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Should We Trust Banks When They Sit On the Board of Directors?

  • Francesco Giavazzi
  • Marco Battaglini
Part of the Financial and Monetary Policy Studies book series (FMPS, volume 33)

Abstract

In the twenties, when the president of New York, New Haven and Hartford Railroad Charles Mellen said he was proud of his ‘Morgan Collar’, his company was only one of the many controlled by investment banks such as the House of Morgan. As J. Bredford De Long (1991) reports, in 1910–1920 these institutions were influential in corporations that capitalized nearly one and a half years’ national product: the companies where the partners of J. P. Morgan and Company sat on the board of directors alone amounted to 30 per cent of the listed equity value. Banks such as the National City Bank, Kidder, Peabody and Company, Kuhn, Loeb and Company, First National Bank and J. P. Morgan and Company were quite different from today’s US commercial banks. Until the Glass Steagal Act, these large investors played a very active role in industrial organization and development: monitoring the firms in which they sat, but also fostering and financing mergers or acquisitions.2 In this sense, their activity was similar to that of the German Grossbanken 3 which were, in the early years of the century, the channel through which German industrialization was financed.

Keywords

Corporate Governance Mutual Fund Institutional Investor Pension Fund Ownership Structure 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer Science+Business Media Dordrecht 1998

Authors and Affiliations

  • Francesco Giavazzi
  • Marco Battaglini

There are no affiliations available

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