We are talking today about Investment Banks and Money Mangers. These are the people who manage investments. Investing used to be more of an individual thing, it's still is for some people. But more increasingly, there's an intermediary between you and your investment. But of course, I'm talking not about commercial banks or regular banks but investment banks. And other kinds of intermediaries like mutual fund managers, ETF, exchange traded fund managers etc. So this is the reality of the modern world and I thought we need to talk about it for this course. So we'll start with investment banks. So what do investment banks do? They traditionally do no accept deposits, they're not members of the Federal Reserve System. There's no FDIC insuring them, well they don't even have deposits. And so commercial banks take deposits and make loans. Investment banks don't take deposit and don't make loans. But in fact they under write securities. But what does it mean to under write a security? It means you're the guy that companies go to, or non profits or even governments go to, when they want to raise money, and they do it with you as a broker, intervening. To underwrite a security means to manage the process of issuing new shares in companies or issuing debt for companies, or as I said, for other organizations. Now just to give some names. The term bulge-bracket, I looked it up on anagrams. It only goes back to the 1980s, so it's not huge O. But the bulge-bracket firms are the big firms. So, first Boston, but they're mostly not pure investment banks anymore. So first, Boston. Actually, it was an outgrowth of the national, I think it's called the National Bank of Boston. But it became an investment bank in New York, big time, but it was acquired by a Swiss bank, Credit Suisse. Goldman Sachs was, until their financial crisis in 2008, was a investment bank. It was forced by regulation to become a bank holding company. And so now, they're regulated as a bank. And they might as well accept deposits. So they are in fact, there was news last year that Goldman Sachs had bought $16 billion of deposits from General Electric, the financial arm of General Electric. So they are now a bank. You can deposit money in Goldman Sachs. I don't know if it's up and running yet, but they don't have corner offices or ATM machines. So they're not really what you think of as a commercial bank. But they're not a pure investment bank either, so they have an investment banking division. >> Can I ask a question? >> Yes. >> Professor, you have discussed a lot about how the business of investment banking are, how they're based on people's trust, and I used to be a US banker. I [INAUDIBLE] echo that. I'm just wondering about your opinion, how about the current stature of the US banks, I mean after the financial crisis and how do you think they can improve their public image? >> Well, I think investment bankers have a better public image than undertakers. Every occupation has its public attitude. So, actually I don't think people are overall extremely like movies about investment bankers are usually, very negative, right? They're usually criminals practically. But if you have one living next door, you've probably don't because he lives in the rich neighborhood. [LAUGH] But if you did you'd probably think he's an okay guy, he or she is an okay person. So, I think there's something about the way I view it is that finance is an important technology. Many people don't view it this way. It's not about shifting papers around and making obscured deals that exclude someone else. It's about making things happen for any good activity has to be financed. And when you get people together to do something important, they start worrying, they have risks that they're concerned about and they're wondering is this for me or not, or maybe I'm out of here. Maybe they'll do a cynical job as an employee. So you have to incentivize people, you have to protect them from risks. We are living in an age of financial capitalism and it may create an inequality and problems like that. But it also create tremendous economic growth that we've been seeing around the world. Since in the last half century particularly when there was a greater appreciation of finance. So I think that there is mistrust and hostility sometimes. And especially after the financial crisis recently. But I think it's manageable and one shouldn't not go into finance. I think, maybe politician are lower esteemed than finance people. And that's also an important thing for people to do. And you shouldn't stay away from that one either.