What are investment banks, and what do they do?
I know Goldman Sachs, Morgan Stanley, and others are them but I just want to know what purpose they serve. I know during the financial crisis they invested heavily in real estate debt securities, then couldn't collect on those assets. On top of that, they financed those assets with short-term debt. Then, investors pulled money and short sales on these companies caused a liquidity crunch. All this is besides the point, I want to know what investment banks are.
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Answer by Joseph
Investment banks underwrite securities. On one side there are companies that need capital to expand. On the other side there are the people who have money to invest. Investment banks link those two sides together for a fee.
Those "banks" are actually enormous financial companies that have a whole plethora of operations. The losses they sustained from speculating on derivatives weren't actually related to their Investment Banking operations.
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