US Financial Crisis: US Banking Sector at Crossroads?



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Code : ECC0023

Year :
2008

Industry : Banking, Insurance and Financial Services

Region : US

Teaching Note: Available

Structured Assignment : Available

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Abstract: This case study's objective is to question and argue out the US banking sector's mega-banking model in the wake of US financial crisis (2008). In 2008, the US financial crisis has tumbled the performance of giant investment banks in the US. The US banking sector had seen the demise of big investment banks like Lehman Brothers, Merrill Lynch and Bear Stearns. Added to this the banking landscape of the US also witnessed conversions of investment banks like Goldman Sachs and Morgan Stanley into bank holding companies. On the other hand, the universal banks were also affected at their worst by the crisis. The one-stop-shop model which proved expensive during Great depression is once again viewed as the same by drawing many criticisms. Under such conditions, the changing status of investment banks, with their risk management skills, strong corporate base, prolific networks, is further increasing the complexities to universal banking model. The competition among the players is intensifying, ultimately affecting the whole US banking sector. This case dwells upon the reasons for the failure of investment banking model and growing significance of universal banking model. It also briefs about the performance of universal banking model at various intervals. It helps in debating on the continuance of universal banking model and the mounting complexities to this model with new entrants.

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Pedagogical Objectives:

  • To understand and assess specialised banking model
  • To debate on the role of universal banks in the US financial crisis
  • To debate on the future of universal banks with the new entrants.

    Keywords : US Financial Crisis,Investment Banks, Universal banks, Glass-Steagall Act, Gramm-Leach-Bliley Act, Subprime Losses, US Banking Sector, Federal Reserve, Leveraged Business, Great Depression, Goldman Sachs, Morgan Stanley, Bailout, Henry Paulson

    Contents :
    Investment Banking: Is the Road Closed?
    Universal Banking
    US Financial Crisis: Involvement of Universal Banks


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