By Kenneth G. Pringle
President Abraham Lincoln's appointment of Gen. Ulysses S. Grant to lead the Union army, and their strategy of total war against the Confederacy, is often credited for finally ending the Civil War after four years of slaughter.
They couldn't have done it without Jay Cooke, a 43-year-old who didn't shoot a gun or plan a battle.
Cooke sold bonds. Government bonds.
In 1865, Cooke marketed a desperately needed load of U.S. debt that allowed the Union to keep fighting and claim victory in months.
And the apparatus that Cooke built to sell those bonds -- a network of thousands of agents throughout the U.S. and Europe -- became the blueprint for the modern investment bank. Investment banking went on to underwrite construction of the railroad, the telephone, and an industrial revolution that turned America into an economic and military superpower.
Today, Wall Street is stronger than ever. The U.S. financial sector earns more corporate profit than any other U.S. industry, and trails only information technology in representation on the S&P 500 index.
To be sure, investment banking's rise isn't universally celebrated. Allegations of profiteering have accompanied it from the start. Cooke himself was accused of corruption and at one point barred from government work.
And critics say the power amassed by these war-built machines of finance is gained at the expense of millions of average Americans.
"[A]n enormous devilfish with a hundred thousand arms reaching into all parts of the country, and all equipped with suckers...extracting nourishment for the monster to which it belongs," is how trader John F. Hume described Wall Street back in 1888.
Rolling Stone journalist Matt Taibbi used similar language in 2010, calling Goldman Sachs "a great vampire squid wrapped around the face of humanity."
It's a timeless analogy.
It isn't known whether Treasury Secretary William P. Fessenden used it when he accused Cooke of corruption in his marketing of $500 million (roughly $13 billion today) in bonds in 1863. But Fessenden cut him off. For the next round of bonds, he would use the national banks created under the Currency Act of 1863. That was his plan, anyway. It failed. Fessenden came back to Cooke.
Despite the earlier "insult" to his character, Cooke couldn't resist another opportunity to help his country -- and make another fortune.
"I know just what ought to be done and could in one week put the machinery in motion, and save our finances from utter ruin," Cooke wrote on Sept. 20, 1864, and he was as good as his word.
Cooke's agents sold in small towns, frontier settlements, and mining camps. He bought newspaper ads and solicited favorable editorials, appealing to Americans' patriotic sympathies.
"A national debt, a national blessing," was Cooke's slogan.
The public bought it. Starting in February 1865, Cooke sold $830 million in bonds in six months, allowing Union troops to force a surrender in April.
Cooke's career didn't end with that triumph. He took his investment-banking concept into railroads, where he went broke and helped trigger the Panic of 1873.
But others followed in his path, and four houses came to dominate American industry: J.P. Morgan; Kuhn, Loeb; Brown Bros.; and Kidder, Peabody.
No one was more powerful than J. Pierpont Morgan, one of the original robber barons identified by Matthew Josephson in 1934 as "members of a new ruling class...the dominating figures of an aggressive economic age."
Morgan's specialty was gaining financial control of firms, often using European money, then reorganizing and consolidating them into functional monopolies. It was dubbed "Morganization." Morgan did it in railroads, coal, and, most famously, steel.
"All I asked Morgan was $420,000,000," Andrew Carnegie testified on Jan. 10, 1902, at an antitrust hearing over U.S. Steel. "I have since been told by insiders that I could've gotten $100,000,000 more."
Morgan merged Carnegie Steel with several chief competitors to create the largest industrial corporation in existence. U.S. Steel controlled two-thirds of the American market, and dominated related sectors including shipping and mining.
Morgan, too, got the cephalopod comparison.
"President After the Coal Trust," the Minneapolis Journal wrote May 10, 1902, calling it "Morgan's Great Fuel Octopus That Limits the Supply and Fixes Prices."
The government worked to rein in Wall Street, from trustbusting to the Federal Reserve Act of 1913 and the Glass-Steagall Act of 1932, which split investment banking from commercial banking. This ended the "aggressive economic age" of Cooke and Morgan, and ushered in a much different one.
"The solid, profitable, but unglamorous world of investment banking," is how Benjamin J. Stein later described it in Barron's. "[I]ts primary function was to finance industrial capital investment by, say, a steel company for, say, a new rolling mill."
That function built the U.S. into the world's leading industrial power after World War II. By the '70s, facing a mature industrial economy, investment banks discovered a new source of profit: corporate raiding.
"[W]in, lose, or draw," Stein wrote, "the investment banks were in a position to get commissions based upon a sizable percentage of already existing pools of value, without creating any new value whatsoever, or in any way adding to America's capital stock."
Welcome to the world of financialization, in which profit is made through fees, stock buybacks, complex derivatives, and the like rather than through investment in production and services. Business investment has been in decline for decades, from 6.7% of gross domestic product in 1984 to 2.5% in 2025.
Meanwhile, dealmaking and the loans that go along with it are bigger than ever, with expectations for "more spinoffs, crypto M&A and participation from sovereign-wealth funds," according to The Wall Street Journal.
As for animal metaphors, the squid has been joined by the cockroach. JPMorgan Chase CEO Jamie Dimon coined the term for problems lurking in private credit, the booming market where unregulated nonbanks lend directly to highly indebted companies with limited borrowing options.
Despite the roach infestation, JPMorgan dived into private credit, along with the rest of Wall Street, with Dimon reckoning his bank could handle the risk. This year, investors are fleeing private credit lenders, and CNBC, citing sources, reported that JPMorgan was reining in lending in the sector. JPMorgan didn't respond to requests for comments from Barron's.
As the headline on Ben Stein's 1987 article put it, "Investment Banking Isn't What It Used to Be."
Write to editors@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 25, 2026 02:30 ET (06:30 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments