The first covered the top 5 investment banks Bear Stearns was in March of 2008. Founded in 1923, shook the collapse of this Wall Street icon of the world of high finance. By the end of May, the end of Bear Stearns was completed. JP Morgan Chase bought Bear Stearns at a price of $ 10 per share, in stark contrast to its 52 week high of $ 133.20 per share. Then came September. Wall Street, and the world watched in a few days, the remaining investment banks on the Top-5List tanked and the investment banking system was declared broken.
Investment Basics
The biggest investment banks are big players in the world of high finance, helping big business and money-governmental, inter alia, through the trading of securities in both the stock and bond markets as well as professional advice on the complex aspects of finance. These include such things as acquisitions and mergers. Investment banks also handle theTrade in a variety of financial investment vehicles, including derivatives and commodities.
This type of bank also has involvement in mutual funds, hedge funds and pension funds, which is one of the key ways is happening in what in the world of high finance is felt by the average consumer. The dramatic fall in the rest of the top investment banks affected retirement and investment not only in the United States but also throughout theWorld.
The High Finance ripoff This led them down
In an article titled "Too Clever By Half", on 22 Published September 2008, offering of Forbes.com, the Chemical Bank Chairman, Professor of Economics at Princeton University and author Burton G. Malkiel is an excellent and easy sharing of what has happened to follow closely. While the catalyst was for the current crisis in the mortgage and lending meltdown and the bursting of the housing bubble, the roots lie in what it Malkielcalls for the dissolution of the ties between lenders and borrowers.
What he refers to the shift from the banking era in which was a loan or mortgage made by a bank or lender and held that banks or lenders. Of course, as they were held on the debt and the associated risks, banks and other lenders pretty careful about the quality of their loans, and weigh the likelihood of repayment, or default by the borrower carefully, against standards that made sense. Banks and lenders postponedare of this model that, what Malkiel calls originate "and distribute" model.
Instead of holding mortgages and loans, mortgage originator, including (non-bank) would only loans until they could be in a range of complex mortgage or packaging Hold-backed securities, into different segments or tranches with different priorities in the right, divided payments received from the underlying mortgages, "with the same model, other types of loans, used aseliminate credit card debt and auto loans.
As these debt-backed assets were sold and traded in investment world, they have been increasingly leveraged, with debt-equity ratio and often even up to 30-to-1. These mistakes often found in a shady and unregulated system that was later called "shadow banking system. As the degree of leverage increases, so does the risk.
With all the money to be made in the shadow banking system, lenders became less choosyabout who they gave loans to because they no longer hold loans or risk, but slicing and dicing them, repackage and sell them at the station an asset. Crazy terms became popular, no money down, no docs required, and the like. Exorbitant exotic loans became popular and lenders steered the depths of the sub-prime market for still more loans to make.
Finally, the system almost ground to a halt with the fall in property prices and increased loan defaults and foreclosures,lenders with short-term loans to other lenders to make loans to such fear makes increasingly leveraged and illiquid entities. The decline in confidence could fall in stock prices as we shall see the last of the top investment banks in debt and uncertain investors feared drowned.
In September, Lehman Brothers did not choose takeover over collapse of Merrill Lynch, and Goldman Sacs and Morgan Stanley retreat to the status of bank holding companies, with potential acquisitions on the horizon.Some of these investment banks back from nearly a century, and many others, such as the 158-year-old Lehman Brothers. Quite an inglorious end for these historic giants of finance, through a system of high finance graft and shady deals, a system which, as it falls apart can also draw down at the end of the economy of the whole world destroyed.
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