The Last-Minute Insertion of a Provision into the Glass-Steagall Act by Chase President Winthrop Aldrich Was the Coup de Grâce (Death Blow) for the House of Morgan

A surprise last-minute insertion in the bill was a provision endorsed by Chase president Winthrop Aldrich that forced private banks to choose between deposit and securities businesses. This was the coup de grâce for the House of Morgan. Later Carter Glass told Leffingwell that Aldrich drafted this provision and that Roosevelt foisted it on him. Pecora’s disclosure about the Morgan partners’ avoidance of income taxes made it impossible to delete this provision, so strong was public wrath. Adding to the pressure was Chase’s decision to disband its securities affiliate, whose refugees joined with renegades from the First National Bank of Boston to form First Boston, the first modern American investment bank.

The Glass-Steagall Act took dead aim at the House of Morgan. After all, it was the bank that had most spectacularly fused the two forms of banking. It had, ironically, proved that the two types of services could be successfully combined; Kuhn, Loeb and Lehman Brothers did less deposit business, while National City and Chase had scandal-ridden securities affiliates. The House of Morgan was the active double threat, with its million-dollar corporate balances and blue-ribbon underwriting business.

--Ron Chernow, The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance (New York: Grove Press, 2001), 375.