Andrew Mellon: Investor to Secretary of Treasury

Andrew Mellon

J.P. Morgan was not alone in having a keen eye for investments. Morgan, a financier with powerful influence and enormous wealth, had made investments in scientific discoveries as well as ventures that became successful. But Morgan did not have the monopoly of having a foresight for profits. Andrew Mellon was also a financier, visionary, and, government official. Mellon would bet his money in several ventures and capitalize in new technologies. From his sound investment decision he accumulated huge wealth and influence and allowed him to be respected and trusted by the Presidents of the United States.

Andrew Mellon was born to a well-off Pennsylvanian family. Born in March 24, 1855, he was the son of a banker of Scottish and Irish descent Thomas Mellon. The Mellon family were wealthy as Thomas dealt with several prominent businessmen, among them was the steel titan Andrew Carnegie. With his family in a stable financial condition, he was able to study in very good schools. In 1873, Mellon almost graduated from the University of Pennsylvania.

When he left the University of Pennsylvania, Mellon began to learn to become a businessman. At 17, with the help of his father, he entered to a lumber business. From this venture, he began to acquire the skills he needed to become a very wealthy businessman. When he proved his skills very well, at the age of 19, alongside with his brother Richard, the two joined with their father to operate the family banking firm, the T. Mellon & Sons. After working for years, by 1882, he convince his father to transfer the ownership of the bank to him.

Andrew’s ownership of the family banking business allowed him to investment and enter into new ventures. Among the first was in 1889 when the Mellon bank helped to organize the Union Trust Company and the Union Savings Bank of Pittsburgh.

Among of the first prominent investment of Mellon was on the future of a new industrial material – aluminum. In the 1880’s, Charles Hall discovered a process that would refine bauxite into aluminum. His process greatly reduced the cost of producing aluminum. Before his discovery aluminum was more expensive than gold. But with his discovery, the price of the material drop significantly. In 1888, Hall capitalized his discovery and founded the Pittsburgh Reduction Company. Mellon invested in the company and became a driving force in the company. In 1907, the company was renamed. It became the Aluminum Company of America or ALCOA in short. Mellon helped it to become prosperous and led it to diversify and made new products made of aluminum, such as bathtubs and sinks.

Mellon also finance scientific discoveries of abrasive and coke. In the 1890’s, Edward Goodrich Acheson made a discovery to produce a new abrasive called silicon carbide or what he dubbed as carborundum. Acheson in 1893, he founded the Caborundum Company to produce his new chemical product. Mellon invested huge money on the new company. He invested $50,000 to the company in exchange for 6.25% of stocks. Another investment of Mellon was on coke, a good substitute for coal. In 1900’s, Heinrich Koppers, a German immigrant to the United States built an oven that made waste products into coke. Koppers attempted to make a business out of his invention. But Mellon bought Koppers’ patent for $300,000 and reorganized Kopper’s company.

Other investment of Mellon involved oil and shipbuilding. In oil, Mellon invested in the oil industry in the 1890’s. They bought oil wells, laid pipelines, and built a refinery in Marcus Hook, Pennsylvania. This failed when it clashed with the oil tycoon, John Rockefeller’s Standard Oil. The company was bought by Rockefeller. But in 1901, a new oil boom underwent in Texas. Spindletop caused a new sensation in the south. Investors flocked to capitalize on the new oil supply discovered. Mellon invested to the Guffey Petroleum Company along with his nephew William Mellon. Later on, the Guffey Petroleum Company merged with its rival to form one of the biggest oil companies in the world, Gulf Oil. Mellon also invested his money into steel. Mellon profited from the establishment of US Steel, as well as from the growth of Charles Schwab’s Bethlehem Steel. In 1900, Mellon, among many investors like Henry Frick, financed the formation of the New York Shipbuilding Co., one of the biggest contractors of the US Navy.

In 1920, Mellon took a turn in his life. An ardent supporter of the Republican Party, in 1921, President Warren Harding appointed Mellon as Secretary of Treasury. Mellon as Secretary supported big businesses. Under his tenure, taxes decreased by half, especially those in the higher class. His idea was that it would give businessmen more savings in order to invest back to the economy, which would create jobs and increase the standard of living of the poor. In order to fill the losses made by the tax cuts, Mellon slashed government spending. In order to gain another source of income, he increased tariffs. This gave the US government new source of revenue as well as protect American industries. Mellon would serve under three Presidents, only stepping down in 1932 under President Herbert Hoover.

Mellon passed away on 1937. But before his final breath, he donated $65 million for the construction of the National Gallery of Arts in Washington DC.

Mellon was another extraordinary man. He did not became rich with one idea he discovered or commercialized. He became rich by funding such new invention and its commercialization. He became wealthy by having a fore sight or a vision of the future of an industry and knowing how much it would grow. Equally remarkable as a businessman was his career as Secretary of Treasury. He introduced new policies that helped the United States to prosper for the 1920’s. Nevertheless, it was also under his watch that the Great Depression began and worsen under his President, Herbert Hoover. Mellon passed away known as one of the richest men in the world.

See also:
Andrew Carnegie
Charles Schwab
J.P. Morgan
John Rockefeller
John Warne Gates

Bibliography:

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Girard, J. & R. Miller (eds.). The Greenwood Encyclopedia of Daily Life in America V. 4: Wartime, Postwar, and Contemporary America, 1940 - Present. Connecticut: Greenwood Press, 2009.

Skrabec, Q. The 100 Most Significant Events in American Business: An Encyclopedia. California: ABC-CLIO, LLC, 2012.

Vassiliou, M. Historical Dictionary of the Petroleum Industry. Maryland: Scarecrow Press, 2009.