The Glass-Steagall Act, famed for separating commercial and investment banking, wasn't purely a consumer protection measure. A key motivation was rival banks, like those run by the Rockefellers, lobbying to break up the dominant J.P. Morgan, revealing a backstory of corporate warfare.
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The current capital market structure, with its high fees, delays, and limited access, is a direct result of regulations from the 1930s. These laws created layers of intermediaries to enforce trust, baking in complexity and rent-seeking by design. This historical context explains why the system is ripe for disruption by more efficient technologies.
As traditional economic-based antitrust enforcement weakens, a new gatekeeper for M&A has emerged: political cronyism. A deal's approval may now hinge less on market concentration analysis and more on a political leader’s personal sentiment towards the acquiring CEO, fundamentally changing the risk calculus for corporate strategists.
The Democratic party's focus on antitrust, according to Warren, is not anti-business but fundamentally pro-market. By preventing monopolies, it fosters a competitive environment where companies are forced to continually innovate to succeed, unlike giants who grow complacent and raise prices.
America's system of nearly 10,000 banks is not a market inefficiency but a direct result of the founding fathers' aversion to centralized, oligopolistic British banks. They deliberately architected a fractured system to prevent the concentration of financial power and to better serve local business people, a principle that still shapes the economy today.
Core components of today's financial landscape, including FDIC insurance, Social Security, and even the 30-year mortgage, were not products of gradual evolution. They were specific policies created rapidly out of the financial ashes of the Great Depression, demonstrating how systemic shocks can accelerate fundamental structural reforms.
Morgan Stanley's 1935 founding was a direct consequence of the Glass-Steagall Act, which forced a separation between commercial banking (deposits, loans) and investment banking (trading, underwriting). This regulatory mandate created the specialized firms that define the structure of modern finance today.
Rockefeller used his company's stock as a strategic weapon beyond just fundraising. He granted cheap shares to influential bankers to secure favorable loan terms for himself while simultaneously blocking competitors' access to capital, transforming his cap table into a tool for building a network of secret, financially-aligned allies.
In an attempt to gain a currency advantage, Caterpillar lobbied the Reagan administration to open Japan's financial markets. This policy backfired, causing Japanese savings to flood into the U.S. and enabling competitor Komatsu to build factories directly on American soil.
Regulatory capture is not an abstract problem. It has tangible negative consequences for everyday consumers, such as the elimination of free checking accounts after the Dodd-Frank Act was passed, or rules preventing physicians from opening new hospitals, which stifles competition and drives up costs.
While post-GFC regulations targeted "too big to fail" institutions, their primary victim was the community banking sector. The new regime made it "too small to succeed," causing half of these banks to disappear. This choked off credit for small businesses and real estate, hindering Main Street's recovery.
