Glass-Steagall Act

• An investment bank main objective is to help corporations and governments in raising funds by underwriting activities. Merrill Lynch is an example of a good investment bank. In addition, investment banks also work as agents in the issuing of securities as well as mergers, acquisitions, and divestitures.  In order to be an investment bank, it has to have a broker-dealer license. The investment banks obligation is to governments and corporations. Nonetheless, the investment banks make money by individuals investing in the bank such as hedge funds and mutual funds, as well as individuals including other small investment. On the same hand, investment banks also underwrite and research securities and trade existing securities for cash or other securities to maximize profit for their investors.

Chase Manhattan is an example of a commercial bank. The specific role of a commercial bank is to provide service to the everyday people. These services include opening, depositing, and closing checking, saving, and money market accounts. The primary income for commercial bank is interest on loans, mortgages and fees. The commercial bank is for the average everyday person because the bankers accept deposits and pay interest on their accounts.  

Glass-Steagall Act

The main concept of Glass-Steagall was to solidify rules that commercial and investment banks have to be separate. In other words, commercial and investment banks cannot operate as one bank. However in 1999, the Glass-Steagall Act was repealed under the Bill Clinton Presidency. Since the Glass-Steagall Act was repealed, investment and commercial banks are allowed to operate under one location.

http://www.ratical.com/co-globalize/linkscopy/GlassSteagall.html





— ALJ Analysis

Glass-Steagall Act was good for the United States because it held banking laws in place, so that banks would not have too much power. However, I think that the repeal of the Glass-Steagall Act was a mistake. Investment and commercial banks should be separate. It maybe a conflict of interest when banks have to decide whether or not it is in their best interest to do business with  investors, governments, or consumers.  Moreover in the long run, bankers are going to sway to business deals that have greater profits, which are usually companies and the government. As a result, this leaves ordinary people like you and me with much hope.

In recent news, the government is considering to reinstate the Glass-Steagall Act. If the Glass-Steagall Act is reinstated, it will affect banks in the United States such as Goldman Sachs and JP Morgan Chase. For example, JP Morgan Chase would be required to separate their banks into commercial (Chase)  and investment (JP Morgan). In short, the banking cartel will have less control. In my opinion, the Glass-Steagall Act is what the United States needs to rejuvenate its economy.

http://www.mybanktracker.com/bank-news/2009/12/17/glass-steagall-act-may-make-a-return-some-lawmakers-say/

Irish Resist EU's Push to Accept a Rescue

The United States is not the only country that is having problems with the economy. In recent news, Europe is opposing $150 billion bailout to Ireland. Similar to the United States, Europe also has some resistance from its people. This resistance is not only with the Irish but also with its investors, which is Europe's main problem. It is hard to reinsure investor that the economy is stable, if the government is steadily giving money into its economy. There also speculation that investors are thinking about pulling out their large investments in companies and banks.

Ireland’s argues that its country does not need a bailout! Ireland is afraid that the bailout will downgrade its country’s ratings around the world similar to the United States. For instance in China, the United States no longer has a triple A credit rates because the US has been dumping so much money into its economy with no signs of rapid stabilization.

 http://online.wsj.com/article/SB10001424052748704327704575614861674707990.html

Chevron to Buy Atlas Energy for $4.3 Billion

The biggest topic of the day is that Chevron buys Atlas Energy for $4.3 billion. This is huge for Chevron because this allows the company to expand its market share. Chevron is already the second largest energy company in the United States. For Chevron, appreciate of the acquisition offers Atlas shareholders a little bit more for its bang for its bucks. Before Chevron completely takes over Atlas, the company would inherit $1.1 billion dollars in debt. Chevron’s deal with Atlas needs to go through a thorough process. Atlas area of expertise is natural gas; therefore, different restriction and regulations apply to acquisition.

http://dealbook.nytimes.com/2010/11/09/chevron-to-buy-atlas-energy-for-3-billion/?src=mv

Money as Debt

Have you ever thought about where money originated? How did it come into existence? There are videos on YouTube called Money as Debt. These videos explain the grand-scheme of money. In one of my previous blogs, I wrote about value and how it is determined. Essentially, I think that money and value go hand-and-hand. Do you know that the government is not the only source of money? Banks actually produce money. For more information, watch the videos below.

 



— ALJ Analysis

Money as Debt is an awesome video. It has given me great insight how money is made. It also explains in great detail how the value of money was created. All over the news, you will hear that the government is spending way too much money. After watching this video, one may ask, "Is the government actually spending this money?" My answer would be “no". The government did not actually produce billion of dollars and give the money to AIG and GM, or rescue the housing market. In examples like AIG, it was almost as if they went through a bankruptcy without filing. The government forgave all debt in order to seize the company. In short, money is only as valuable as people perceive it to be. Sure, people want to have the ability to buy products and obtain assets. But those things also have value. It is the way of life — or is it?