History of the Investment BanksBefore Great DepressionBetween these years Investment banking lived it’s bestyears before the Great Depression.
Heads of the markets were JP Morgan andNational City Bank, usually they were taking a step for affecting and sustain. JPMorgan himself saved the country from a horrable panic in 1907. Banks whichused the Federal Reserve loans to enforced the markets caused a high marketspeculation, resulted a collapse in markets and it led to the Great Depression.After The DepressionThe nations banking system was in chaos, %40 of the banks were bankrupt orsubdued to merge. Building a wall between the commercial and investment bankingfor healing the banking system, the government enacted a law called theGlass-Steagall Act (The Bank Act of 1933). Moreover, to prevent the conflict ofinterest between the request of acquire of investment banking business andmission to ensure just and neutral mediation services, a seperation done bygovernment. These regulations remembered as “Chinese Wall”.
In 1975, the direction of removing the negoitated rate, mercantilecommissions shrunken and trading profitability went down. Search-focusedboutiques.werestuck plus under one roof the idea of an integrated investment bank, ensuringsales, trading, research and investment banking started to take root.
Derivatives, high return an structured products.which were the financial products seen atthe end of the 70′ and begining of the 80’s, made high profits for investmentbanks. The simplification of corporate merging assumed as Glass-Steagall willfall at some point from investment bankers and it will cause a securitiesbusiness exceed by commercial banks in the late 1970’s. In 1999 The Bank Act of1933 did collapse and the consequences were not as bad as expected.After RegulationInvestment bankers escaped the recessional picture and they had the respectfor power and ability which gained in the fortunate times.
The rise of theinvetment bankers mentioned in the populer media. In 1990s they tought thatthere will be a boom in initial stock offering (IPO). Abvious IPO deals weremade amount of 548 in 1999 – in one year- went to the public in online. InNovember 1999, Glass-Steagall Act has been removed when entry into force of anew law called Gramm-Leach-Bliley Act (GLBA) provide a solution to theconfusion between banking with securities and insurance businesses and allowedto a broad banking system. GLBA was functioning well since the wall wascollapsing over time.