Banking is the foundation of our financial system. The stock market crash of 1929 and the subprime mortgage and credit crisis show that when banks do not function correctly, the economy follows. Over the centuries, banking has changed (Beattie, 2015). Among its many developments is investment banking.
Investment banking is a kind of banking that provides financing for business enterprises and investment services and solutions for corporations, governments, and individuals. They create capital and provide solutions and strategies. They finance Initial Public Offering (IPO) launches, Private Placement, Bonds, Mergers and Acquisitions, and other services. Other services include investment, portfolio, and risk management, FICC (Fixed Income Clearing Corporation) services, equity securities and trading of derivatives. Some successful investment banks are: J.P. Morgan & Co. ($94 billion), Bank of America Merrill Lynch ($85 billion), Goldman Sachs ($40 billion), Morgan Stanley ($34 billion), and Citigroup ($76 billion) (“Top 10 Investment Banks”, 2015).
Some influential investment bankers have been Mayer Rothschild, Junias Morgan, and Amadeo P. Giannini. Rothschild, in the 1700s, overcame usury laws to establish the first international bank. His children invested in infrastructure, such as railroads, that would lead to the industrial revolution. Morgan brought true finance to America, helping George Peabody strengthen ties with England’s capital markets. The credit he secured led to fast industrialization. His son J.P. supervised financial reorganization and consolidation that allowed American production to increase greatly in the 20th century. Giannini changed the banking system from an elitist institution only for the wealthy to one accessible to ordinary people. After his retirement, Giannini came out of retirement to fight a Wall Street raider for control of his bank. He won and is remembered for democratizing banks and as one of the few non-Wall Streeters to challenge and defeat a Wall Streeter (Beattie, 2015).
One modern, very successful investment banker is Kenneth Griffin. The richest person in Illinois with a personal fortune of $6.6 billion, Griffin is founder and CEO of Citadel LLC (“The Richest Person In Every State”, 2015). Griffin earned his wealth in hedge funds and scores 8 (out of 10) on Forbes’ list of self-made billionaires (“Ken Griffin”, 2015).
He began trading while a student at Harvard in 1987. In 1990, he founded Citadel. The group includes Citadel (an alternative asset manager), Citadel Securities (a liquidity provider in American capital markets), and Citadel Technology (providing solutions for investment management technology) (“Kenneth Griffin”, 2015).
The “Kenneth Griffin” (2015) website states that Griffin contributes to several charitable organizations and serves on the boards of several business and civic organizations.
Investment banks create capital for other companies. They do this by underwriting equity securities and new debt for corporations and providing guidance regarding stock issue and placement. They also assist in the sale of securities, reorganization, mergers and acquisitions, and broker trades. These services are available to private lenders as well as institutions. They also may trade securities for their investments (“Investment Banking”, 2015).
Beattie, A. (2015). The 5 Most Influential Bankers Of All Time. Retrieved from http://www.investopedia.com/articles/financialcareers/09/most-influential-bankers.asp
Investment Banking. (2015). Retrieved from http://www.investopedia.com/terms/i/investment-banking.asp
Ken Griffin. (2015). Retrieved from http://www.forbes.com/profile/ken-griffin/
Kenneth Griffin. (2015). Retrieved from https://www.citadel.com/about/leadership/kenneth- griffin/
The Richest Person In Every State. (2015). Retrieved from http://www.forbes.com/richest-in- each-state/list/#tab:overall
Top 10 Investment Banks. (2015). Retrieved from http://finance.mapsofworld.com/investment/banks/top-10-bank.html