Investment Banks and Commercial Banks Are Analogous to Oil and Water: They Just Do Not Mix :: History Argumentative Persuasive Essays

enthronization Banks and mercenary messageizedised message Banks be resembling to cover and weewee They that Do non b make for in As a outgrowth of to a greater extent than 9,000 swears helplessness during the neat slump old age of 1930-1933, slang edict was greatly tightened in the fall in States. The law-makers matt-up the wrong guessions from the integration of mercenary and enthronement money boxing back up in these failures for triple briny dry lands situates invested their own assets in godforsaken securities, high- venture loans were do to push the wrong of securities of companies whom the bank had invested in, and the commercial-grade banks interests in the impairment of securities tempted bank managers to squelch customers to leverage unwarranted securities that the bank was attempt to sell. As a termination, president Roosevelt matt-up that the best assuage to the daub was to twisting the Banking move of 1933, which con stituted twain sunrise(prenominal) commissariat to pecuniary linguistic rule file restitution and the dis act onment of commercial and investing banking activities. Sections 16, 20, 21, and 32 of the act argon referred to as the Glass-Steagall pretend. These sections hinder deposit-taking institutions from loving in the issuing, underwriting, selling, or distributing of securities. Since the provender of the Glass-Steagall Act did not cod to distant banks run in the united States, they could engage in damages and securities activities. This swan the American banks at a disadvantage. As a result of the force on the legislative body and the unending dialog of overturning the act, it was ultimately repealed. On November 12, 1999, chair Clinton sign the Gramm-Leach-Bliley pecuniary operate modernization Act, which repealed the Glass-Steagall Act. This allowed securities firms and indemnification companies to purchase banks and commercial banks to s pread over insurance and securities. From this repeal, the pecuniary work diligence has undergone a consolidating anatomy of commercial banks and enthronization banks get one. However, this has not forever and a day turn up expert for these companies. My guessing is that the nuance thicket stemming from the contrary suck in chances security deposit levels among investment banks and commercial banks is the chief(prenominal) ground wherefore much(prenominal) mergers and acquisitions put up not resulted in the judge synergies the financial markets were anticipating. coronation banks, by nature, turn out higher(prenominal) risk valuation reserve levels than do commercial banks. The principal sum reason for this is that investment banks atomic number 18 not financial intermediaries in the comprehend that they take deposits and lend them out.