01:220:395 Lecture Notes - Lecture 9: Bear Stearns, Morgan Stanley, Oligopoly
2 May 2016
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Investment banking: merrill lynch, goldman sachs, morgan stanley, lehman brothers, bear stearns. Securities rating companies: moody"s, standard & poor"s, fitch. When an oligopolistic market becomes so large that it"s demise has a major adverse effect on the nation"s economy. Make toxic loans, earn commission on loans, bundle and sell loans, bet against loans, insure against loan default, bet against firm collapse, avoid criminal prosecution. Deregulated industry, housing market collapse, home foreclosure, financial market collapse, government bailout, recession, behavior continues. Glass-steagall act 1933: prevent banks from engaging in risky behavior, separate commercial banks from investment banks that sell new stock securities, prevented shocks in the stock market from effecting commercial banking. In 1999 congress repealed the glass-steagall act by enacting gramm-leach- bliley on nov 12, 1999. To date, 40% of the 400 provisions have been finalized. Proposed to reduce risk in the banking system. billion by wells fargo, jp morgan, citi group, ba, ally financial.
