attained in isolation. If this country is to prosper,
we must try to help raise in some measure the standard of living in other countries and thereby bring
about a wider market for our goods as well as those of friendly nations. We must find outlets abroad,
foreign markets for excess production in many of our products; we must buy, as well as sell, goods and
services abroad; we must be ready to make foreign loans and investments; we must aid in maintaining
peace and world order and in the reconstruction of foreign nations, foreign exchanges, and foreign trade.
Only in this way can we insure a maintenance of the standard of living in this country on a level comparable with what we have enjoyed in the past. It is certain, however, that it will not be possible for us to
have everything at once, or to escape our fair share of the burdens, the disruptions, or the costs of the war.
The Company is proud of the performance of its men and women during the war—of those who
served in the armed forces and also of those who have with loyalty and skill carried on the increasing



activity in the Company's operations, maintaining under conditions of a heavily depleted staff, th&
quality of service traditionally rendered by the Company. Upon our country's entity into the war in
December 1941, there were 36 officers and 621 staff members in the employ of the Company, of ivhom
240 were women. A total of 12 officers and, 124 staff members, including 5 ivomen, entered the armed
forces. Three young men gave their lives in the performance of their duties; three were seriously wounded;
and a number of others suffered less serious injuries. Of those who entered the armed services, 57 have
returned to their positions with the Company and it is expected that a majority of the others will return
following their discharge from service. At the close of the year, operating personnel consisted of 46 officers
and 602 staff members, of ivhom 313 were ivomen.
Operations of the Company during 1945 were again governed largely by conditions related to
war and war adjustments.
Deposits continued to stand at high levels; loans for war purposes declined
ivhile coinmercial and business loans for normal purposes rose about $35,000,000 during the year.
Operating results for the year ended December 31, 1945, and for the year ended December 31,
1944, in comparative form, were as follows:
1945

1944

T
Income
Net earnings from interest
Fees and commissions

$7,651,603
2,109,224

$9,760,827

$8,189,031
1,772,887

$9,961,918

Expenses
Operating expenses
Miscellaneous taxes and expenses

$4,560,373
493,812

5,054,185

$4,115,797
508,078

4,623,875

Operating Earnings, before security
profits and charges shown below

$4,706,642
2,529,651

Charges
Federal income taxes...:.
Special payment toward past service
pension cost
Net Earnings

1,619,029

$7,236,293

Net security profits

$5,338,043
$6,957,072

$1,780,000
371,000

$1,642,268
2,151,000
$5,085,293

—0—

1,642,268
$5,314,804

During 1945 certain changes were effected in the investment portfolio of the Company, as a
result of which earnings from interest for the period were lower, but security profits resulted from such
changes. Security profits also include approximately $618,000 resulting from the redemption of certain
securities acquired at a substantial discount by the Company at the time of its incorporation.
Operating
expenses in 1945 included $272,000 representing additional compensation to staff members and officers
for the year 1945, as hereinafter mentioned. Net earnings were charged, as shown above, with a special
payment of $371,000 toward past service pension cost.
The net earnings for 1945, after payment of $1,600,000 in dividends to stocJcholders, are
reflected in Undivided Profits, which increased $1,949,265 during 1945, and in General Reserve, which
increased $1,536,028 during 1945.
Condensed Statements of Condition of the Company as of December 31, 1945, and as of December
31, 1944, cure submitted hereivith.
In the Condensed Statements of Condition, general market securities, including all United
States Government obligations, are valued at cost or, when purchased at a premium, at amortized
cost calculated to the earliest call date. The General Reserve of the Company is set forth in the statements
in conformity with the practice adopted by the Company in 1944United States Government securities amounted to about 59% of the total assets of the Company
on December 31, 1945, as compared with about 66% on December 31, 1944- These securities stood on the



Condensed Statements of Condition
ASSETS

,

Dec. 31, 1945-

Cash on Hand and Due from Banks . .
United States Government Securities . .
State and Municipal Bonds and Notes .
Stock of the Federal Reserve Bank . .
Other Bonds and Securities (including
Shares of Morgan Grenfell & Co. Limited and Morgan & Cie. Incorporated) .
Loans and Bills Purchased

$137,208,564.25
487,984,871.45
12,103,782.96
1,200,000.00

Accrued Interest, Accounts Receivable, etc.
Banking House
Liability of Customers on Letters of
Credit and Acceptances

-Dec. 31, 1944

2,530,442.21
3,000,000.00

N

$128,580,741.82
535,055,435.96
10,766,289.01
1,200,000.00

17,117,461.09
150,389,136.62

15,697,733.80
116,959,509.44
2,597,765.01
3,000,000.00

5,295,010.64

2,739,134.35

$796,829,269.22

$816,596,609.39

LIABILITIES
Deposits
Official Checks Outstanding
Accounts Payable and Miscellaneous Liabilities
Acceptances Outstanding and Letters of
Credit Issued
Capital
Surplus
Undivided Profits
General Reserve

$715,457,44625
13,531,922.50

$748,229,822.87

$728^89,368.75
8,319,953.98

$756,549,776.85

5,045,039.27
3,957,354.23

5,959,223.91
20,000,000.00
20,000,000.00
6,378,366.69
10,457,270.60
$796,829,269.22

2,739,13435
20,000,000.00
20,000,000.00
4,429,101.56
8,921,242.40
$816,596,609.39

United States Government securities carried at $243,987,328.53 on December 31, 1944, and $197,885,566.20
on December 31, 1945, in the above statements were pledged to qualify for fiduciary powers, to
secure public monies as required by law, and for other purposes.
Members of Federal Reserve System and Federal Deposit Insurance Corporation







DIRECTORS
THOMAS W. LAMONT

Chairman
R. C. LEFFINGWELL

Chairman Executive Committee
GEORGE WHITNEY

President
HENRY C. ALEXANDER

Vice-President

THOMAS S. LAMONT

Vice-President

ARTHUR M. ANDERSON

Vice-President
I. C. R. ATKIN

Vice-President

GUSTAV METZMAN

President New
York Central
Railroad Company

PAUL C. CABOT

President State
Street Investment
Corporation
BERNARD S. CARTER

President
Morgan & Cie.
Incorporated
CHARLES S. CHESTON

W. A. MITCHELL

Vice-President
JUNIUS S. MORGAN

ALFRED P. SLOAN JR.

Chairman General
Motors Corporation

JOHN L. COLLYER

President The B. F.
Goodrich Company
H. P. DAVISON

E. TAPPAN STANNARD

President Kennecott
Copper Corporation

Vice-President
CHARLES D. DICKEY

Vice-President
RALPH W. GALLAGHER

N. D. JAY
Vice-Chairman
of the Board
Morgan & Cie.
Incorporated

JAMES L. THOMSON

Chairman Finance
Committee Hartford Fire
Insurance Company
JOHN S. ZINSSER

President Sharp &Dohme
Inc.

books of the Company at an amortized cost of $4-67,984,871. They averaged about four years and one
month to maturity, or about two years and seven months to earliest call date, grouped as folloivs:
To
Maturity

Principal Amount
Within one year
From one to five years
From five to ten years
Over ten years

$191,159,000
71,355,000
158,360,000
33,376,000
$454,250,000

To
Call Bate

$203,759,000
172,610,000
77,805,000
76,000
$454,250,000

Near the close of the year additional compensation was paid to staff members in the amount
of $145,500. This was about 10% of the total staff payroll for 1945, although there ivere variations
in the amounts paid to individuals and, to classifications of staff members. On January 9, 1946, the
Board of Directors authorized, under and within the limits prescribed in the Additional Compensation
Plan of the Company, the payment of additional compensation to officers of the Company for the year
1945 in the amount of $126,500. During the year the Company arranged for hospital and surgical
insurance for all of its employees and eligible members of their families, at an annual cost to the Company
estimated at about $20,000.
Under the Employees Retirement Plan, in addition to regular payments in respect of current
service benefits, the Company has continued its regular annual contributions in respect of prior service
benefits at the rate of 10% of the actuarial value of such benefits. During 1945 such contribution
amounted to $236,500, which was an increase of about $24,000 over the previous year's regular contribution, this increase being due to a reduction from 3% to 2V2% in the rate of interest assumed in the
actuarial calculations under the Plan. In addition, as indicated above, the Company made a special
contribution in respect of prior service benefits during 1945 in the amount of $371,000.
Continuation
of regular contributions at the rate of $236,500 a, year for about 6V2 years, is estimated to be sufficient
to provide in full for past service benefits under the Plan.
The Company's investment in Morgan Grenfell 8f Co. Limited, London, remained unchanged
throughout the year.
In accordance ivith plans previously reported to the stockholders, Morgan 8f Cie. Incorporated, a
wholly owned subsidiary of the Company, succeeded to the business of the firm of Morgan <* Cie., Paris,
f
upon its dissolution, effective as of May 31, 1945. Earlier succession had been prevented by war time
conditions. The continuance of this business with a record of distinguished service since its establishment
in 1868 should prove to be of advantage to the Company, of convenience to the public, and of substantial service to American interests arid to international trade relations. The Company oivns all of the
$1,000,000 capital stock of Morgan Sf Cie. Incorporated, $850,000 of which was subscribed and paid
for by the Company and, $150,000 of which was contributed without cost to it in 1941, by the partners
of the firm of J. P. Morgan 8f Co., in liquidation.
The Board of Directors of Morgan 8? Cie. Incorporated is composed of officers of J. P. Morgan
8f Co. Incorporated and of Morgan Sf Cie. Incorporated. Mr. Thomas W. Lamont seizes as Chairman of
its Board, Mr. George Whitney as Chairman of its Executive Committee, and Mr. Maurice Pesson-Didion
as Chairman of its Managing Committee (Paris). Its chief executive officers are Mr. Nelson Dean Jay,
Vice-Chairman of the Board, and Mr. Bernard S. Carter, President.
Since the last annual report to the stockholders, there have been a number of additions to the
Board of Directors of J. P. Morgan $• Co. Incorporated. Mr. Charles S. Cheston, zintil recently Assistant
Director of the Office of Strategic Services, was elected a member of the Board on February 21, 1945.
Mr. Nelson Dean Jay and Mr. Bernard S. Carter, for many years members of the firm of Morgan 8f Cie.,
Paris, and now chief executive officers of Morgan fy Cie. Incorporated, were elected members of the Board
on October 3, 1945. Mr. John L. Collyer, President of The B. F. Goodrich Company, and Mr. Ralph W.
Gallagher were elected members of the Board on January 9, 1946. Those Directors of the Company
who were on service with the armed forces have now returned to their civilian activities.



George Whitney,
President.