Morgan Empire Split in Two

The revelry inside the Treasury Building continued.

Outside, Roosevelt had already climbed into his car. Looking at Feilan through the window, he asked, "What you said just now—had you planned it beforehand, or was it improvised?"

Feilan fell silent for a second, then smiled. "Half and half."

"What do you mean, half and half?"

"Some of it was planned in advance, and some was improvised on the spot."

Roosevelt stared at him for several seconds. Then, just as William had done earlier, he raised his index finger, grinned, and wagged it at him, leaving behind a meaningful smile.

The black sedan vanished into Washington's night.

Ballantine watched in that direction and suddenly spoke. "Feilan, are we really not going to report this to the President?"

"Let him have one peaceful night."

"Feilan is right. In an atmosphere like today's... it really isn't good to spoil the President's mood. We can discuss those problems tomorrow."

William let out a sigh.

Ballantine nodded.

The next morning.

1600 Pennsylvania Avenue, the White House.

Feilan, William, and Ballantine arrived at the White House together.

They had slept well the night before, but there was not a trace of warmth on William and Ballantine's faces now.

Only Feilan looked as composed as ever.

He walked at the front, his steps steady, with no emotion visible on his face.

The door to the Oval Office was pushed open.

Roosevelt was already there.

He sat behind his desk, several documents spread out before him, a cup of coffee in his hand.

Hearing the door open, he looked up. "Good morning, William, Ballantine, Feilan."

"Good morning, Mr. President."

The three answered in unison.

"Mr. President, regarding the banks... we need to give you a detailed summary."

"Go ahead."

Roosevelt's expression remained unchanged.

In truth, he had long known that the banking problem was nowhere near as simple as it appeared, and that it had not been saved as the media had boasted.

Of course, he had also noticed Ballantine and the others holding back yesterday.

But although he was the President, he was still an ordinary man.

Ever since taking office, he had endured enormous pressure every day.

Yet yesterday had truly been a historic day for the United States.

On the one hand, he did not want to ruin the atmosphere. On the other, he wanted to give himself a break and get a peaceful night's sleep, so he had pretended not to ask further.

William took a deep breath, pulled a document from his briefcase, and spread it before Roosevelt. "Mr. President, these are some deeper issues the Treasury Department discovered while reviewing the banks over the past several days..."

He began his report.

Every one of those issues weighed heavily:

First, the asset quality of the banking system was far worse than it looked on the surface. Many banks still carried loans on their books, but in reality, those loans could no longer be recovered. They had been repeatedly "extended," with new loans used to repay old ones, while numbers on paper concealed the real holes.

Second, the interconnected transactions between banks were astonishingly complicated. You had a stake in me, and I had a stake in you. Once one ran into trouble, it would drag down an entire swath like a row of dominoes.

Finally, banks faced virtually no legal restrictions when using depositors' money for speculation. As long as the banks themselves considered it "safe," they could pour the money into the stock market, futures, or any high-risk field.

There was no firewall between banks and securities firms. Many major banks handled both deposits and loans as well as securities underwriting, clutching depositors' hard-earned money in one hand while stirring up storms in the stock market with the other.

William's voice grew increasingly grave. "These problems are the deeper causes of bank failures and the crisis. The Emergency Banking Act reopened the banks, brought deposits back, and restored the public's faith in us."

"But in truth, not a single one of these problems has been solved. If we let them continue unchecked, the crisis will soon return—and it may be even worse than this time."

Roosevelt's expression turned solemn. He slowly asked, "Then what should we do?"

"My recommendation is to first strengthen oversight. Establish a dedicated agency to conduct regular reviews of bank operations. Banks engaged in violations should receive warnings and fines, while those with serious offenses should have their licenses revoked. At the same time, we should encourage banks to strengthen self-discipline and establish industry standards..."

William took a deep breath and laid out the plan he had pondered for several days.

After listening, Roosevelt did not state his position immediately. Instead, he turned his gaze to Feilan, who stood to one side. "Feilan, what do you think?"

"If the United States today is compared to a patient, then the Emergency Banking Act was an emergency measure to stop the bleeding. It pulled this patient back from the brink of hemorrhaging to death and temporarily removed him from mortal danger."

Roosevelt nodded.

"But..."

Feilan abruptly shifted the direction of his words. "Stopping the bleeding is not the same as curing the disease. This patient still has a rotten heart inside him. If the problem with that heart is not resolved, it is only a matter of time before he collapses."

"You're right. Then how do we perform this heart surgery?"

"I believe the first and most essential step is to build four 'firewalls'!"

Roosevelt, Ballantine, and William all turned probing gazes toward Feilan.

"The first: separate commercial banking from investment banking. Banks holding depositors' money can no longer engage in high-risk securities business. Those who want to play the stock market can set up another company and play with their own money."

"The second: the Federal Deposit Insurance Corporation. Every depositor's funds should be insured by the government, with the initial cap set at $2,500. Even if a bank fails, ordinary people will not lose everything."

"The third: regulation of bank holding companies. The financial conglomerates that control multiple banks through subsidiaries must submit to unified supervision by the Federal Reserve System. They can no longer use complicated ownership structures to evade scrutiny."

"The fourth: public disclosure of information. Banks must regularly disclose their loan portfolios, capital positions, and related-party transactions. Let sunlight shine into every corner, leaving those shady operations nowhere to hide."

After Feilan finished, the office fell into a terrifying silence.

Ballantine stared at him, dumbfounded, his mouth hanging open, yet unable to utter a single word.

William's expression changed again and again. Several times, he seemed about to speak, only to swallow the words back down.

Roosevelt looked at William. "William, what do you think this means?"

William fell silent for several seconds. "The separation of banking and securities means that financial empires like Morgan's may be split in two. Their commercial banking and investment banking operations will have to be separated. The Morgan Family will have to choose between 'doing banking' and 'doing securities.'"

"Deposit insurance means the government will directly guarantee depositors' money. Those major banks have always opposed it, because they can use 'safety' as an excuse to attract deposits and squeeze out smaller banks. Once the government provides a safety net, their advantage will be gone."

"As for regulation of holding companies, that means people like Rockefeller and DuPont will no longer be able to hide behind layer upon layer of shareholdings to manipulate banks. They will have to step out and submit to scrutiny..."