Investment banks are not banks and their main job is not investing. So what the fuck do these places actually do?
The name itself is admittedly confusing, but that’s because when we think of a bank we think of this type of bank, a money bank. but in the context of investment banks, it’s best to think about the word “bank” as simply an intermediary.
A money bank acts as a middle man between people that want to save and borrow money, a blood bank acts as a middle man between donors and recipients. If people want to donate food to the needy, they go to food banks!
And if someone want’s to make a baby but they lack the the necessary ingredients.. well you get the point.
An investment bank is an intermediary for (you guessed it) investments. They link up clients (which are almost always large companies) that want to raise money from other clients that are looking to make savvy investments.
This “middlemaning” operation means they spend more time handling pitch decks and client relations than the money on the balance sheet of the bank itself.
To make it all the more confusing most large investment banks these days have also opened up conventional retail banks, as well as proprietary trading divisions
#Shorts
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