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Costello was the leader of the anti-narcotics faction of the Mafia. As the "specialist" in political and police corruption, he had a better idea what society would tolerate from the mob, including loansharking, extortion , restitution and gambling; and what they would not, i.e drugs. Genovese led the faction that wanted to deal - in a big way.So Costello was scared off, and Albert "The Mad Hatter" Anastasia, an acting boss who supported Costello, was whacked out by Joey Gallo and his brother. This cleared the way for the Mafia to go into heroin trafficking, big time.

Interestingly enough, Costello was probably on the losing side from the git go, because the ONLY boss who really mattered, Charley Lucky, was setting up the distribution and processing pipeline in Europe [having been deported to Italy after the war], and had convictions for narcotics trafficking going back to the 20s [Genovese had been his underboss.