HOT TAKE: Commercial banking is more crucial than IB
With everything going on with SVB, its abundantly clear that commercial banking is far more influencial than investment banking. Certain commercial banks alone (i.e. SIFIs) have the power to bring down the entire economy (aka "Too Big To Fail"), spread panic, get urgent govt attention, etc.
What would happen if a EB goes down? What would happen if BB gets out of IB? Deals would still happen, just maybe not as efficiently. Berkshire Hathaway/Warren Buffett seldom use investment banks as a prime example.
Also, the vast majority people need retail/commercial banking, and even MS/GS had to convert to commercial banks in 2008.
Looking forward to seeing comments about how right I am.
The fact the traditional banking is more important to the general economy than investment banking is painfully obvious.
Not so sure about that, scroll down for evidence.
Otherwise, consider this reiteration.
Companies need to raise debt + equity, so no, they're both important. I do agree that BBs / full service banks are slightly more important than EBs / non-full service banks since they're more integrated within the financial system and what products they offer to clients.
Could someone make a career out of retail banking?
if youre the head of retail banking for like a city (lets say youre the guy senior guy running all chase branches in boston) sure, but most people dont make much money there. You probably want to look into private banking which is essentially "retail" banking for rich people, managing their investment portfolios, helping them manage their taxes, providing personal lines of credit, mortgages, and being their liaison for the rest of the bank
You're a VP in commercial banking and posted this?
Seems like the question is "which is more critical for daily life" - yea, obviously commercial / retail banks touch more people /entities than investment banking so if they "disappeared" it would cause much more upheaval locally. However, they're equally important: I think one only needs to look at '08, which was the potential wholesale destruction of investment banking, to see the potential impact. Can also look at the S&L crises to see impact to commercial banking - trying to compare the two is kind of...dumb.
As an aside - MS / GS did not "convert to commercial banks in 2008", they converted to Bank Holding Companies so that they could access the Fed Window as a life line. That does not mean they suddenly started competing with BoA and Wells in retail banking, to be sure - GS invested a considerable amount of money trying and has basically given up Marcus.
EB's don't "go down" - they are effectively consultants with a different business model - they don't have a balance sheet.
A bank holding company (or financial holding company since we're being super technical) is a mechanism for commercial banks-- as you said to access Fed discount window and FDIC insurance.
Also, the IBs that imploded in 2008 were forced-rescued by traditional commercial banks (i.e. JPM and BAC). Pure investment banks can't save commercial banks, and seems only the Fed/federal govt can intervene.
Goldman and MS both do commercial lending with deposits as a funding source. It's just that GS failed at retail banking and MS never bothered (but recently acquired E-Trade).
The root cause of the problem is always LIQUIDITY; Lehman and Bear Stearns couldn't off load their shitty MBS products, because the buyers, mostly commercial banks, were getting screwed by credit quality, or lack thereof. S&L crisis and what happened with SVB have to do with asset/liability [duration] mismatch, which is still about liquidity.
Sure...but what we're discussing here is that commercial banks - Chase, Citi, Wells and BoA, plus the regionals, and their specific business line of lending to individuals and companies is more important than anything else. You said GS/MS converted to become commercial banks with the heavy implication that they are now the same as those big 4 in terms of the business they conduct. I would argue that this is not at all the case, and MS never tried to be a commercial bank outside of add-ons to wealth management and GS tried retail and publicly announced it was rolling it back.
I would also contend that your argument that "JPM and BoA rescued the IBs" actually refutes your point: both Ken and Jamie (both commercial bankers, btw) wanted to expand their presence in investment banking. So too did Dean Witter (white sock) want to acquire Morgan Stanley (white shoe). For a long time it's been a one way street as IB has always had higher fees and margins than retail/commercial. Will that change...I kind of doubt it. Still, SVB has shown that retail...at least very wealthy retail in excess of FDIC insurance...is systemically important and will become a key consideration by law makers.
Agreed, I don't understand the point OP is trying to make...
Thank you, VP in Corporate Banking, for saving us from economic doom once again. Oh where would we be without your brave service.
Yeah, I believe comm bankers deserve a good treat once in a while.
Hope your dealflow picks up soon!
FYI, Wallstreetoasis.com literally changed my original words and removed text from the OP I was replying to.
Please be aware, scary times!
you use your free weekends to post this take here? you see the part on the website where this section is labeled IB? it means your kind if not welcome here. go back and enjoy your $150k a year salary.
$140k base actually, but the job stability and 30 hour work weeks (if that), ease the pain.
Finally, commercial banks are in the news (for failing likely due to morons working there) and you see the opportunity to brag about working in the sector. Sorry you couldn’t break into high finance.
Hey OP, I'm looking to switch into a job from consulting with much easier hours, pay is not the number one concern for me as long as it's not as abysmal as marketing-level wages because I'm fortunate to own my own place already and have savings from inheritance. Were you serious about the 30-hr work weeks? And do you have an idea how the hours will change as your progress in your career?
We have interns salary shaming adults in their late 20s / early 30s? What is this website becoming, 4chan?
There are plenty of people in Commercial Banking at the VP level clearing 200k/300k+ while mostly golfing and maintaining relationships. Would you rather have autonomy over your life, be able to see every kids sporting event, sleep 8 hours a night, AND make enough to pay for your kids through college, or would you rather have a heart attack at 29, bald by 31, and two divorces by 40?
Was OPs post kind of on the nose? Sure. But dont make it personal when you're talking to an adult who has likely worked 5-10 years, and certainly dont salary shame people you know nothing about. I have friends in sales who didnt finish college out earning Associates in IBD. Your job title doesnt determine your salary, how good you are does. I would estimate I am walking away with TC higher than 50+% of PE Associates this year. Most work more than me, with better credentials, and attended better schools. Smart people find the opportunities where you can generate the most while working the least.
Also, dont talk shit until you get a full-time job
Take it easy intern. You're still a nobody.
This is an incredibly painfully obvious observation...
apples to oranges
There's been some bad takes on this board, but this has to be up there.
stop making us look bad you fucxking potato
lol
Intern tier take from a VP at CB, you guys really are the B-Team
This is an analyst 1 take, c'mon man. Different functions, different spheres, both important.
I know corporate/commercial get a lot of shtick from the wannabe masters of the universe but end of the day, you're going home at 5 PM and having real weekends. That should trigger the hardos enough.
HOT TAKE: Back office tech support is more crucial than quant trading!
Without back office tech support, the whole computer networks and systems of every fortune 500 company fails and the economy stops. Whereas the world economy would continue as normal without people algorithmically trading the markets!
What a profound insight
Whole point is systemic risk, dumbass.
Shit-tier quality shitpost. If your argument is that there is still systemic, potentially large risk from commercial banks, well yeah, no shit. Looks like someone woke up this morning and chose violence.
But seriously, I don’t know any good corporate or investment bankers who don’t value (or at least pretend to value) the contributions that the other teams make. We try to be joined up and work well together and this would not go over well.
This is really chicken and egging it. If a regional banking goes bust because they mismanaged, a backbone of an economy is impacted. If an IB is mismanaging and peddling ultimately bad outcomes, it has potential to cause numerous areas of an economy to bust. Either behavior isn't good. If you were to ask me to choose between a failure of the majority of either, very negative repercussions are likely to reverberate through the vast majority of an economy, they may just arrive in different ways. Yes, philosophically, if we had to choose to keep one or the other, regional banking serves as a backbone whereas IB provides a valuable service, but that should be an obviously clear comparison and doesn't really say anything to me imo.
No shit and having more nurses / GPs / general surgeons is more important to our healthcare system than neurosurgeons. No one does IB because it's systemically important to mainstreet. They do it because the work is more complex, demanding, and highly compensated.
I like this analogy
it's not a hot take. it's pretty obvious.
However, most people want to make money rather than being crucial and making a fraction.
You're right, as the saying goes, "half the pay, double the life".
Hot take, Jamie Dimon is the most important banker in the world in 2008 and 2023.
Love Jamie. Funny that he's the epitome of a deal maker even though he's not an investment banker (would take him over the DJ and Gorman). JPM's board is already dreading his eventual retirement.
Long live Jamie!
absurd take!
remember when bear stearns and lehman bros, two investment banks that the average american has never heard of (nor do they understand what IB is), both failed causing an actual financial crisis?
Lehman failed, who bought Bear Stearns as a favor to the US economy (for pennies on the dollar)? How about Merill Lynch?
Also, investment banks were just slicing, pooling and securitzing MBS into tranches, which were being originated by commercial banks and then being repurchased by commercial banks as exotic securities.
Music stopped for everyone when securities lost their phony investment grade ratings and started failing, leading to liquidity issues.
Never forget.
This is a dumb take, IB and CB are different. Commercial banks have benefited from the ability to securitize mortgages, car loans, credit cards, to issue stock, preferred stock and bonds. Depending on your clients they’ll lean towards one or the other for their financing source. Both are important. The funny thing is though that loans have become more securities-like for leveraged names
This is a freezing cold take. Without commercial banking there is no growth in the economy whatsoever. We would still be huddled around a fire pit doing cave paintings without commercial banking.
IB is just paid better because you have to wear ferragamo shoes to do it
This is not a revelation. Not sure I understand the point of this post beyond you believing this would provide some profound enlightenment.
I'm of the opinion that commercial banking flies under the radar...until things go wrong.
When I think "commercial" bank, I think some random community bank in Monowi, NE.
The big 4 banks have are more than a third of all deposits, commercial banking is dominated by large institutions. That random community bank in Nebraska may not be able to offer true middle market commercial lending given concentration concerns.
This is like saying Ford is more integral to the auto industry than Ferrari.
No shit, but I wouldn’t be caught dead driving a Ford over a Ferrari.
Ferrari is optional, Ford is required. Can't have Ferrari without Ford (wouldn't have been any roads!).
Some IBs are Pontiacs.
Yes, civilization as we know it depends on utilities. Deposit-taking lenders are the financial world's equivalent of a utility. This is akin to comparing Google to PG&E. What's your point?
No.
Power grid goes down in Silicon Valley? Entire northern California feels it. Happens all the time btw.
Regional bank goes down in Silicon Valley? Entire world feels it (i.e. Asia and Europe).
Today I learned the commercial banking system which is the literal lubricant behind trillions of daily transactions that underpin the functional economy is more important than capital raising and M&A.
In other news, humans also need oxygen and water to survive.
IT as an industry is way more critical to the American economy than Waymo's autonomous driving department.
McDonald's is way more critical to feeding American families than my uncle's restaurant and night club.
Nurses and receptions are way more important and touch way more lives than specialty oncology-dermatologists.
And so on and so on.
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