The Ownership Structure of Investment Banks: A Case for Private Partnerships?
Academy of Banking Studies Journal 2011, Jan-July, 10, 1
Academy of Banking Studies Journal
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INTRODUCTION The subprime mortgage crisis and its fallout have caused losses for households, businesses and government in the U.S. as well as abroad. Among the crisis' more prominent victims are the five largest U.S. investment banks, which, by the end of 2008, had ceased to exist as stand-alone publicly traded firms. Lehman Brothers filed for bankruptcy protection in September 2008, while Bear Stearns and Merrill Lunch were sold to bank holding companies that same year. Also during 2008, Morgan Stanley and Goldman Sachs yielded to government pressure to change to bank holding company status in order to weather threats to their solvency. Clearly, investment banks, as originators and distributors of asset-backed securities, were at the very heart of the financial crisis. What caused this dramatic failure of all of the top investment banks? Was it a failure of managerial judgment, complacency on the part of investors, or a failure of regulators and credit rating agencies? Was the main culprit the 'Originate to Distribute" model of commercial banking, which facilitated the creation of toxic assets? In hindsight, it appears that several factors conspired to produce the crisis that ensued.
- Category: Industries & Professions
- Published: 01 January 2011
- Publisher: The DreamCatchers Group, LLC
- Print Length: 11 Pages
- Language: English