And Then There Were None - High Finance ripoff takes down the top 5 investment banks

to fall The first of the top 5 investment banks Bear Stearns was in March 2008. Founded in 1923, shook the collapse of Wall Street this symbol to the world of high finance. By the end of May, the end of Bear Sterns was complete. JP Morgan Chase bought Bear Stearns at a price of $ 10 per share, in stark contrast to its 52 week high of $ 133.20 per share. Then came September. Wall Street, and the world watching, while a handful of days, the remaining investment banks on theTop 5 list tumbled and the investment-banking system was declared broken.

Investment Basics

The largest of the investment banks are big players in the realm of high finance, helping big business and government to collect money through means such as trading in securities in both the stock and bond markets as well as professional advice to the more complex aspects of high finance. Among these are such things as acquisitions and mergers. Investment banks also handleTrading of a variety of financial investment vehicles, including derivatives and commodities.

This type of bank involvement in investment funds, hedge funds and pension funds, which is one of the key ways in which what happens in the world of high finance can be felt by the average consumer. The dramatic crash of the remaining top investment banks affected retirement and investment not only in the United States but also around the world.

The High Finance ripoffThis led her down

In an article titled "Too Clever by Half", 22 September 2008, published by Forbes.com offers the Chemical Bank Chairman Professor of Economics at Princeton University and author Burton G. Malkiel is an excellent and easy to follow breakdown of what exactly has happened. While the trigger for the current crisis was the mortgage and lending meltdown and the bursting of the housing bubble, are the roots of what it calls Malkiel in the fraction of the bond betweenLenders and borrowers.

What he refers to is the transition from the era in which a bank loan or a mortgage from a bank or lender has been made and held by such bank or lender. Of course, as they were held on the debt and the associated risks, the banks and other lenders rather cautious about the quality of their loans and weighed the likelihood of repayment, or by the insolvency of the borrower carefully made against the standards that make sense. Banks and lenders moved away from this model, to what Malkiel calls a "come and distribute" model.

Instead of holding mortgages and loans, "mortgage originators (including non-bank) loans would hold only until they could in a series of complex mortgage-backed securities packaged into different segments or tranches with different priorities in the right to receive broken payments from the underlying mortgages, "with the same model is also used other types of loans as to credit> Card debt and auto loans.

As these debt-backed assets were sold and traded investment world has been increasingly leveraged them with equity ratios are often as high as 30-to-1. These machinations are often found in a shady and unregulated system, the so-called shadow banking system came. Since the degree of leverage increases, so too the risk.

With all the money to be made in the shadow banking system, lenders became less selective about whothey gave in loans, since they believe that more loans or the risk was, but it bit by bit, to repackage and sell them at a profit. Crazy terms became popular, no money down, no docs required, and the like. Exorbitant exotic loans became popular and lender controlled the depths of the sub-prime market for still more loans to make.

Finally, the system almost ground to a halt with the fall in property prices and increased loan defaults and foreclosures, withLenders make short-term loans to other lenders afraid to make loans to such increasingly leveraged and illiquid entities. The decline in confidence could fall, stock prices, as the last of the top investment banks are seen drowning in fear shaky debt and investor.

September has failed Lehman Brothers, Merrill Lynch choose takeover over collapse and Goldman Sacs and Morgan Stanley retreat to the status of bank holding companies, with potential buyouts on the horizon. Some of theThese investment banks back nearly a century, dates and others, such as the 158-year-old Lehman Brothers. Quite an inglorious end for these historic giants of finance, through a system of high finance trickery and shady dealings, a system which, as it falls apart, even by the end of May to pull destroyed the economy of the entire world.