History of the Investment Banks
Before Great Depression
Between these years Investment banking lived it’s best
years before the Great Depression. Heads of the markets were JP Morgan and
National City Bank, usually they were taking a step for affecting and sustain. JP
Morgan himself saved the country from a horrable panic in 1907. Banks which
used the Federal Reserve loans to enforced the markets caused a high market
speculation, resulted a collapse in markets and it led to the Great Depression.
After The Depression
The nations banking system was in chaos, %40 of the banks were bankrupt or
subdued to merge. Building a wall between the commercial and investment banking
for healing the banking system, the government enacted a law called the
Glass-Steagall Act (The Bank Act of 1933). Moreover, to prevent the conflict of
interest between the request of acquire of investment banking business and
mission to ensure just and neutral mediation services, a seperation done by
government. These regulations remembered as “Chinese Wall”.
In 1975, the direction of removing the negoitated rate, mercantile
commissions shrunken and trading profitability went down. Search-focused
stuck plus under one roof the idea of an integrated investment bank, ensuring
sales, trading, research and investment banking started to take root.
Derivatives, high return an structured products.which were the financial products seen at
the end of the 70′ and begining of the 80’s, made high profits for investment
banks. The simplification of corporate merging assumed as Glass-Steagall will
fall at some point from investment bankers and it will cause a securities
business exceed by commercial banks in the late 1970’s. In 1999 The Bank Act of
1933 did collapse and the consequences were not as bad as expected.
Investment bankers escaped the recessional picture and they had the respect
for power and ability which gained in the fortunate times. The rise of the
invetment bankers mentioned in the populer media. In 1990s they tought that
there will be a boom in initial stock offering (IPO). Abvious IPO deals were
made amount of 548 in 1999 – in one year- went to the public in online. In
November 1999, Glass-Steagall Act has been removed when entry into force of a
new law called Gramm-Leach-Bliley Act (GLBA) provide a solution to the
confusion between banking with securities and insurance businesses and allowed
to a broad banking system. GLBA was functioning well since the wall was
collapsing over time.