ECON 252 (2008) - Lecture 17 - Investment Banking and Secondary Markets

Lecture 17 - Investment Banking and Secondary Markets

Overview

First, Professor Shiller discusses today's changing financial system and recent market stabilization reform introduced by U.S. Treasury Secretary Henry Paulson. The financial system is inherently unstable and would benefit from more surveillance, particularly for consumer protection issues, given the recent subprime mortgage crisis. Although this particular reform might not be successful, more regulators and policymakers are talking about changing the stabilization system and will likely alter the role of the Fed in the future.

Second, Professor Shiller introduces the mechanics and role of investment banking. Investment banks underwrite securities and arrange for the issue of stocks and bonds by corporations. Corporations work with investment banks to navigate the Securities and Exchange Commission requirements for issuing securities. The banks then take on a "bought deal" or "best efforts deal" and help the corporation to find a market for the securities. Investment banking depends on the reputation of its bankers and, as we have seen recently, can be destroyed by rumors about the bank's insolvency.

Resources

Assignment

Fabozzi et al. Foundations of Financial Markets and Institutions, chapters 13 and 14

Course Media

Transcript

html

Audio

mp3

Low Bandwidth Video

mov [100MB]

High Bandwidth Video

mov [500MB]