Meaning: This quote by Ron Chernow touches on the shift in the locus of American savings from banks to brokerage houses and the impact it had on the investment landscape in the United States. In order to fully understand the implications of this quote, it is necessary to delve into the historical context and the changes that occurred in the financial industry.

In the early 20th century, banks were the primary institutions where individuals entrusted their savings. Banks were seen as conservative and risk-averse entities, focused on providing loans and safeguarding deposits. However, with the rise of brokerage houses, a new avenue for savings and investment emerged. Brokerage houses, or investment firms, offered individuals the opportunity to invest in stocks, bonds, and other securities with the potential for higher returns, but also with greater risk.

Chernow's quote highlights the difference in risk tolerance between banks and brokerage houses. He suggests that the brokerage house, as the new locus for American savings, attracted money that would eventually flow into the stock market. This shift in savings behavior was driven by the perception that brokers, as opposed to bankers, had a higher tolerance for risk. As a result, individuals were more inclined to invest their savings in the stock market through brokerage houses, seeking the potential for greater returns despite the inherent risks involved.

The transition from traditional savings in banks to investment in the stock market reflects a broader societal and economic shift. As the economy evolved and financial markets developed, there was a growing recognition of the potential for wealth accumulation through investment in equities and other securities. This transition also coincided with changes in the regulatory environment and the development of investment products and services offered by brokerage houses.

The quote also speaks to the changing dynamics of financial intermediation. Banks traditionally served as intermediaries between savers and borrowers, channeling savings into loans for businesses and individuals. However, the emergence of brokerage houses redefined the intermediary role by offering direct access to the capital markets. This shift expanded the options available for savers and investors, while also introducing new complexities and risks associated with market participation.

In the broader context of American financial history, the shift towards brokerage houses as the locus for savings reflects a fundamental transformation in the way individuals engage with their financial resources. It represents a departure from the conservative savings and lending model of banks towards a more active and risk-oriented approach to wealth management.

In conclusion, Ron Chernow's quote captures the pivotal moment when the brokerage house supplanted the bank as the primary destination for American savings, leading to a significant influx of funds into the stock market. This shift was driven by the perception of brokers as having a higher risk tolerance compared to bankers, signaling a broader evolution in financial intermediation and investment behavior. The quote encapsulates a key turning point in the history of American finance, marking the transition towards a more dynamic and market-oriented approach to wealth accumulation and investment.