The Corporation and the Twentieth Century

179. There were two other ways commercial banks could organize securities affiliates: (1) the bank could own the affiliate as a subsidiary or (2) a holding company could own both the bank and the affiliate. Legal restrictions prevented banks from selling equity and many other kinds of securities through their own internal departments; even the sale of bonds by a bank was considered ultra vires until the McFadden Act of 1927 (White 1986, p. 35).

180. Cleveland and Huertas (1985, p. 156).

181. Seligman (1982, p. 24).

182. Perino (2010, p. 145). A populist Republican, Couzens had been a ground-floor investor

in and former general manager of the Ford Motor Company. After a falling out with Henry Ford, he turned to politics and philanthropy. Ultimately Ford bought him out for $30 million.

183. Cleveland and Huertas (1985, p. 185). 184. Benston (1990, p. 110).

185. Huertas and Silverman (1986, p. 96). 186. Kroszner and Rajan (1994, p. 829). 187. Pecora (1939, p. 71).

188. Cleveland and Huertas (1985, p. 169). This instantiation of the Bank of America was an old New York bank that had been bought by A. P Giannini’s Transamerica Corporation in 1928 as part of Gianinni’s effort to engage in interstate branch banking through a bank holding com- pany. It would evolve circuitously into the Bank of America of today.

189. White (1986).

190. Hoover (1952b, p. 121).

606 Notes to Chapter 6

191. Kelly (1985).

192. Cleveland and Huertas (1985, p. 197).

193. “Aldrich Hits at Private Bankers in Sweeping Plan for Reforms,” New York Times,

March 9, 1933, p. A1.

194. Schlesinger (1958, pp. 434–35); Tabarrok (1998). National City had been the principal

bank of William Rockefeller, the brother of John D. Rockefeller Sr.; and the William Rockefeller family had intermarried with the family of National City president James Stillman. Winthrop Aldrich was the son of Senator Nelson Aldrich and the brother-in-law of John D. Rockefeller Jr. He had only recently taken charge of Chase, which had grown through mergers and acquisitions. Aldrich was in the process of remaking the bank and purging older directors and officers, including those with Morgan associations. (One particularly lavish golden parachute raised eyebrows at the Pecora hearings.) Aldrich’s proposals for the Glass-Steagall Act were arguably part of this process, as the Act’s provisions would give banks authority to limit the number of their direc- tors. Amusingly, in the year 2000 Chase would merge with J. P. Morgan & Co. to form today’s JPMorgan Chase.

195. Kelly (1985, p. 53).

196. Chernow (1990, p. 375).

197. Tabarrok (1998, p. 11).

198. Chernow (1990, pp. 384–87).

199. Carosso (1970, pp. 371–75).

200. DeLong (1992, p. 22).

201. The “firewall” provisions would be repealed in 1999. After the financial crisis of 2008,

there were calls for a “new Glass-Steagall Act.” This despite the fact that most of the entities that failed in the crisis—including Bear Stearns, Lehman Brothers, Merrill Lynch, and Morgan Stanley—were pure investment houses, whereas the entities called upon to bail them out—like JPMorgan Chase and Bank of America—were integrated operations. William D. Cohan, “Bring Back Glass-Steagall? Goldman Sachs Would Love That,” New York Times, April 21, 2017.

202. Gilbert (1986). The Banking Act of 1933 covered only Fed member banks; the ceilings were extended to all commercial banks by the Banking Act of 1935.

203. In the 1960s, the Vietnam War inflation and the rise of mutual funds combined to in- duce savers to withdraw their funds from the banking system. Commercial banks were reduced to giving away steak knives and toasters to attract depositors, and they clamored for repeal (Calomiris and Haber 2014, p. 194). Regulation Q was eventually phased out in the 1980s.

204. Kennedy (1973, pp. 205–8).

205. Calomiris and White (1995).

206. Deposit insurance of the kind set up under the Glass-Steagall Act also creates serious

problems of moral hazard: because premiums aren’t tied to the riskiness of a bank’s loans and because the bank’s liability is limited to the value of its net worth, the system encourage risky lending; and because deposits are insured, it eliminates the incentive for depositors to monitor the quality of banks. This is why the earlier state experiments with deposit insurance failed. In the 1980s, a similar insurance system would take down the entire American savings-and-loan industry (White 1989).

207. Chernow (1990, p. 374). 208. Brandeis (1914, p. 92).

Notes to Chapter 6 607

209. Keller and Gehlmann (1988); Schlesinger (1958, pp. 440–42); Seligman (1982, pp. 39–72).

210. Landis (1959, p. 32).

211. Keller and Gehlmann (1988, p. 339); Seligman (1982, p. 54).

212. Mahoney (2001).

213. Parrish (1970, pp. 108–44); Seligman (1982, pp. 73–100).

214. Seligman (1982, p. 99).

215. McCraw (1984, pp. 153–209).

216. The code had been devised as one of many industry codes under the National Industrial