Matt Yglesias

31 Responses to “Late Night Musing”

1. NBarnes Says:
   September 22nd, 2008 at 2:55 am

   I couldn’t, and I’m not a total financial babe in the woods. Which makes me wonder what the difference actually is, and how long it would take me to really grok the distinction.

2. aleks Says:
   September 22nd, 2008 at 3:26 am

   Investment banks are much less regulated, and are theoretically less protected by the government, except that they’re too big to fail so protecting them is the govt’s top priority.

   Is that about it?

3. max Says:
   September 22nd, 2008 at 3:42 am

   The former investment banks are trying to survive. More regulated than thou.

   Matthew, we should put her in charge of the bonds.

   max
   ['I doubt she'll let us get ripped off.']

4. Brandon Says:
   September 22nd, 2008 at 4:16 am

   There’s a reason it’s difficult. With superentities like JPMorgan Chase that control extensive financial services, investment banking, and commercial/retail deposit banking arms, the distinction has become pretty blurred. Goldman and Morgan were part of a dying breed anyway.

5. Anthony Damiani Says:
   September 22nd, 2008 at 5:26 am

   Well, when you tell me that the government is handing out $700,000,000,000.00, I figure it’s only a matter of time before someone starts repositioning themselves to make money off the deal. The difference between this and the Bear Sterns/AIG thing is partly that it’s unfolding more slowly with wider application. That makes it eminently gameable.

   But, hey, at least congress and the courts will be able to offer close oversight of the… what’s that you say?

   Nevermind.

6. Wondrin' Says:
   September 22nd, 2008 at 6:28 am

   First of all, how many do you think could actually describe what an investment bank does? Do you think this guy could?

7. cleek Says:
   September 22nd, 2008 at 6:59 am

   the difference is simple: one has WMDs, the other has ties to al-queda. that’s what i heard from a guy who knows a guy. either way, we can’t take any chances.

8. Luke Says:
   September 22nd, 2008 at 8:43 am

   Seems a LITTLE risky to put your paycheck into Morgan Stanley or Goldman Sachs, right now.

   NPR, in its mandatory hour of intensely conservative programming, was talking about how great it was that we’d repealed the act splitting investment and commercial banks. This act was, of course, a New Deal measure to prevent the Great Depression from happening again, insofar as a stock market crash wouldn’t directly effect checking accounts and personal liquidity.

   So, naturally, since it sounds horrifying for these mergers to be happening, NPR had nobody but cheerleaders on. Because it would be IRRESPONSIBLE to frighten we poor sheep and start a run on banks! Better to let us lose everything in darkness.

9. Archit Says:
   September 22nd, 2008 at 8:47 am

   At the very least, I bet Barney Frank could.

10. low-tech cyclist Says:
    September 22nd, 2008 at 9:18 am

    Let’s see: Lehman’s already in bankruptcy, Merrill Lynch was bought up by Bank of America, and Morgan Stanley and Goldman Sachs are converting themselves into commercial bank holding companies.

    So, who does that leave to rescue?

11. DTM Says:
    September 22nd, 2008 at 9:34 am

    For the record, as I understand it the primary distinction is basically that commercial banks can take deposits in checking and savings accounts that are guaranteed by the FDIC, and in turn are regulated by the OCC and the Fed. Those deposits are the key component of a commercial bank’s capital, and their loans are generally structured as a contract between the borrower and the bank (although note some big commercial banks do get involved in underwriting bond deals).

    In contrast, since investment banks don’t have such deposits, their primary role is to arrange securities transactions between those needing capital and those looking to invest capital (e.g., by arranging stock and bond issues). As an aside, though, investment banks sometimes do have their own capital and invest it through securities. Anyway, as a result of their securities-based role, they are regulated by the SEC.

    By the way, I don’t know how many people in Congress knew all this. But I bet a decent number are getting the idea that transforming themselves into bank holding companies is part of what will allow these entities to participate in the anticipated bank bailout.

12. sd Says:
    September 22nd, 2008 at 11:45 am

    Luke,

    It absolutely was a good thing to repeal the law that mandated a wall between commercial and investment banking. The old law was dumb when it was enacted and stiffled innovation in the markets for year. Its repeal has nothing to do with the current financial crisis, which would have happened in one form or another even if the law had not been repealed.

    The only difference of course is that had the law not been repealed it would have illeagal for Bak of America to buy Merril last week, meaning that the feds would have had to bail out yet another massive financial institution.

13. 55 Says:
    September 22nd, 2008 at 11:48 am

    Does Sarah Palin know what a bank is?

14. aleks Says:
    September 22nd, 2008 at 1:18 pm

    # 55 Says:
    September 22nd, 2008 at 11:48 am

    Does Sarah Palin know what a bank is?
    **********

    Sarah Palin is perhaps the most knowledgeable person about banks in the United States. You can see one from Alaska.

15. bob mcmanus Says:
    September 22nd, 2008 at 3:13 pm

    11:Yeah FDIC. Uhh, has the FDIC overnight guaranteed all of their accounts?

16. Peter K. Says:
    September 22nd, 2008 at 4:03 pm

    sd

    It absolutely was a good thing to repeal the law that mandated a wall between commercial and investment banking. The old law was dumb when it was enacted and stiffled innovation in the markets for year. Its repeal has nothing to do with the current financial crisis, which would have happened in one form or another even if the law had not been repealed.

    Stiffled innovation? Seems like the markets innovated themselves into a major clusterf*ck.

    Raise capital gains taxes! A lot! Tax the fat boys!

    Next time we have a market meldown, the banks will be screaming for bailouts too, because of their investment divisions.

17. Kyle Says:
    September 22nd, 2008 at 9:51 pm

    low tech cyclist: Wamu and Wachovia come to mind. And there are plenty of smaller banks that will start collapsing in the next few months.

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