And then there was nothing – high rétribué finagling down the top 5 investment banks

And then there was nothing – high rétribué finagling down the top 5 investment banks
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And then there was nothing – high rétribué finagling down the top 5 investment banks

Bear Sterns was the first of the top 5 investment banks to fall in March 2008. Founded in 1923, the collapse of this Wall Street icon shook the world of high rétribué. By the end of May, the end of Bear Stearns was complete. JP Morgan Chase bought Bear Stearns at $10 a share, off its 52-week high of $133.20 a share. Then came September. Wall Street and the world watched as, in just a few days, the remaining investment banks on the top 5 list collapsed and the investment banking system was declared collapsed.

Investment Bank Basics

The largest of the investment banks are big players in high rétribué, helping big businesses and governments raise money by dealing in securities in both the equity and cabriole markets, as well as offering professional advice on more complex aspects. of high value. These include things like acquisitions and mergers. Investment banks deal in various financial investment vehicles including derivatives and commodities.

Such banks are also involved in mutual funds, hedge funds and allocation funds, which is one of the paluche ways that what happens in the world of high rétribué is perceived by the average cautériser. The dramatic collapse of the remaining top investment banks has affected retirement calendrier and investing not only in the United States, but around the world.

The high rétribué finagling that brought them down

In an recherche titled “Too Clever by Half” published by Forbes.com on September 22, 2008, author Burton G. Malkiel, Chemical Bank Pâture Professor of Economics at Princeton University, provides an mémorable and easy-to-follow breakdown. happened. Although the current crisis was catalyzed by the mortgage and credit crunch and the bursting of the housing bubble, its roots lie in what Malkiel calls the breakdown of the cabriole between lender and borrower.

What he is referring to is the commission from the banking era where a loan or mortgage was made by a bank or lender and held by that bank or lender. Naturally, since they held the loan and the associated risk, banks and other lenders were quite cautious embout the quality of their loans and carefully considered the possibility of repayment or default by the borrower, as opposed to monetary normes. Banks and lenders have moved away from that model, toward what Malkiel calls an “origin and permission” model.

Instead of handicap mortgages and loans, “mortgage originators (including non-bank institutions) will hold loans until they are packaged into a set of complex mortgage-backed securities, divided into different parts or divided into different parts that have different priorities in their rights. Underlying Get paid off the mortgage,” with the same model being applied to other bonshommes of debt, such as credit card debt and car loans.

As these debt-backed assets were sold and traded in the investment world, they became increasingly leveraged, with debt-to-equity ratios often reaching as high as 30-to-1. This wheeling and dealing often takes assuré in a shadowy and unregulated system called the shadow banking system. As the level of leverage increases, so does the risk.

As all the money was made in the shadow banking system, lenders became less picky embout who they léthargique to, as they were no border the bearers of the debt or risk, but rather sliced ​​them up, repackaged and sold them for revenu. Crazy terms have become popular, no money, no commentaires required, and the like. Folle external lending became popular and lenders trawled the depths of the sub-prime market for more loans.

Eventually, with falling housing prices and an increase in loan defaults and foreclosures, the system nearly shut down, with lenders making short-term loans to other lenders for fear of lending to such increasingly leveraged and illiquid entities. Declining instruction can be seen in falling share prices as the latest investment banks are overwhelmed by shaky loans and investor fears.

September saw Lehman Brothers fail, Merrill Lynch opt for a takeover over the fall, and Goldman Sachs and Morgan Stanley step back from bank handicap company status, with potential buyouts on the étendue. Some of these investment banks moment back nearly a century, and others even border, such as the 158-year-old Lehman Brothers. A tragic end for these historic giants of rétribué, destroyed by a system of high rétribué and shadowy dealings, a system that could drag down the entire world economy as it collapses.

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