History of investment banking in the United States
Encyclopedia
Philadelphia financier Jay Cooke
established the first modern American investment bank
during the Civil War era. However, private banks had been providing investment banking functions since the beginning of the nineteenth century and many of these evolved into investment banks in the post-bellum era. However, the evolution of firms into investment banks did not follow a single trajectory. For example, some currency brokers such as Prime, Ward and King and John E. Thayer and Brother moved from foreign exchange operations to become private banks, taking on some investment bank functions. Other investment banks evolved from mercantile firms such as Thomas Biddle and Co. and Alexander Brothers.
launched the first mass securities selling operation in U.S. history employing thousands of salesmen to float what ultimately amounted to $830 million worth of government bonds to a wide group of investors. Cooke then reached out to the general public, acting as an agent of the Treasury Department, personally led a war bond drive that netted approximately $1.5 billion for Treasury.
in 1873 and embraced the gold standard
and demonetized silver
.Gold became the only metallic standard in the United States, hence putting the United States de facto
on the gold standard
.
until the first decade of the 20th century, the private investment banking industry was dominated by two distinct groups: the German-Jewish immigrant bankers and the so-called "Yankee houses". Despite this ostensible ethnic difference, the two groups shared a similar economic structure. With one exception, the Yankee houses had ties with expatriate Americans who had become merchant bankers in London. Similarly, almost all of the German-Jewish houses had ties with German-Jewish merchant bankers in London. The one exception was Kuhn, Loeb which was tied to European sources of capital through the German investment banking community.
Modern banking in Europe and the United States was influenced by Jewish financiers, such as the Rothschild family
and Warburg family
, and Jews were major contributors to the establishment of important investment banks on Wall Street
.
In the middle of the nineteenth century, a number of German Jews founded investment banking firms which later became mainstays of the industry. Most prominent Jewish banks in the United States were investment banks, rather than commercial bank
s. Jonathan Knee postulates that Jews were forced to focus on the development of investment banks because they were excluded from the commercial banking sector.
In many cases, the efforts of Jewish immigrants to start banks was enabled due to the substantial support of their Jewish banking connections in Europe.
Several major banks were started following the mid 1800s by Jews, including Goldman Sachs
(founded by Samuel Sachs
and Marcus Goldman
), Kuhn Loeb (Solomon Loeb
and Jacob H. Schiff), Lehman Brothers
(Henry Lehman
), Salomon Brothers
, and Bache & Co.
(founded by Jules Bache
).
The firm of Kuhn, Loeb & Co. played a prominent role in the area of railway finance.
In the late 1860s, The Seligman family
transitioned from merchandising to banking, setting up operations in New York, St. Louis, and Philadelphia as well as Frankfurt, Germany, London and Paris that gave European investors an opportunity to buy American government and railroad bonds. In the 1880s the firm provided financing for French efforts to build a canal in Panama as well as the subsequent American endeavor. In the 1890s J.& W. Seligman & Co. Inc. underwrote the securities of newly formed trusts, participated in stock and bond issues in the railroad and steel and wire industries, and invested in Russia and Peru, and in American in shipbuilding, bridges, bicycles, mining, and other enterprises. In 1910 William C. Durant
of the fledgling General Motors Corporation gave control of his company to the Seligmans and Lee, Higginson & Co. in return for underwriting $15 million worth of corporate notes.
Lehman Brothers
entered investment banking in the 1880s, becoming a member of the Coffee Exchange
as early as 1883 and finally the New York Stock Exchange
in 1887. In 1899, it underwrote
its first public offering, the preferred and common stock of the International Steam Pump Company. Despite the offering of International Steam, the firm's real shift from being a commodities house to a house of issue did not begin until 1906. In that year, under Philip Lehman
, the firm partnered with Goldman, Sachs & Co.
, to bring the General Cigar Co. to market, followed closely by Sears, Roebuck and Company
. During the following two decades, almost one hundred new issues were underwritten by Lehman, many times in conjunction with Goldman, Sachs. Among these were F.W. Woolworth Company, May Department Stores Company, Gimbel Brothers, Inc.
, R.H. Macy & Company
, The Studebaker Corporation
, the B.F. Goodrich Co.
and Endicott Johnson Corporation
.
in Europe, and Jacob Schiff
, of Kuhn, Loeb & Co.
in New York City, made the claims of anti-Semites believable to some.
The Morgan Bonds scandal injected populist anti-Semitism into the 1896 presidential campaign
. It was disclosed that President Grover Cleveland
had sold bonds to a syndicate which included J. P. Morgan
and the Rothschilds house
, bonds which that syndicate was now selling for a profit, the Populists used it as an opportunity to uphold their view of history, and prove to the nation that Washington and Wall Street were in the hands of the international Jewish banking houses.
Another focus of anti-Semitic feeling was the allegation that Jews were at the center of an international conspiracy to fix the currency and thus the economy to a single gold standard.
Jacob Schiff
was perhaps the most influential Jewish banker in the United States at the end of the nineteenth century. He was president of Kuhn Loeb and financed railroads such as the Pennsylvania Railroad
and the Louisville and Nashville Railroad
, and he took part in the reorganization of the Baltimore & Ohio Railroad in 1896-99, and at various times aided the Westinghouse
Electric Company, and the Western Union Telegraph Company.
unanimously determined that a small cabal
of financiers had gained consolidated control of numerous industries through the abuse of the public trust in the United States. The chair of the House Committee on Banking and Currency, Representative Arsène Pujo
, (D
–La.
7th
) convened a special committee to investigate a "money trust", the de facto monopoly of Morgan and New York's other most powerful bankers. The committee issued a scathing report on the banking trade, and found that the officers of J.P. Morgan & Co.
also sat on the boards of directors of 112 corporations with a market capitalization of $22.5 billion (the total capitalization of the New York Stock Exchange
was then estimated at $26.5 billion).
Attorney Samuel Untermyer who headed the 1913 Pujo Money Trust Investigation Committee to investigate money trusts defined a money trust to George Baker during the Pujo hearings; "We define a money trust as an established identity and community of interest between a few leaders of finance, which has been created and is held together through stock-holding, interlocking directorates, and other forms of domination over banks, trust companies, railroads, public service and industrial corporations, and which has resulted in vast and growing concentration and control of money and credits in the hands of a few men".
The Pujo Committee Report concluded that a community of influential financial leaders had gained control of major manufacturing, transportation, mining, telecommunications and financial markets of the United States. The report revealed that no less than eighteen different major financial corporations were under control of a cartel led by J.P Morgan, George F Baker and James Stillman. These three men, through the resources of seven banks and trust companies (Banker’s Trust Co., Guaranty Trust Co., Astor Trust Co., National Bank of Commerce, Liberty National Bank, Chase National Bank, Farmer’s Loan and Trust Co.) controlled an estimated $2.1 billion. The report revealed that a handful of men held manipulative control of the New York Stock Exchange and attempted to evade interstate trade laws.
The Pujo Report singled out individual bankers including Paul Warburg
, Jacob H. Schiff, Felix M. Warburg
, Frank E. Peabody, William Rockefeller
and Benjamin Strong, Jr.
. The report identified over $22 billion in resources and capitalization controlled through 341 directorships held in 112 corporations by members of the empire headed by J.P. Morgan.
The findings of the committee inspired public support for ratification of the Sixteenth Amendment
in 1913, passage of the Federal Reserve Act
that same year, and passage of the Clayton Antitrust Act
in 1914. They were also widely publicized in the Louis Brandeis
book, Others People's Money--and How the Bankers Use It.
took immediate steps to pass legislation to respond to the Great Depression
. A major component of Roosevelt's New Deal
was reform of the nation's banking system.
and investment banking). In order to comply with the new regulation, most large banks split into separate entities. For example, JP Morgan split into three entities: JP Morgan continued to operate as a commercial bank, Morgan Stanley was formed to operate as an investment bank, and Morgan Grenfell operated as a British merchant bank.
in the aftermath of the stock market crash of 1929 and during the ensuing Great Depression
. Legislated pursuant to the interstate commerce clause of the Constitution, it requires that any offer or sale of securities using the means and instrumentalities of interstate commerce be registered pursuant to the 1933 Act, unless an exemption from registration exists under the law.
The 1933 Act was the first major federal legislation to regulate the offer and sale of securities. Prior to the Act, regulation of securities was chiefly governed by state laws, commonly referred to as blue sky law
s. When Congress enacted the 1933 Act, it left in place a patchwork of existing state securities laws to supplement federal laws in part because there were questions as to the constitutionality of federal legislation.
is a law governing the secondary trading
of securities (stock
s, bonds
, and debenture
s) in the United States of America. It was a sweeping piece of legislation. The Act and related statutes form the basis of regulation of the financial markets and their participants in the United States. The 1934 Act also established the Securities and Exchange Commission (SEC), the agency primarily responsible for enforcement of United States federal securities law.
was to drive investment banks out of corporate reorganizations.
, head of the high-yield bond department at Drexel Burnham Lambert
, popularized the use of high yield debt (also known as junk bonds) in corporate finance, especially in mergers and acquisitions. This new source of capital sparked an explosion in leveraged buyouts and hostile takeovers.
The repeal of the Glass–Steagall Act of 1933 effectively removed the separation that previously existed between Wall Street investment banks and depository banks. This repeal directly contributed to the severity of the Financial crisis of 2007–2010.
of debt securitization. Previously, investment banks had assisted lenders in raising more lending funds and having the ability to offer longer term fixed interest rates by converting lenders' outstanding loans into bonds. For example, a mortgage lender would make a house loan, and then use the investment bank to sell bonds to fund the debt, the money from the sale of the bonds can be used to make new loans, while the lender accepts loan payments and passes the payments on to the bondholders. This process is called securitization. However, lenders have begun to securitize loans themselves, especially in the areas of mortgage loans. Because of this, and because of the fear that this will continue, many investment banks have focused on becoming lenders themselves, making loans with the goal of securitizing them. In fact, in the areas of commercial mortgages, many investment banks lend at loss leader interest rates in order to make money securitizing the loans, causing them to be a very popular financing option for commercial property investors and developers. Securitized house loans may have exacerbated the subprime mortgage crisis
beginning in 2007, by making risky loans less apparent to investors.
of the investment bank no longer worked without the regulation imposed on it by Glass-Steagall. Once Robert Rubin
, a former co-chairman of Goldman Sachs
became part of the Clinton
administration and deregulated banks, the previous conservatism of underwriting established companies and seeking long-term gains was replaced by lower standards and short-term profit. Formerly, the guidelines said that in order to take a company public, it had to be in business for a minimum of five years and it had to show profitability for three consecutive years. After deregulation, those standards were gone, but small investors did not grasp the full impact of the change.
Investment banks Bear Stearns
, founded in 1923 and Lehman Brothers
, over 100 years old, collapsed; Merrill Lynch
was acquired by Bank of America, which remained in trouble, as didGoldman Sachs
and Morgan Stanley
. The ensuing financial crisis of 2008 saw Goldman Sachs
and Morgan Stanley
"abandon their status as investment banks" by converting themselves into "traditional bank holding companies", thereby making themselves eligible to receive billions of dollars each in emergency taxpayer-funded assistance. By making this change, referred to as a technicality, banks would be more tightly regulated. Initially, banks received part of a $700 billion Troubled Asset Relief Program (TARP) intended to stabilize the economy and thaw the frozen credit markets. Eventually, taxpayer assistance to banks reached nearly $13 trillion dollars, most without much scrutiny, lending did not increase and credit markets remained frozen.
A number of former Goldman-Sachs top executives, such as Henry Paulson
and Ed Liddy moved to high-level positions in government and oversaw the controversial taxpayer-funded bank bailout. The TARP Oversight Report released by the Congressional Oversight Panel found, however, that the bailout tended to encourage risky behavior and "corrupt[ed] the fundamental tenets of a market economy
".
Under threat of a subpoena
by Senator Chuck Grassley
, Goldman Sachs revealed that through TARP bailout of AIG
, Goldman received $12.9 billion in taxpayer aid (some through AIG), $4.3 billion of which was then paid out to 32 entities, including many overseas banks, hedge funds and pensions. The same year it received $10 billion in aid from the government, it also paid out multi-million dollar bonuses to 603 employees and hundreds more received million-dollar bonuses. The total paid in bonuses was $4.82 billion.
Morgan Stanley received $10 billion in TARP funds and paid out $4.475 billion in bonuses. Of those, 428 people received more than a million dollars and of those, 189 received more than $2 million.
, that Jews control Wall Street, and that Jews control the United States Federal Reserve. The ADL notes that these canards can be traced back to the prevalence of Jews in the money-lending profession
in Europe during the Middle Ages, due to a prohibition against Christians in that profession. The Protocols of the Elders of Zion repeated a number of these canards.
Jay Cooke
Jay Cooke was an American financier. Cooke and his firm Jay Cooke & Company were most notable for their role in financing the Union's war effort during the American Civil War...
established the first modern American investment bank
Investment banking
An investment bank is a financial institution that assists individuals, corporations and governments in raising capital by underwriting and/or acting as the client's agent in the issuance of securities...
during the Civil War era. However, private banks had been providing investment banking functions since the beginning of the nineteenth century and many of these evolved into investment banks in the post-bellum era. However, the evolution of firms into investment banks did not follow a single trajectory. For example, some currency brokers such as Prime, Ward and King and John E. Thayer and Brother moved from foreign exchange operations to become private banks, taking on some investment bank functions. Other investment banks evolved from mercantile firms such as Thomas Biddle and Co. and Alexander Brothers.
Civil War
During the Civil War, banking houses were syndicated to meet the federal government's need for money to fund its war efforts. Jay CookeJay Cooke
Jay Cooke was an American financier. Cooke and his firm Jay Cooke & Company were most notable for their role in financing the Union's war effort during the American Civil War...
launched the first mass securities selling operation in U.S. history employing thousands of salesmen to float what ultimately amounted to $830 million worth of government bonds to a wide group of investors. Cooke then reached out to the general public, acting as an agent of the Treasury Department, personally led a war bond drive that netted approximately $1.5 billion for Treasury.
Post-Civil War era
The market for financial services evolved dramatically in the post-Civil War era. One of the most significant changes was the emergence of "active investment banking" in which investment bankers influenced the management of client companies through sitting on the finance committees and even directly on the board of directors of those companies.Surging demand for capital
Lance Davis has demonstrated that the process of capital formation in the nineteenth century was markedly different between the British capital market and the American capital market. British industrialists were readily able to satisfy their need for capital by tapping a vast source of international capital through British banks such as Westminster's, Lloyds and Barclays. In contrast, the dramatic growth of the United States created capital requirements that far outstripped the limited capital resources of American banks. Investment banking in the United States emerged to serve the expansion of railroads, mining companies, and heavy industry. Unlike commercial banks, investment banks were not authorized to issue notes or accept deposits. Instead, they served as brokers or intermediaries, bringing together investors with capital and the firms that needed that capital.Gold standard
The Fourth Coinage Act was enacted by the United States CongressUnited States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....
in 1873 and embraced the gold standard
Gold standard
The gold standard is a monetary system in which the standard economic unit of account is a fixed mass of gold. There are distinct kinds of gold standard...
and demonetized silver
Silver
Silver is a metallic chemical element with the chemical symbol Ag and atomic number 47. A soft, white, lustrous transition metal, it has the highest electrical conductivity of any element and the highest thermal conductivity of any metal...
.Gold became the only metallic standard in the United States, hence putting the United States de facto
De facto
De facto is a Latin expression that means "concerning fact." In law, it often means "in practice but not necessarily ordained by law" or "in practice or actuality, but not officially established." It is commonly used in contrast to de jure when referring to matters of law, governance, or...
on the gold standard
Gold standard
The gold standard is a monetary system in which the standard economic unit of account is a fixed mass of gold. There are distinct kinds of gold standard...
.
Late nineteenth century
From the Panic of 1873Panic of 1873
The Panic of 1873 triggered a severe international economic depression in both Europe and the United States that lasted until 1879, and even longer in some countries. The depression was known as the Great Depression until the 1930s, but is now known as the Long Depression...
until the first decade of the 20th century, the private investment banking industry was dominated by two distinct groups: the German-Jewish immigrant bankers and the so-called "Yankee houses". Despite this ostensible ethnic difference, the two groups shared a similar economic structure. With one exception, the Yankee houses had ties with expatriate Americans who had become merchant bankers in London. Similarly, almost all of the German-Jewish houses had ties with German-Jewish merchant bankers in London. The one exception was Kuhn, Loeb which was tied to European sources of capital through the German investment banking community.
Jewish investment banks
Jewish banking houses were instrumental to the process of capital formation in the United States in the late 19th and early 20th century.Modern banking in Europe and the United States was influenced by Jewish financiers, such as the Rothschild family
Rothschild family
The Rothschild family , known as The House of Rothschild, or more simply as the Rothschilds, is a Jewish-German family that established European banking and finance houses starting in the late 18th century...
and Warburg family
Warburg family
The Warburg family is a financial dynasty of German Jewish origin, noted for their accomplishments in physics, classical music, art history, pharmacology, physiology, finance, private equity and philanthropy. They are believed to be descended from the Venetian Jewish del Banco family, in the early...
, and Jews were major contributors to the establishment of important investment banks on Wall Street
Wall Street
Wall Street refers to the financial district of New York City, named after and centered on the eight-block-long street running from Broadway to South Street on the East River in Lower Manhattan. Over time, the term has become a metonym for the financial markets of the United States as a whole, or...
.
In the middle of the nineteenth century, a number of German Jews founded investment banking firms which later became mainstays of the industry. Most prominent Jewish banks in the United States were investment banks, rather than commercial bank
Commercial bank
After the implementation of the Glass–Steagall Act, the U.S. Congress required that banks engage only in banking activities, whereas investment banks were limited to capital market activities. As the two no longer have to be under separate ownership under U.S...
s. Jonathan Knee postulates that Jews were forced to focus on the development of investment banks because they were excluded from the commercial banking sector.
In many cases, the efforts of Jewish immigrants to start banks was enabled due to the substantial support of their Jewish banking connections in Europe.
Several major banks were started following the mid 1800s by Jews, including Goldman Sachs
Goldman Sachs
The Goldman Sachs Group, Inc. is an American multinational bulge bracket investment banking and securities firm that engages in global investment banking, securities, investment management, and other financial services primarily with institutional clients...
(founded by Samuel Sachs
Samuel Sachs
Samuel Sachs was an American investment banker. He was born in the state of Maryland to Jewish immigrants from Bavaria, Germany. Sachs, along with his longtime friend Philip Lehman of Lehman Brothers, pioneered the issuing of stock as a way for new companies to raise funds...
and Marcus Goldman
Marcus Goldman
Marcus Goldman was a German-born American businessman and entrepreneur. He was born in Trappstadt, Germany and emigrated to the United States in 1848...
), Kuhn Loeb (Solomon Loeb
Solomon Loeb
Solomon Loeb was a German American merchant in textiles and later a banker with Kuhn, Loeb & Co.. His father, a devout Jew, had been a small corn- and wine-dealer in Worms, which belonged to the Grand Duchy of Hesse and by Rhine. S. Loeb emigrated to the United States in 1849. He settled in...
and Jacob H. Schiff), Lehman Brothers
Lehman Brothers
Lehman Brothers Holdings Inc. was a global financial services firm. Before declaring bankruptcy in 2008, Lehman was the fourth largest investment bank in the USA , doing business in investment banking, equity and fixed-income sales and trading Lehman Brothers Holdings Inc. (former NYSE ticker...
(Henry Lehman
Henry Lehman
Henry Lehman was a German-American businessman and the founder of Lehman Brothers financial services, which declared bankruptcy in 2008....
), Salomon Brothers
Salomon Brothers
Salomon Brothers was a bulge bracket, Wall Street investment bank. Founded in 1910 by three brothers along with a clerk named Ben Levy, it remained a partnership until the early 1980s, when it was acquired by the commodity trading firm Phibro Corporation and then became Salomon Inc. Eventually...
, and Bache & Co.
Bache & Co.
Bache & Company was a securities deim that provided stock brokerage and investment banking services. The firm, which was founded in 1879, was based in New York, New York....
(founded by Jules Bache
Jules Bache
Jules Semon Bache was a German-born American banker, art collector and philanthropist.-Biography:Born in Germany, as a young boy his family emigrated to the United States, settling in New York City. In 1881, he started work as a cashier at Leopold Cahn & Co., a stockbrokerage firm founded by his...
).
The firm of Kuhn, Loeb & Co. played a prominent role in the area of railway finance.
In the late 1860s, The Seligman family
J. & W. Seligman & Co.
J. & W. Seligman & Co., founded in 1846, was a prominent U.S. investment bank c. 1860s–1920s until the divestiture of its investment banking arm in the aftermath of the Glass–Steagall Act. The firm was involved in the financing of several major U.S. railroads in the 1870s and the construction of...
transitioned from merchandising to banking, setting up operations in New York, St. Louis, and Philadelphia as well as Frankfurt, Germany, London and Paris that gave European investors an opportunity to buy American government and railroad bonds. In the 1880s the firm provided financing for French efforts to build a canal in Panama as well as the subsequent American endeavor. In the 1890s J.& W. Seligman & Co. Inc. underwrote the securities of newly formed trusts, participated in stock and bond issues in the railroad and steel and wire industries, and invested in Russia and Peru, and in American in shipbuilding, bridges, bicycles, mining, and other enterprises. In 1910 William C. Durant
William C. Durant
William Crapo "Billy" Durant was a leading pioneer of the United States automobile industry, the founder of General Motors and Chevrolet who created the system of multi-brand holding companies with different lines of cars....
of the fledgling General Motors Corporation gave control of his company to the Seligmans and Lee, Higginson & Co. in return for underwriting $15 million worth of corporate notes.
Lehman Brothers
Lehman Brothers
Lehman Brothers Holdings Inc. was a global financial services firm. Before declaring bankruptcy in 2008, Lehman was the fourth largest investment bank in the USA , doing business in investment banking, equity and fixed-income sales and trading Lehman Brothers Holdings Inc. (former NYSE ticker...
entered investment banking in the 1880s, becoming a member of the Coffee Exchange
New York Board of Trade
The New York Board of Trade , renamed ICE Futures US in September of 2007, is a wholly owned subsidiary of IntercontinentalExchange . It is a physical commodity futures exchange located in New York City. It originated in 1870 as the New York Cotton Exchange...
as early as 1883 and finally the New York Stock Exchange
New York Stock Exchange
The New York Stock Exchange is a stock exchange located at 11 Wall Street in Lower Manhattan, New York City, USA. It is by far the world's largest stock exchange by market capitalization of its listed companies at 13.39 trillion as of Dec 2010...
in 1887. In 1899, it underwrote
Underwriting
Underwriting refers to the process that a large financial service provider uses to assess the eligibility of a customer to receive their products . The name derives from the Lloyd's of London insurance market...
its first public offering, the preferred and common stock of the International Steam Pump Company. Despite the offering of International Steam, the firm's real shift from being a commodities house to a house of issue did not begin until 1906. In that year, under Philip Lehman
Philip Lehman
Philip Lehman was a Jewish-American investment banker. Born in New York City to Emanuel and Pauline , his father, was a co-founder of investment bank, Lehman Brothers. Philip became a partner in the family-owned firm in 1887 and was the firm's managing partner from 1901 to 1925...
, the firm partnered with Goldman, Sachs & Co.
Goldman Sachs
The Goldman Sachs Group, Inc. is an American multinational bulge bracket investment banking and securities firm that engages in global investment banking, securities, investment management, and other financial services primarily with institutional clients...
, to bring the General Cigar Co. to market, followed closely by Sears, Roebuck and Company
Sears, Roebuck and Company
Sears, officially named Sears, Roebuck and Co., is an American chain of department stores which was founded by Richard Warren Sears and Alvah Curtis Roebuck in the late 19th century...
. During the following two decades, almost one hundred new issues were underwritten by Lehman, many times in conjunction with Goldman, Sachs. Among these were F.W. Woolworth Company, May Department Stores Company, Gimbel Brothers, Inc.
Gimbel's
Gimbel Brothers was an American department store corporation from 1887 through the late 20th century. The store is known for creating the Gimbels Thanksgiving Day Parade, the oldest parade in the country. Gimbels was also once the largest department store chain in the country...
, R.H. Macy & Company
Macy's
Macy's is a U.S. chain of mid-to-high range department stores. In addition to its flagship Herald Square location in New York City, the company operates over 800 stores in the United States...
, The Studebaker Corporation
Studebaker
Studebaker Corporation was a United States wagon and automobile manufacturer based in South Bend, Indiana. Founded in 1852 and incorporated in 1868 under the name of the Studebaker Brothers Manufacturing Company, the company was originally a producer of wagons for farmers, miners, and the...
, the B.F. Goodrich Co.
Goodrich Corporation
The Goodrich Corporation , formerly the B.F. Goodrich Company, is an American aerospace manufacturing company based in Charlotte, North Carolina. Founded in Akron, Ohio in 1870 as Goodrich, Tew & Co. by Dr. Benjamin Franklin Goodrich. The company name was changed to the "B.F...
and Endicott Johnson Corporation
Endicott Johnson Corporation
The Endicott-Johnson Shoe Company was a prosperous manufacturer of shoes based in New York's Southern Tier, with factories mostly located in the area's Triple Cities of Binghamton, Johnson City, and Endicott...
.
The "Yankee houses"
The history of the "Yankee houses" can be traced to the decision of Junius Spencer Morgan to become a partner at George Peabody & Company in London. When Peabody retired in 1864, Morgan became the senior partner and the firm was renamed "J.S. Morgan & Company". Junius' son, John Pierpont Morgan entered the business and ultimately became a partner at what was to become Drexel, Morgan & Co., the most important investment bank in American history. By 1900, J.P. Morgan was the most important investment banker in the United States and "the dominant figure in all the Drexel banks."Populist targeting of Jews
Beginning in the early 1880s, declining farm prices also prompted elements of the Populist movement to blame the perceived evils of capitalism and industrialism on Jews because of their alleged racial/religious inclination for financial exploitation and, more specifically, because of the alleged financial manipulations of Jewish financiers such as the Rothschilds. Although Jews played only a minor role in the nation's commercial banking system, the prominence of Jewish investment bankers such as the RothschildsRothschild family
The Rothschild family , known as The House of Rothschild, or more simply as the Rothschilds, is a Jewish-German family that established European banking and finance houses starting in the late 18th century...
in Europe, and Jacob Schiff
Jacob Schiff
Jacob Henry Schiff, born Jakob Heinrich Schiff was a German-born Jewish American banker and philanthropist, who helped finance, among many other things, the Japanese military efforts against Tsarist Russia in the Russo-Japanese War.From his base on Wall Street, he was the foremost Jewish leader...
, of Kuhn, Loeb & Co.
Kuhn, Loeb & Co.
Kuhn, Loeb & Co. was a bulge bracket, investment bank founded in 1867 by Abraham Kuhn and Solomon Loeb. Under the leadership of Jacob H. Schiff, it grew to be one of the most influential investment banks in the late 19th and early 20th centuries, financing America's expanding railways and growth...
in New York City, made the claims of anti-Semites believable to some.
The Morgan Bonds scandal injected populist anti-Semitism into the 1896 presidential campaign
United States presidential election, 1896
The United States presidential election held on November 3, 1896, saw Republican William McKinley defeat Democrat William Jennings Bryan in a campaign considered by political scientists to be one of the most dramatic and complex in American history....
. It was disclosed that President Grover Cleveland
Grover Cleveland
Stephen Grover Cleveland was the 22nd and 24th president of the United States. Cleveland is the only president to serve two non-consecutive terms and therefore is the only individual to be counted twice in the numbering of the presidents...
had sold bonds to a syndicate which included J. P. Morgan
J. P. Morgan
John Pierpont Morgan was an American financier, banker and art collector who dominated corporate finance and industrial consolidation during his time. In 1892 Morgan arranged the merger of Edison General Electric and Thomson-Houston Electric Company to form General Electric...
and the Rothschilds house
Rothschild family
The Rothschild family , known as The House of Rothschild, or more simply as the Rothschilds, is a Jewish-German family that established European banking and finance houses starting in the late 18th century...
, bonds which that syndicate was now selling for a profit, the Populists used it as an opportunity to uphold their view of history, and prove to the nation that Washington and Wall Street were in the hands of the international Jewish banking houses.
Another focus of anti-Semitic feeling was the allegation that Jews were at the center of an international conspiracy to fix the currency and thus the economy to a single gold standard.
Jacob Schiff
Jacob Schiff
Jacob Henry Schiff, born Jakob Heinrich Schiff was a German-born Jewish American banker and philanthropist, who helped finance, among many other things, the Japanese military efforts against Tsarist Russia in the Russo-Japanese War.From his base on Wall Street, he was the foremost Jewish leader...
was perhaps the most influential Jewish banker in the United States at the end of the nineteenth century. He was president of Kuhn Loeb and financed railroads such as the Pennsylvania Railroad
Pennsylvania Railroad
The Pennsylvania Railroad was an American Class I railroad, founded in 1846. Commonly referred to as the "Pennsy", the PRR was headquartered in Philadelphia, Pennsylvania....
and the Louisville and Nashville Railroad
Louisville and Nashville Railroad
The Louisville and Nashville Railroad was a Class I railroad that operated freight and passenger services in the southeast United States.Chartered by the state of Kentucky in 1850, the L&N, as it was generally known, grew into one of the great success stories of American business...
, and he took part in the reorganization of the Baltimore & Ohio Railroad in 1896-99, and at various times aided the Westinghouse
Westinghouse Electric (1886)
Westinghouse Electric was an American manufacturing company. It was founded in 1886 as Westinghouse Electric Company and later renamed Westinghouse Electric Corporation by George Westinghouse. The company purchased CBS in 1995 and became CBS Corporation in 1997...
Electric Company, and the Western Union Telegraph Company.
Early 20th century
During the period from 1890–1925, the investment banking industry was highly concentrated and dominated by an oligopoly that consisted of JP Morgan & Co.; Kuhn, Loeb & Co.; Brown Brothers; and Kidder, Peabody & Co. There was no legal requirement to separate the operations of commercial and investment banks; as a result deposits from the commercial banking side of the business constituted an in-house supply of capital that could be used to fund the underwriting business of the investment banking side.The Panic of 1907 and the Pujo Committee
In 1913, the Pujo CommitteePujo Committee
The Pujo Committee was a United States congressional subcommittee which was formed between May 1912 and January 1913 to investigate the so-called "money trust", a community of Wall Street bankers and financiers that exerted powerful control over the nation's finances. After a resolution introduced...
unanimously determined that a small cabal
Cabal
A cabal is a group of people united in some close design together, usually to promote their private views and/or interests in a church, state, or other community, often by intrigue...
of financiers had gained consolidated control of numerous industries through the abuse of the public trust in the United States. The chair of the House Committee on Banking and Currency, Representative Arsène Pujo
Arsène Pujo
Arsène Paulin Pujo , was a member of the United States House of Representatives best known for chairing the "Pujo Committee", which sought to expose an anticompetitive conspiracy among some of the nation's most powerful financial interests.-Biography:Pujo practiced law in Louisiana, and was elected...
, (D
Democratic Party (United States)
The Democratic Party is one of two major contemporary political parties in the United States, along with the Republican Party. The party's socially liberal and progressive platform is largely considered center-left in the U.S. political spectrum. The party has the lengthiest record of continuous...
–La.
Louisiana
Louisiana is a state located in the southern region of the United States of America. Its capital is Baton Rouge and largest city is New Orleans. Louisiana is the only state in the U.S. with political subdivisions termed parishes, which are local governments equivalent to counties...
7th
Louisiana's 7th congressional district
Louisiana's 7th congressional district is a congressional district in the U.S. state of Louisiana located in the southwestern part of the state. It contains the cities of Crowley, Eunice, Jennings, Lafayette, Lake Charles, Opelousas, Sulphur and Ville Platte....
) convened a special committee to investigate a "money trust", the de facto monopoly of Morgan and New York's other most powerful bankers. The committee issued a scathing report on the banking trade, and found that the officers of J.P. Morgan & Co.
J.P. Morgan & Co.
J.P. Morgan & Co. was a commercial and investment banking institution based in the United States founded by J. Pierpont Morgan and commonly known as the House of Morgan or simply Morgan. Today, J.P...
also sat on the boards of directors of 112 corporations with a market capitalization of $22.5 billion (the total capitalization of the New York Stock Exchange
New York Stock Exchange
The New York Stock Exchange is a stock exchange located at 11 Wall Street in Lower Manhattan, New York City, USA. It is by far the world's largest stock exchange by market capitalization of its listed companies at 13.39 trillion as of Dec 2010...
was then estimated at $26.5 billion).
Attorney Samuel Untermyer who headed the 1913 Pujo Money Trust Investigation Committee to investigate money trusts defined a money trust to George Baker during the Pujo hearings; "We define a money trust as an established identity and community of interest between a few leaders of finance, which has been created and is held together through stock-holding, interlocking directorates, and other forms of domination over banks, trust companies, railroads, public service and industrial corporations, and which has resulted in vast and growing concentration and control of money and credits in the hands of a few men".
The Pujo Committee Report concluded that a community of influential financial leaders had gained control of major manufacturing, transportation, mining, telecommunications and financial markets of the United States. The report revealed that no less than eighteen different major financial corporations were under control of a cartel led by J.P Morgan, George F Baker and James Stillman. These three men, through the resources of seven banks and trust companies (Banker’s Trust Co., Guaranty Trust Co., Astor Trust Co., National Bank of Commerce, Liberty National Bank, Chase National Bank, Farmer’s Loan and Trust Co.) controlled an estimated $2.1 billion. The report revealed that a handful of men held manipulative control of the New York Stock Exchange and attempted to evade interstate trade laws.
The Pujo Report singled out individual bankers including Paul Warburg
Paul Warburg
Paul Moritz Warburg was a German-born American banker and early advocate of the U.S. Federal Reserve system.- Early life :...
, Jacob H. Schiff, Felix M. Warburg
Felix M. Warburg
Felix Moritz Warburg was a member of the Warburg banking family of Hamburg, Germany.- Biography :He was a grandson of Moses Marcus Warburg, one of the founders of the bank, M. M. Warburg . Felix Warburg was a partner in Kuhn, Loeb & Co.. He is known as a leading advocate of a Federal Reserve...
, Frank E. Peabody, William Rockefeller
William Rockefeller
William Avery Rockefeller, Jr. , American financier, was a co-founder with his older brother John D. Rockefeller of the prominent United States Rockefeller family. He was the son of William Avery Rockefeller, Sr. and Eliza Rockefeller.-Youth, education:Rockefeller was born in Richford, New York,...
and Benjamin Strong, Jr.
Benjamin Strong, Jr.
Benjamin Strong, Jr. was an American banker. He served as Governor of the Federal Reserve Bank of New York for 14 years until his death...
. The report identified over $22 billion in resources and capitalization controlled through 341 directorships held in 112 corporations by members of the empire headed by J.P. Morgan.
The findings of the committee inspired public support for ratification of the Sixteenth Amendment
Sixteenth Amendment to the United States Constitution
The Sixteenth Amendment to the United States Constitution allows the Congress to levy an income tax without apportioning it among the states or basing it on Census results...
in 1913, passage of the Federal Reserve Act
Federal Reserve Act
The Federal Reserve Act is an Act of Congress that created and set up the Federal Reserve System, the central banking system of the United States of America, and granted it the legal authority to issue Federal Reserve Notes and Federal Reserve Bank Notes as legal tender...
that same year, and passage of the Clayton Antitrust Act
Clayton Antitrust Act
The Clayton Antitrust Act of 1914 , was enacted in the United States to add further substance to the U.S. antitrust law regime by seeking to prevent anticompetitive practices in their incipiency. That regime started with the Sherman Antitrust Act of 1890, the first Federal law outlawing practices...
in 1914. They were also widely publicized in the Louis Brandeis
Louis Brandeis
Louis Dembitz Brandeis ; November 13, 1856 – October 5, 1941) was an Associate Justice on the Supreme Court of the United States from 1916 to 1939.He was born in Louisville, Kentucky, to Jewish immigrant parents who raised him in a secular mode...
book, Others People's Money--and How the Bankers Use It.
Diminution of the Jewish presence
After the death of Jacob Schiff in 1921, many banks which had their roots in the German-Jewish immigrant community began to lose their Jewish character. They no longer filled the ranks of management nor sought their capital needs from within the family or the "crowd". By the 1930s, Jewish presence in the private investment banking had diminished dramatically.New Deal-era reforms
By the beginning of 1933, the banking system in the United States had effectively ceased to function. The incoming Roosevelt administration and the incoming Congress73rd United States Congress
The Seventy-third United States Congress was a meeting of the legislative branch of the United States federal government, composed of the United States Senate and the United States House of Representatives. It met in Washington, DC from March 4, 1933 to January 3, 1935, during the first two years...
took immediate steps to pass legislation to respond to the Great Depression
Great Depression in the United States
The Great Depression began with the Wall Street Crash of October, 1929 and rapidly spread worldwide. The market crash marked the beginning of a decade of high unemployment, poverty, low profits, deflation, plunging farm incomes, and lost opportunities for economic growth and personal advancement...
. A major component of Roosevelt's New Deal
New Deal
The New Deal was a series of economic programs implemented in the United States between 1933 and 1936. They were passed by the U.S. Congress during the first term of President Franklin D. Roosevelt. The programs were Roosevelt's responses to the Great Depression, and focused on what historians call...
was reform of the nation's banking system.
Glass-Steagall Act of 1933
The Glass–Steagall Act of 1933 was passed in reaction to the collapse of a large portion of the American commercial banking system in early 1933. One of its provisions introduced the separation of bank types according to their business (commercialCommercial bank
After the implementation of the Glass–Steagall Act, the U.S. Congress required that banks engage only in banking activities, whereas investment banks were limited to capital market activities. As the two no longer have to be under separate ownership under U.S...
and investment banking). In order to comply with the new regulation, most large banks split into separate entities. For example, JP Morgan split into three entities: JP Morgan continued to operate as a commercial bank, Morgan Stanley was formed to operate as an investment bank, and Morgan Grenfell operated as a British merchant bank.
Securities Act of 1933
Congress enacted the Securities Act of 1933Securities Act of 1933
Congress enacted the Securities Act of 1933 , in the aftermath of the stock market crash of 1929 and during the ensuing Great Depression...
in the aftermath of the stock market crash of 1929 and during the ensuing Great Depression
Great Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...
. Legislated pursuant to the interstate commerce clause of the Constitution, it requires that any offer or sale of securities using the means and instrumentalities of interstate commerce be registered pursuant to the 1933 Act, unless an exemption from registration exists under the law.
The 1933 Act was the first major federal legislation to regulate the offer and sale of securities. Prior to the Act, regulation of securities was chiefly governed by state laws, commonly referred to as blue sky law
Blue sky law
A blue sky law is a state law in the United States that regulates the offering and sale of securities to protect the public from fraud. Though the specific provisions of these laws vary among states, they all require the registration of all securities offerings and sales, as well as of stock...
s. When Congress enacted the 1933 Act, it left in place a patchwork of existing state securities laws to supplement federal laws in part because there were questions as to the constitutionality of federal legislation.
Securities Exchange Act of 1934
The Securities Exchange Act of 1934Securities Exchange Act of 1934
The Securities Exchange Act of 1934 , , codified at et seq., is a law governing the secondary trading of securities in the United States of America. It was a sweeping piece of legislation...
is a law governing the secondary trading
Secondary market
The page applies to the finanical term; For the merchandising concept, see Aftermarket .The secondary market, also called aftermarket, is the financial market where previously issued securities and financial instruments such as stock, bonds, options, and futures are bought and sold....
of securities (stock
Stock
The capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors...
s, bonds
Bond (finance)
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...
, and debenture
Debenture
A debenture is a document that either creates a debt or acknowledges it. In corporate finance, the term is used for a medium- to long-term debt instrument used by large companies to borrow money. In some countries the term is used interchangeably with bond, loan stock or note...
s) in the United States of America. It was a sweeping piece of legislation. The Act and related statutes form the basis of regulation of the financial markets and their participants in the United States. The 1934 Act also established the Securities and Exchange Commission (SEC), the agency primarily responsible for enforcement of United States federal securities law.
Chandler Act of 1938
One effect of the Bankruptcy Act of 1938Bankruptcy Act of 1938
The United States Bankruptcy Act of 1938, known as the Chandler Act, expanded voluntary access to the bankruptcy system and made voluntary petitions more attractive to debtors. The Chandler Act gave authority to the Securities and Exchange Commission in the administration of bankruptcy filings...
was to drive investment banks out of corporate reorganizations.
Era of the dealmakers
After the reforms of the New Deal era, the major Wall Street investment banks focused on dealmaking, serving as advisers to corporation on mergers and acquisitions as well as public offerings of securities.Transition from dealmaking to trading
In the 1980s, the emphasis on dealmaking shifted to a new focus on trading, Firms such as Salomon Brothers, Merrill Lynch and Drexel Burnham Lambert became prominent as investment banks earned an increasing amount of their profits from trading for their own account. Advances in computing technology enabled banks to use sophisticated mathematical-models to develop and execute trading strategies. The high frequency and large volume of trades enabled them to generate a profit by taking advantages of small changes in market conditions.Junk bonds and the leveraged buyout
In the 1980s, Michael MilkenMichael Milken
Michael Robert Milken is an American business magnate, financier, and philanthropist noted for his role in the development of the market for high-yield bonds during the 1970s and 1980s, for his 1990 guilty plea to felony charges for violating US securities laws, and for his funding of medical...
, head of the high-yield bond department at Drexel Burnham Lambert
Drexel Burnham Lambert
Drexel Burnham Lambert was a major Wall Street investment banking firm, which first rose to prominence and then was forced into bankruptcy in February 1990 by its involvement in illegal activities in the junk bond market, driven by Drexel employee Michael Milken. At its height, it was the...
, popularized the use of high yield debt (also known as junk bonds) in corporate finance, especially in mergers and acquisitions. This new source of capital sparked an explosion in leveraged buyouts and hostile takeovers.
Repeal of the Glass-Steagall Act
Provisions of the Glass-Steagall Act that prohibit a bank holding company from owning other financial companies were repealed on November 12, 1999, by the Gramm–Leach–Bliley Act.The repeal of the Glass–Steagall Act of 1933 effectively removed the separation that previously existed between Wall Street investment banks and depository banks. This repeal directly contributed to the severity of the Financial crisis of 2007–2010.
Vertical integration
In recent years, there has been a move towards vertical integrationVertical integration
In microeconomics and management, the term vertical integration describes a style of management control. Vertically integrated companies in a supply chain are united through a common owner. Usually each member of the supply chain produces a different product or service, and the products combine to...
of debt securitization. Previously, investment banks had assisted lenders in raising more lending funds and having the ability to offer longer term fixed interest rates by converting lenders' outstanding loans into bonds. For example, a mortgage lender would make a house loan, and then use the investment bank to sell bonds to fund the debt, the money from the sale of the bonds can be used to make new loans, while the lender accepts loan payments and passes the payments on to the bondholders. This process is called securitization. However, lenders have begun to securitize loans themselves, especially in the areas of mortgage loans. Because of this, and because of the fear that this will continue, many investment banks have focused on becoming lenders themselves, making loans with the goal of securitizing them. In fact, in the areas of commercial mortgages, many investment banks lend at loss leader interest rates in order to make money securitizing the loans, causing them to be a very popular financing option for commercial property investors and developers. Securitized house loans may have exacerbated the subprime mortgage crisis
Subprime mortgage crisis
The U.S. subprime mortgage crisis was one of the first indicators of the late-2000s financial crisis, characterized by a rise in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages....
beginning in 2007, by making risky loans less apparent to investors.
2008 Financial Crisis
The 2007 credit crisis proved that the business modelBusiness model
A business model describes the rationale of how an organization creates, delivers, and captures value...
of the investment bank no longer worked without the regulation imposed on it by Glass-Steagall. Once Robert Rubin
Robert Rubin
Robert Edward Rubin served as the 70th United States Secretary of the Treasury during both the first and second Clinton administrations. Before his government service, he spent 26 years at Goldman Sachs eventually serving as a member of the Board, and Co-Chairman from 1990-1992...
, a former co-chairman of Goldman Sachs
Goldman Sachs
The Goldman Sachs Group, Inc. is an American multinational bulge bracket investment banking and securities firm that engages in global investment banking, securities, investment management, and other financial services primarily with institutional clients...
became part of the Clinton
Bill Clinton
William Jefferson "Bill" Clinton is an American politician who served as the 42nd President of the United States from 1993 to 2001. Inaugurated at age 46, he was the third-youngest president. He took office at the end of the Cold War, and was the first president of the baby boomer generation...
administration and deregulated banks, the previous conservatism of underwriting established companies and seeking long-term gains was replaced by lower standards and short-term profit. Formerly, the guidelines said that in order to take a company public, it had to be in business for a minimum of five years and it had to show profitability for three consecutive years. After deregulation, those standards were gone, but small investors did not grasp the full impact of the change.
Investment banks Bear Stearns
Bear Stearns
The Bear Stearns Companies, Inc. based in New York City, was a global investment bank and securities trading and brokerage, until its sale to JPMorgan Chase in 2008 during the global financial crisis and recession...
, founded in 1923 and Lehman Brothers
Lehman Brothers
Lehman Brothers Holdings Inc. was a global financial services firm. Before declaring bankruptcy in 2008, Lehman was the fourth largest investment bank in the USA , doing business in investment banking, equity and fixed-income sales and trading Lehman Brothers Holdings Inc. (former NYSE ticker...
, over 100 years old, collapsed; Merrill Lynch
Merrill Lynch
Merrill Lynch is the wealth management division of Bank of America. With over 15,000 financial advisors and $2.2 trillion in client assets it is the world's largest brokerage. Formerly known as Merrill Lynch & Co., Inc., prior to 2009 the firm was publicly owned and traded on the New York...
was acquired by Bank of America, which remained in trouble, as didGoldman Sachs
Goldman Sachs
The Goldman Sachs Group, Inc. is an American multinational bulge bracket investment banking and securities firm that engages in global investment banking, securities, investment management, and other financial services primarily with institutional clients...
and Morgan Stanley
Morgan Stanley
Morgan Stanley is a global financial services firm headquartered in New York City serving a diversified group of corporations, governments, financial institutions, and individuals. Morgan Stanley also operates in 36 countries around the world, with over 600 offices and a workforce of over 60,000....
. The ensuing financial crisis of 2008 saw Goldman Sachs
Goldman Sachs
The Goldman Sachs Group, Inc. is an American multinational bulge bracket investment banking and securities firm that engages in global investment banking, securities, investment management, and other financial services primarily with institutional clients...
and Morgan Stanley
Morgan Stanley
Morgan Stanley is a global financial services firm headquartered in New York City serving a diversified group of corporations, governments, financial institutions, and individuals. Morgan Stanley also operates in 36 countries around the world, with over 600 offices and a workforce of over 60,000....
"abandon their status as investment banks" by converting themselves into "traditional bank holding companies", thereby making themselves eligible to receive billions of dollars each in emergency taxpayer-funded assistance. By making this change, referred to as a technicality, banks would be more tightly regulated. Initially, banks received part of a $700 billion Troubled Asset Relief Program (TARP) intended to stabilize the economy and thaw the frozen credit markets. Eventually, taxpayer assistance to banks reached nearly $13 trillion dollars, most without much scrutiny, lending did not increase and credit markets remained frozen.
A number of former Goldman-Sachs top executives, such as Henry Paulson
Henry Paulson
Henry Merritt "Hank" Paulson, Jr. is an American banker who served as the 74th United States Secretary of the Treasury. He previously served as the Chairman and Chief Executive Officer of Goldman Sachs.-Early life and family:...
and Ed Liddy moved to high-level positions in government and oversaw the controversial taxpayer-funded bank bailout. The TARP Oversight Report released by the Congressional Oversight Panel found, however, that the bailout tended to encourage risky behavior and "corrupt[ed] the fundamental tenets of a market economy
Market economy
A market economy is an economy in which the prices of goods and services are determined in a free price system. This is often contrasted with a state-directed or planned economy. Market economies can range from hypothetically pure laissez-faire variants to an assortment of real-world mixed...
".
Under threat of a subpoena
Subpoena
A subpoena is a writ by a government agency, most often a court, that has authority to compel testimony by a witness or production of evidence under a penalty for failure. There are two common types of subpoena:...
by Senator Chuck Grassley
Chuck Grassley
Charles Ernest "Chuck" Grassley is the senior United States Senator from Iowa . A member of Republican Party, he previously served in the served in the United States House of Representatives and the Iowa state legislature...
, Goldman Sachs revealed that through TARP bailout of AIG
AIG
AIG is American International Group, a major American insurance corporation.AIG may also refer to:* And-inverter graph, a concept in computer theory* Answers in Genesis, a creationist organization in the U.S.* Arta Industrial Group in Iran...
, Goldman received $12.9 billion in taxpayer aid (some through AIG), $4.3 billion of which was then paid out to 32 entities, including many overseas banks, hedge funds and pensions. The same year it received $10 billion in aid from the government, it also paid out multi-million dollar bonuses to 603 employees and hundreds more received million-dollar bonuses. The total paid in bonuses was $4.82 billion.
Morgan Stanley received $10 billion in TARP funds and paid out $4.475 billion in bonuses. Of those, 428 people received more than a million dollars and of those, 189 received more than $2 million.
Antisemitic canards
The prominent role of Jews in European and American finance has led to a number of antisemitic canards related to alleged Jewish control of international finance which have been documented by the Anti Defamation League, including the myth that world banking is dominated by the Rothschild familyRothschild family
The Rothschild family , known as The House of Rothschild, or more simply as the Rothschilds, is a Jewish-German family that established European banking and finance houses starting in the late 18th century...
, that Jews control Wall Street, and that Jews control the United States Federal Reserve. The ADL notes that these canards can be traced back to the prevalence of Jews in the money-lending profession
Antisemitism in Europe (Middle Ages)
Antisemitism was prevalent in the Middle Ages, the period of European history from the 5th century to the 15th century.- Accusations of deicide :In the Middle Ages, religion played a major role in driving antisemitism...
in Europe during the Middle Ages, due to a prohibition against Christians in that profession. The Protocols of the Elders of Zion repeated a number of these canards.
See also
- History of bankingHistory of bankingThe first banks were the merchants of the ancient world that made loans to farmers and traders that carried goods between cities. The first records of such activity dates back to around 2000 BC in Assyria and Babylonia...
- History of banking in the United StatesHistory of banking in the United States-Antebellum history:In the first half of the 19th century, many of the smaller commercial banks within New England were easily chartered as laws allowed to do so...
- History of private equity and venture capitalHistory of private equity and venture capitalThe history of private equity and venture capital and the development of these asset classes has occurred through a series of boom and bust cycles since the middle of the 20th century. Within the broader private equity industry, two distinct sub-industries, leveraged buyouts and venture capital...
Further reading
- Cameron, Rondo. Banking in the Early Stages of Industrialization: A Study in Comparative Economic History (1967)
- Grossman, Richard S. Unsettled Account: The Evolution of Banking in the Industrialized World Since 1800 (Princeton University Press; 2010) 384 pages. Considers how crises, bailouts, mergers, and regulations have shaped the history of banking in Western Europe, the United States, Canada, Japan, and Australia.
- Hammond, BrayBray HammondBray Hammond was an American author and assistant secretary of Board of Governors of the Federal Reserve System between the years of 1944 and 1950.-Authored books:* Sovereignty and an Empty Purse: Banks and Politics in the Civil War...
, Banks and Politics in America, from the Revolution to the Civil WarBanks and Politics in AmericaBanks and Politics in America is a 1957-published book written by Bray Hammond. The book describes the differences in banking and politics in the United States between the American Revolution and the Civil War period. The book was awarded the Pulitzer Prize....
, Princeton : Princeton University Press, 1957. - Rothbard, Murray N., History of Money and Banking in the United States.Full text (510 pages) in pdf format