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Investment BankingInstitutions, Politics, and Law$
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Alan D. Morrison and William J. Wilhelm, Jr.

Print publication date: 2007

Print ISBN-13: 9780199296576

Published to Oxford Scholarship Online: May 2007

DOI: 10.1093/acprof:oso/9780199296576.001.0001

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Investment Banking in the Age of Laissez‐Faire

Investment Banking in the Age of Laissez‐Faire

Chapter:
(p.155) 6 Investment Banking in the Age of Laissez‐Faire
Source:
Investment Banking
Author(s):

Alan D. Morrison (Contributor Webpage)

William J. Wilhelm Jr.

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780199296576.003.0006

The second half of the 19th century saw the high water mark for laissez-faire capitalism. Business people, politicians, and jurists were largely agreed that economic progress was best accomplished in free markets, supported by a minimal state. In this environment, investment banks were extremely important: they levered their reputations and their relationships to create the private laws that were needed to support large-scale financial capitalism. Technological advances forced the merchant banks mentioned in Chapter 5 to specialize in investment banking. This chapter discusses the role of the largest investment banks, and in particular of Kuhn Loeb and JP Morgan, in shaping modern corporate America. The investment banks invested investor activism, and they created the modern investment bank syndicate. In particular, their activist work with financially distressed corporations resulted in the development the ‘equity receivership’, the first coherent corporate bankruptcy law.

Keywords:   free markets, financial capitalism, Kuhn Loeb, JP Morgan, syndicate, investor activism, equity receivership

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