Steel, soon forced him [Morgan] to modify his stand, though at times he would have preferred total control. More important, by 1898 he could not ignore the massive power of new financial competitors and had to treat them with deference. Standard Oil Company, utilizing National City Bank for its investments, had fixed resources substantially larger than Morgan's, and by 1899 was ready to move into the general economy.... The test came, of course, in the Northern Securities battle, which was essentially an expensive draw. Morgan and Standard paid deference to each other thereafter, and mutual toleration among bankers increased sharply.... A benign armed neutrality, rather than positive affection, is as much a reason as any for the high number of interlocks among the five major New York banking houses.
Writing in the year 1919, from the perspective of an inside viewof Wall Street at that time, John Moody completes the picture: This remarkable welding together of great corporate interests could not, of course, have been accomplished if the "masters of capital" in Wall Street had not themselves during the same period become more closely allied. The rivalry of interests which was so characteristic during the reorganization period a few years before had very largely disappeared. Although the two great groups of financiers, represented on the one hand by Morgan and his allies and on the other by the Standard Oil forces, were still distinguishable, they were now 1- Paul and Lehrman, p. 119.
2- Kolko,
436 THE CREATURE FROM JEKYLL ISLAND
working in practical harmony on the basis of a sort of mutual
"community of interest" of their own. Thus the control of capital and credit through banking resources tended to become concentrated in the hands of fewer and fewer men.... Before long it could be said, indeed, that two rival banking groups no longer existed, but that one vast and harmonious banking power had taken their place.
THE ALDRICH-VREELAND ACT
The monetary contractions of 1879 and 1893 were handled byWall Street fairly easily and without government intervention, butthe crisis of 1907 pushed their resources close to the abyss. Itbecame clear that two changes had to be made: all remnants ofbanking competition now had to be totally eliminated and replacedby a national cartel; and far greater sums of fiat money had to bemade available to the banks to protect them from future runs bydepositors. There was now no question that Congress would haveto be brought in as a partner in order to use the power ofgovernment to accomplish these objectives. Kolko continues: The crisis of 1907, on the other hand, found the combined banking structure of New York inadequate to meet the challenge, and chastened any obstreperous financial powers who thought they might b u i l d their f o r t u n e s i n d e p e n d e n t l y of the entire banking community.... The nation had grown too large, banking had become too complex. Wall Street, humbled and almost alone, turned from its own resources to the national government.2
The first step in this direction was openly a stop-gap measure.
