From the very beginning, investment banking in America has been both celebrated and criticized, often accused of enriching a few at the expense of ordinary people. One of the earliest figures in shaping this world was Jay Cooke, whose work during the Civil War illustrates the immense influence of financiers in American history. When President Abraham Lincoln appointed Gen. Ulysses S. Grant to lead the Union army, it was Cooke who provided the critical financial support that allowed the Union to continue fighting.
Cooke, a 43-year-old financier, did not wield a sword or command troops; instead, he sold government bonds. These bonds raised desperately needed funds for the Union army, effectively financing the war effort and hastening the Confederacy’s defeat. The network Cooke built—thousands of agents across the U.S. and Europe—became the foundation for modern investment banking. This system later supported major infrastructure projects, including railroads and the telephone, fueling an industrial revolution that positioned the United States as an economic and military powerhouse.
Despite its achievements, investment banking has never escaped controversy. Cooke himself faced accusations of corruption and was temporarily barred from government work. Critics have long argued that the sector’s power and profits come at the expense of everyday Americans. In 1888, trader John F. Hume described Wall Street as “[a]n enormous devilfish with a hundred thousand arms reaching into all parts of the country,” extracting resources for itself. Decades later, journalist Matt Taibbi would famously describe Goldman Sachs as a “great vampire squid wrapped around the face of humanity,” demonstrating that skepticism about financiers is timeless.
Cooke’s work with Union bonds illustrates the dual nature of finance: it can serve the public good while simultaneously generating massive private wealth. Despite earlier criticisms, Cooke seized opportunities to stabilize national finances, selling $830 million in bonds over six months in 1865. His campaigns involved direct outreach to towns, frontier settlements, and mining communities, paired with strategic advertising that emphasized patriotism. “A national debt, a national blessing” became a rallying slogan, and the public responded enthusiastically.
After the war, Cooke turned his investment banking model to railroads, a venture that ultimately led to financial ruin and the Panic of 1873. Nevertheless, other financiers followed in his footsteps, including the powerful houses of J.P. Morgan, Kuhn, Loeb, Brown Bros., and Kidder, Peabody. Among them, J. Pierpont Morgan became synonymous with the consolidation of American industry, mastering the practice of “Morganization”—the strategic merging and reorganization of companies into monopolies across railroads, coal, and steel.
Morgan’s influence was staggering. In 1902, he merged Carnegie Steel with its competitors to create U.S. Steel, controlling two-thirds of the American steel market and dominating related sectors like mining and shipping. Even Morgan earned a reputation akin to Cooke’s “devilfish,” as newspapers described his reach and control over markets as a monstrous octopus. Critics and regulators struggled to balance his immense power with public interest, leading to early forms of government intervention.
The government eventually implemented measures to rein in Wall Street, from trust-busting efforts to the creation of the Federal Reserve in 1913 and the Glass-Steagall Act in 1932, which separated commercial and investment banking. These reforms marked a transition from the aggressive, highly visible finance of Cooke and Morgan to a more structured, albeit still highly profitable, financial sector. Investment banks then primarily focused on financing industrial expansion, such as steel mills and manufacturing plants, fueling America’s rise as an industrial superpower after World War II.
By the 1970s, however, investment banks discovered a new avenue for profit: financialization. Rather than funding productive investment, banks increasingly earned fees through mergers, acquisitions, stock buybacks, and complex financial instruments. As a result, the share of U.S. GDP devoted to business investment declined from 6.7% in 1984 to just 2.5% in 2025. Meanwhile, dealmaking, corporate restructuring, and sophisticated financial products grew exponentially, reflecting a shift from creating value to redistributing it.
This shift has also spawned a new lexicon of animal metaphors for Wall Street. While John Hume’s devilfish and Taibbi’s vampire squid remain iconic, JPMorgan Chase CEO Jamie Dimon recently compared private credit risks to cockroaches, highlighting the hidden threats in this booming sector. Private credit, an unregulated market where nonbanks lend to highly leveraged companies, has expanded rapidly, emphasizing the ongoing tension between financial innovation and systemic risk.
Investment banking’s trajectory, from Cooke’s wartime bond sales to Morgan’s monopolies and today’s complex derivatives and private-credit markets, underscores a dual narrative: finance can both enable societal progress and concentrate wealth and power. For ordinary Americans, the sector has always been a source of both opportunity and skepticism, and its evolution continues to spark debate about fairness, oversight, and the true role of Wall Street in society.
Even today, the lessons of Cooke and Morgan resonate. The tools and methods that once helped win a war and build infrastructure now serve highly complex financial markets. While the scale and sophistication have grown, the fundamental tension remains: balancing private profit with public good, ensuring that the financial sector contributes to the broader economy rather than merely enriching itself.
From the Civil War to contemporary finance, investment banking has evolved, but its influence is undeniable. The sector’s ability to reshape industries, drive innovation, and generate enormous wealth coexists with the perennial critiques of power, greed, and inequity, making it one of the most consequential and controversial elements of the modern economy.