The outbreak of the Great Depression in 1929 exposed the hidden systemic risks of America’s mixed operation model of commercial banks and investment banks, triggering nationwide public doubts and institutional reflection on Wall Street’s chaotic financial operation. Countless ordinary depositors lost their savings amid bank failures, and public anger surged toward powerful financial conglomerates that combined deposit banking with speculative securities trading. To rectify financial chaos and prevent systemic financial risks, the U.S. government officially promulgated the Glass-Steagall Act in 1933, which strictly separated low-risk deposit-taking commercial banking business from high-risk investment banking and securities trading business.

This drastic institutional reform dealt a heavy blow to the Morgan family’s long-term integrated financial operation model, which relied on stable commercial bank deposit funds to feed high-risk investment banking and capital market layout. For decades, Morgan had deployed customer deposits to fund industrial mergers, bond underwriting and cross-border capital deals. Now this core profit pathway was legally blocked. To comply with national regulatory requirements and avoid severe legal sanctions, the Morgan system was forced to split its core business. Traditional commercial banking, deposit and loan business was retained as J.P. Morgan & Co., focusing on corporate finance and commercial service. High-end investment banking, securities underwriting and M&A business were independently split into Morgan Stanley.

The public universally regarded this split as the complete disintegration of the Morgan financial empire. Newspapers celebrated the victory of financial regulation over monopolistic capital. But in essence, it was a passive strategic adjustment for the family to adapt to new supervision, realizing the decentralized and hidden development of financial power. Key elite connections, client networks and long-standing industrial partnerships remained intact behind the legal partition. The old Morgan influence merely shifted from one unified institution into separate, seemingly independent entities, preserving its capacity to shape corporate financing and market deals for decades ahead.