Investment banks help companies and governments raise money by issuing and selling securities in the capital markets (both equity and bond), as well as providing advice on transactions such as mergers and acquisitions. This functions are played by securities companies like Nomura, Daiwa, Monex, etc. in Japan.
In New York, on September 15, 2008, Lehman Brothers Holdings announced it would file for Chapter 11 bankruptcy protection citing bank debt of $613 billion, $155 billion in bond debt, and assets worth $639 billion. On September 16, 2008, after an AIG liquidity crisis following the downgrading of its credit rating, the U.S. Federal Reserve Bank stepped in to prevent financial collapse of the company. The Fed announced the creation of a credit facility of up to US$85 billion in exchange for warrants for a 79.9% equity stake and the right to suspend dividends to previously issued common and preferred stock.
What's the difference between Lehman Brothers and AIG ? LB is an investment bank and AIG is a conglomerate of insurance finance services. The key of judgement whether public rescue is required or not is the influence volume of counter parties, an analyst says. The core competence of investment bank is brokerage service and trading. Collecting money, then investing it. No big assets are required. Only excellent fund managers and traders are required. They will move to other banks to look for higher revenue after bankruptcy. Invisible hand of God ?
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