Investment banks perform two recognized functions: trading and capital market intermediation. These functions are different and unique from those commonly carried out by commercial banks that accept deposits and provide loans. Investment banks are essential agents of capital generation and price setting. They are instrumental in coordinating the consumption of present and the future. The role of investment and commercial banks is well defined in the U.S. than other nations around the word.
The independent investment-banking sector in the United States
Glass-Steagall Act enforced by the U.S. Congress back in 1933, created a distinct legal line of operation between commercial banks and investment banks. This act restricted investment banks against accepting deposits or making loans. On the hand, commercial banks could not engage in the underwriting of securities. Fortunately, the Gramm-Leach-Bliley Act of 1999 eased these barriers.
In the modern mixed economies, government institutions, large corporations, and individual investors depend on investment banks to develop capital. They match individual or firms selling securities with those willing to buy. These banks earn their revenues by linking producer to savers and facilitating financial development.
Controlling interest rates
Investment banks work in close cooperation with commercial banks to assist in determining predominant market interest rates. While the rates for investment and commercial products are different, all interest rate affect each other. For instance, interest rate determines the amount of interest a saving will generate and the cost of borrowing.
Based in Florida, Martin Lustgarten is a brilliant entrepreneur and investment banker. Previously, he held dual citizenship for Venezuela and Australia, which helped him to access a large pool of loyal customers. He navigates the market shifts and economic recessions by investing in different sectors across the globe. Martin’s ability to study the market and predict changes has enabled him to guide his clients in investing wisely in the competitive markets.
Maintaining a diverse international portfolio is a strategy that Martin has employed for many years. Having established a professional career as an investor, Martin decided to institute his company (Lustgarten Investment Bank). Through this firm, he has delivered efficient investment banking services to retail and institutional investors.