Write the conclusion in your own words and explain the reasons for the Global financial crises explained in the case study. Also, highlights the strategic decisions of investments to avoid risk in these conditions.
Although the move toward bringing financial service E activities into larger, complex banking organizations The Global Financial Crisis and the Demise of Large, Free-Standing Investment Banks BSV-INIW Next to go was Lehman Brothers, the fourth- largest investment bank, which declared bankruptcy A was inevitable after the demise of Glass-Steagall, no on September 15. Only one day before, Merrill Lynch, one expected it to occur as rapidly as it did in 2008. the third-largest investment bank, which also suf- Over a six-month period from March to September fered large losses on its holdings of subprime securi- 2008, all five of the largest, free-standing investment ties, announced its sale to Bank of America for less banks ceased to exist in their old form. When Bear than half of its year-earlier price. Within a week Stearns, the fifth-largest investment bank, revealed its Goldman Sachs and Morgan Stanley, the first- and large losses from investments in subprime mortgage second-largest investment banks, both of which had securities, it had to be bailed out by the Fed in March smaller exposure to subprime securities, nevertheless 2008; the price it paid was a forced sale to J.P. saw the writing on the wall. They realized that they Morgan for less than one-tenth what it had been worth would soon become regulated on a similar basis and only a year or so before. The Bear Stearns bailout decided to become bank holding companies so they made it clear that the government safety net had been could access insured deposits, a more stable funding extended to investment banks. The trade-off is that base. investment banks will be subject to more regulation, It was the end of an era. Large, free-standing along the lines of commercial banks, in the future. investment banking firms are now a thing of the past. Although the move toward bringing financial service E activities into larger, complex banking organizations The Global Financial Crisis and the Demise of Large, Free-Standing Investment Banks BSV-INIW Next to go was Lehman Brothers, the fourth- largest investment bank, which declared bankruptcy A was inevitable after the demise of Glass-Steagall, no on September 15. Only one day before, Merrill Lynch, one expected it to occur as rapidly as it did in 2008. the third-largest investment bank, which also suf- Over a six-month period from March to September fered large losses on its holdings of subprime securi- 2008, all five of the largest, free-standing investment ties, announced its sale to Bank of America for less banks ceased to exist in their old form. When Bear than half of its year-earlier price. Within a week Stearns, the fifth-largest investment bank, revealed its Goldman Sachs and Morgan Stanley, the first- and large losses from investments in subprime mortgage second-largest investment banks, both of which had securities, it had to be bailed out by the Fed in March smaller exposure to subprime securities, nevertheless 2008; the price it paid was a forced sale to J.P. saw the writing on the wall. They realized that they Morgan for less than one-tenth what it had been worth would soon become regulated on a similar basis and only a year or so before. The Bear Stearns bailout decided to become bank holding companies so they made it clear that the government safety net had been could access insured deposits, a more stable funding extended to investment banks. The trade-off is that base. investment banks will be subject to more regulation, It was the end of an era. Large, free-standing along the lines of commercial banks, in the future. investment banking firms are now a thing of the past
