The Past Speaks

Reviews in History has published my review of  Gentlemen Bankers: The World of J. P. Morgan by Susie Pak (Harvard University Press, 2013) along with Professor Pak’s reply. I really like the image that accompanies my review on the website.

As I say in my review essay, it’s a great book on a really important topic. I loved how Pak blended social and financial history.  As more and more stories about JPMorgan Chase & Co appear in the news, it is worthwhile having a fresh perspective on the history of one of the firms that eventually became part of the modern bank.

As long-time readers of this blog will know, my obsessions/interests include the linkages between politics and banking, or rather politicians and bankers. That’s why I was particularly interested in the part of the book that appears to undermine, albeit indirectly, some historical claims about the motivations for the Glass-Steagall Act that we made back in 1998 by Alex Tabarrok, an influential economist. In a rather speculative essay in the Quarterly Journal of Austrian Economics Tabarrok argued that the requirement that investment and commercial banks be separated was inserted into the law to further the interests of the Rockefeller banks, which were rivals of the House of Morgan. According to Tabarrok, the Banking Act of 1933 represented the culmination of more than a generation of political conflict between the Rockefellers and the Morgans. Tabarrok claims that the Rockefeller clique knew that the forced separation of investment and commercial banking would harm the Morgan interests far more than it would harm them. According to Tabarrok, they supported the move as a way of raising their rival’s costs. Tabarrok’s interpretation undermined the academic legitimacy of Glass-Steagall in the period immediately just before Congress voted to repeal of the last vestiges of the legislation in 1999. Alas, his paper was based mainly on circumstantial evidence.

Contrary to popular belief, the beliefs of academics do filter down to the political class and do influence public policy . “Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist economics blogger.” I bring this point up because if we are going to think clearly about bank regulation for the future, we need to get the history right as well.

Anyway, Susie Pak should be congratulated on writing a wonderful book.