% COLUMBIA LAW REVIEW [Vol.91:10 G.Conclusion:The Uneasy Accommodation The conclusion of all this is that legal decisions deeply influenced corporate structure.Some influence was direct:prohibitions on banks and bank holding companies-the institutional players with half of the money -from ow ng and ing,prohibition n owning stock for a half- on insur ance com pani ntury and now limitir g their own ership,and tax penalties on mutual funds owning control blocks.And some influence was indirect:(1)fragmented investors talking to one another must act through the SEC's proxy machinery;(2)schedules have to be filed with the SEC;(3)groups that own 10%or more of an industrial con sit n of 16(b)liabili ng dis 8 rgen rt-swing pro s;ar d(4)an institutio ing to ain influence and control will be subject to enhanced duties and abilities. Just as important as these prohibitions and costs are social con straints and fe fear that a essful effort at control will trig ger a political ion.If the e politica syster will turn on the e controllers anyway-and worse yet,if control would risk overregulation in re- sponse -then those who might overcome the legal obstacles could de- cline the added risk of political reaction.Social constraints- -the view ontrol by institutional investors is improper-also have a These social constraints may th emse lves be esult of poli itical and legal conditioning. Furthermore,when the Glass-Steagall Act and the 1940 Act sev- ered financial institutions from one another,the law eliminated an easy coordinating link.Influence on operating companies could have com through in on in ution tha uld (1) underwrite the e indu ustrial company's securities,(2)own a big block of its stock directly,(3)own a big block of stock indirectly througb an affiliated commercial bank's trust department,(4)own stock through a sponsored mutual fund,(5)own stock through an affiliated life insur- ance company,and (6)also own ool of pension fund assets manage d by the cial in Such superma rkets are impossible to build in the United States. That nexus of relationships does exist in Japan and Germany;ele- ments of that nexus appeared in the banking networks of J.P.Morgan Chase.and National City during the be f this cen ury.84 deed,an intern 1 netwo might functi work of several financial institutions talking to one another,or acting jointly through a leveraged buyout fund.Monitoring requires staff and specialized expertise;when the institutions fragment,they lose scale economies of staff and expertise. Whether these interna networks are good or bad is worthy of dis cussion:the networks could siphon resources for banker proft and still 84.See G.Edwards,The Evolution of Finance Capitalism 171(1938)COLUMBIA LAW REVIEW G. Conclusion: The Uneasy Accommodation The conclusion of all this is that legal decisions deeply influenced corporate structure. Some influence was direct: prohibitions on banks and bank holding companies-the institutional players with half of the money-from owning and controlling, prohibitions on insurance com￾panies from owning stock for a half-century and now limiting their own￾ership, and tax penalties on mutual funds owning control blocks. And some influence was indirect: (1) fragmented investors talking to one another must act through the SEC's proxy machinery; (2) schedules have to be filed with the SEC; (3) groups that own 10%o or more of an industrial company's stock risk imposition of 16(b) liability, forcing dis￾gorgement of any short-swing profits; and (4) an institution wishing to obtain influence and control will be subject to enhanced duties and liabilities. Just as important as these prohibitions and costs are social con￾straints and fear: fear that a successful effort at control will trigger a political reaction. If the political system will turn on the controllers anyway-and worse yet, if control would risk overregulation in re￾sponse-then those who might overcome the legal obstacles could de￾cline the added risk of political reaction. Social constraints-the view that control by institutional investors is improper-also have a role. These social constraints may themselves be the result of political and legal conditioning. Furthermore, when the Glass-Steagall Act and the 1940 Act sev￾ered financial institutions from one another, the law eliminated an easy coordinating link. Influence on operating companies could have come through internal coordination in a financial institution that would (1) underwrite the industrial company's securities, (2) own a big block of its stock directly, (3) own a big block of stock indirectly through an affiliated commercial bank's trust department, (4) own stock through a sponsored mutual fund, (5) own stock through an affiliated life insur￾ance company, and (6) also own stock in a pool of pension fund assets managed by the financial institution. Such financial supermarkets are impossible to build in the United States. That nexus of relationships does exist in Japan and Germany; ele￾ments of that nexus appeared in the banking networks ofJ.P. Morgan, Chase, and National City during the beginning of this century.84 In￾deed, an internal network might function better than an external net￾work of several financial institutions talking to one another, or acting jointly through a leveraged buyout fund. Monitoring requires staff and specialized expertise; when the institutions fragment, they lose scale economies of staff and expertise. Whether these internal networks are good or bad is worthy of dis￾cussion: the networks could siphon resources for banker profit and still 84. See G. Edwards, The Evolution of Finance Capitalism 171 (1938). [Vol. 91:10