Chase Manhattan Corp. had been very uppity at the end of last year. Its earnings were soaring as a result of surging prices of "New Economy" stocks in Chase's portfolio. CEO William B. Harrison Jr. declared that "I got converted--I became a believer," in the staying power of the New Economy.

Understandably. The company reported $1.3 billion in gains in the fourth quarter from its New Economy investments, largely in technology stocks. It was a heady period, making Chase feel like an invincible steamroller. That mentality further convinced management that it had to get deeper into the investment banking business, and increased its appetite to buy a big investment bank.

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