Friday, September 19, 2008

Folding investment banking back into commercial banks???!!!

Pre 1933: Banks could take deposits and make loans as well as play the role of an investment bank

Post 1933: When the financial system collapsed, many blamed the business model of these "universal banks". As a result the Glass-Steagall Act was passed, whereby universal banks could no longer take deposits while also issuing and selling debt and equity.

1999: 66 years later the Glass-Steagall Act was repealed, but majority of the bulge bracket investment banks refused to merge with the boring commercial banks, perhap they werent sexy enough? Citigroup was an exception...

2008: This year we see the situation reversing really quick, in a matter of a week! We now see investment banks begging on their knees to be adopted by commercial banks. That leaves us with just Goldman Sachs...

Not too different from things in Malaysia...flip flop flip flop haha


Blogger zewt said...

now, morgan stanley can now bring those worthless notes to discount houses and sell... wonder who will buy though.

8:38 AM  

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