Loan Crisis Throws New Light on Investment Banks

Loan Crisis Throws New Light on Investment Banks
They tried to spread the risk from risky mortgage-backed securities, until the market collapsed. Transcript of radio broadcast:
10 April 2008

This is the VOA Special English Economics Report.

Investment banks have long played a part in the financial system. But the recent crisis over securities based on risky home loans has brought them new attention.
Investment banks handle stocks, bonds and other securities. They underwrite new offerings. That means they take the risk of buying the securities and reselling them to the public. They also provide business advice and market research, and deal in existing securities.

Investment bankers have structured some newer securities in highly complex ways. Their value could be tied to lists of stocks or prices of goods or, as the world now knows, groups of risky home loans.

These mortgage-backed securities were sold to investors worldwide as a way to spread the risk. But as more and more loans went bad, the market collapsed.

Before the nineteen thirties, the United States had no separation between traditional banking and investment banking activities. Bank holding companies could own other financial companies that would underwrite new stocks. They would also provide stockbroker services for the public. People often bought shares with money borrowed from the banks.

Then, in nineteen twenty-nine, the stock market crashed. Between nineteen thirty and nineteen thirty-three almost ten thousand banks failed.

Congress passed a banking act in nineteen thirty-three known as the Glass-Steagall Act. It banned commercial banks from buying and selling securities; their job was to pay interest on savings and lend to borrowers.

This ban remained until nineteen ninety-nine. That year the Gramm-Leach-Bliley Act permitted commercial banks to deal in securities and sell insurance. They can again own investment companies that underwrite securities.

Many banks now regret that they got involved with high-risk mortgage securities. The collapse last month of the nation's fifth largest investment bank, Bear Stearns, showed the risks. The International Monetary Fund says total losses related to American subprime mortgages could reach almost one trillion dollars.

On March seventeenth, the Federal Reserve started offering loans to investment banks, as it does for other banks. The program will continue for at least six months. The central bank used a power described in section thirteen of the Federal Reserve Act. But this power has not been used since the law was updated in nineteen thirty-two.

And that's the VOA Special English Economics Report, written by Mario Ritter. I'm Steve Ember.

----------------------------Google Translate

贷款危机抛出新的轻于投资银行
他们试图传播的风险，从风险抵押贷款支持证券，直至市场崩溃。全文电台广播：
2008年4月10日

这是美国之音特别英语经济学报告。

投资银行早已起到了部分在财务制度。但是最近的危机证券基于风险的住房贷款为他们带来新的关注。
投资银行处理股票，债券和其他证券。他们承担的新产品。这意味着他们采取冒险购买证券及倒卖给市民。它们还提供商业咨询和市场研究，并处理在现有的证券。

投资银行家们已有条理一些较新的证券业在高度复杂的方式。其值可绑名单，股票或商品的价格，或者像现在世界上众所周知，团体险住房贷款。

这些按揭证券出售给投资者，以此来分散风险。但随着越来越多的贷款到最糟糕的是，市场崩溃。

前19个三十多岁，美国没有区分传统银行业务和投资银行业务活动。银行控股公司可以拥有其他金融公司将承担新的种群。他们也将提供股票经纪服务，为公众开放日。人们常买股票的钱借自银行。

然后，在1929年，股市暴跌。与1930年和1933年几乎万银行倒闭。

国会通过银行法，在1933年被称为玻璃steagall行为。它禁止商业银行买卖证券，其职责是支付利息的储蓄和贷款的借款人。

这项禁令直到1999年。正是这一年， gramm -利奇- Bliley法案允许商业银行向证券交易和卖保险。他们可以再次自己的投资公司，包销的证券。

很多银行现在感到遗憾的是，他们参加了与高风险抵押贷款证券。在去年5月举行的全国第五大投资银行Bear Stearns公司，显示了风险。国际货币基金会说，总的损失与美国次级抵押贷款可达到近1万亿美元。

3月17 ，美国联邦储备委员会开始提供贷款，以投资银行，因为它为其他银行。该计划将持续至少六个月。中央银行用电源描述在第13位美国联邦储备委员会采取行动。但是，这种权力还没有得到使用，既然法律已被更新，在1932年。

这也是该美国之音特别英语经济学报告，写马里奥里特尔。我史蒂夫Ember公司。