Investment Banks in Global Crisis

Goldman Sachs is not the only one aimed at reducing the deficit of derivatives investment banking, in the Greek crisis we could also see Credit Suisse, JP Morgan Chase, Deutsche Bank...Behind almost every crisis and every profit, there is always the shadow of an international investment bank.

From Iceland, Greece, Spain, Portugal, Italy to Ireland, like dominoes, sovereign debt crises spread in Europe. Since the size of short positions in the euro since early February continues to create a new high. The U.S. unemployment rate is still high.

The world has not entirely recovered from 2008 global financial crisis. Goldman Sachs was already at the disorder in the financial markets begun to profit. As the euro zone is exposed along with the crisis, Goldman Sachs and other Wall Street's major financial institutions, the debt crisis in Greece, have an important responsibility. They are with the Greek government in 2001 after doing a currency swap transactions. Goldman Sachs used their financial technology to help Athens to cover up its poor financial situation, helping to reduce Greece's budget deficit in order to qualify to join the euro, and profit 300 million U.S. dollars.

It is interesting that by that time there is a world-renowned investment bank's downfall. And on Wall Street, like other investment banks, Lehman has created that crisis. The difference is that the liquidity crisis, the withdrawal of counterparties, financing costs rise, and brokerage clients run on. However, most desperate investment bank, then every time after the crisis can survive and even to live better, or call the edge ball escaped the supervision of, or customer rewards, or the taxpayers money. Shrouded in the Great Depression, Goldman achieved rapid growth in the late 20's "investment trust" by lending their money for investment, and to their shareholders and beneficiaries of net income distribution. Some of the Trust's investment portfolio limited to a restricted list of some of the investment scope is very broad.

Later, the world's been causing utter confusion of the "real estate securitization," the theoretical basis but also from investment banks. 80 years from the 20th century, Salomon Brothers economist Henry Kaufman, chief of a study of milk powder and baby boomers, study says baby boomers will bring about at least 150 billion U.S. dollars of housing loans and "loan securitization." The era of financial innovation that has arrived. Wall Street investment banks are those predictable and less predictable, clear, less clear-cut as the present value of discounted cash flow.

Each time the bubble burst, investment banks are sure to see the ghost flashes, they chase dedicatedly to maximizing their profits. Unfortunates are still a minority, such as Lehman and other exceptions. But fortunate, such as Goldman Sachs who can always find being taken advantage of, once again stage a comeback. In 2001, with Goldman Sachs, led by Wall Street investment behavior of the Greek government organized a series of currency swap transactions, making the Greek government concealed the GDP 1.6% of its debt.

In 2001, with Greece-related transactions, Goldman Sachs in fact used financial derivative instruments to finance one billion euro for Greece. However, the money has not appeared in Greece's public debt ratio was the statistical data inside. At the same time, Goldman Sachs, from a German bank, purchased a 20-year one billion euro CDS "credit default swaps" insurance to spread risk, so that the debt problem of payments by the insured party make up the shortfall.

Former Federal Reserve Chairman Alan Greenspan said credit default swaps was a major financial innovation in the global spread of U.S. credit risk, and increases the risk of the entire financial system of anti-toughness. Investment guru Warren Buffett said that unless derivatives contracts are secured or guaranteed, otherwise they are the ultimate value will depend on the credibility of their counterparties. Range of derivatives contracts is a person (perhaps Madman's) imagination to be used to limit speculation in credit default swaps are weapons of mass destruction. Soros obviously agree with Buffett's view. He said that the credit default swaps and implies an obligation to each other whether the uncertainty hanging over the Street.

Needless to say, derivatives, that is, the traditional intermediation business, investment and financing, investment banks are often faced with conflicts of interest. As early as the 1920s the U.S. stock market, little was released non-premium stock. Morgan possession of the flagship of the underwriting consortium is soaring price guarantee, in fact, the market price of those sold by the relationship between a household's stock is a straightforward gift. The beginning of the Internet bubble period, the Netscape underwritten by Morgan Stanley, IPO price is only 28 dollars, but the listing on the first day washed more than 70 U.S. dollars, but closed at 50 a few dollars. At that time initial offerings and to whom, and whoever earned ah, you can pick initial offerings and investors in the form of brokerage fees are usually returned to the investment bank. Sometimes brokerage fees are to be outrageous. However, the listed business continued to be considered an effective solution to the investment and financing information asymmetry between the principal.

Mergers and acquisitions in the investment bank are considered the credibility of the views of the listed derivatives business and among business, a foreign investment bank employee said China because the acquisition was a successful charge, so the basic orientation is to facilitate transactions. Last year, after the financial crisis, China's investment moves cast a particularly large number, of which there are a lot of projects from these large international investment bank's recommendation, almost in the cast most of their investment projects, investment banks have a presence.