Investment Banking Essay

1. Why were proponents of deregulation so palmy in the late 1990s? How over untold can we blame deregulation for the meltdown in the investiture banking industry, and how could the government fork up foreseen and/or stopped the domino execution before the crisis of 2008?s The gov could be in possession of dogged to non back up what they were non regulating. They are partly to blame for the crisis because who knows if the banks would allow issued the loans they issued and egressn on huge amounts of find if they didnt gestate got the guarantee of the banks slowly them. 2. Could both one of the investing banks have remained competitive with away following the industry bring down of taking on increasing amounts of leverage to get on returns on investment? If so, how? It is not in all likelihood that an investment bank could have made the huge profits otherwise banks were making with that leverage to boost returns. They could have possibly takingsn on slight find and been more profitable in the long run, but not likely that they could have kept up briefly term.3. Why was Lehman Brothers allowed to flop while brave Stearns was not? The investment bank of Lehman Brothers vie a different part in the market than Bear Stearns. The government didnt want this bankruptcy spreading and so they were able to convince JP Morgan to buy go forth Bear Stearns while they let Lehman Brothers collapse and pick up the pieces. 4. Did the compensation organize of the investment banking industry encourage banking executives and employees to take on excessive risk to boost short-term profits? Why or why not? Banks were encouraged to take on huge amounts of risk because of the truly high return. For a while, there were no consequences for defaults because risk was being transferred but they got to assert the money made off the loans and bonds issued.5. How much of the industry-wide crisis stemmed from the investment banks financials and the current scotch c limate as opposed to investor apprehension and speculation? The investment banks are in general to blame because their conditions caused investor panic and speculation. Banks should have pass judgment their uninformed investors rash behavior because that is rattling hard to control. 6. Both Bear and Lehman unloosened out their proprietary hedge funds. Did they have any other option? What would have happened had they not done so?Investors and employers had a visual sense of skin in the game in the hedge fund market so they had a lot of pressure to bail out these funds. If they had chosen not to bail them out then their reputations would have asleep(p) downhill eventually leading to their investors suspicion of the firm. 7. Could Morgan Stanley and Goldman Sachs have survived without becoming bank retention companies? What were the benefits and disadvantages of becoming bank property companies? What does title as bank attribute companies symbolize for the way Morgan an d Goldman operate going forward?By becoming bank holding companies the power was put into very a couple of(prenominal) hands. Becoming a bank holding company increases diversity so that you do not only play in one market. This lessons risk but by chance also decreases high returns that can be made if you focus on the investment banking business. Perhaps they could have survived if they had been able to set out up with a balance of risk to take. Morgan and Goldman needed to expand from solely investment banking and perform commercial banking operations as well.