Financial Markets 101 and the Current Financial Crisis
I've been asked to define some financial terms and comment on the current financial crisis and coming recession. -Financial institution (is it any bank or stock broker?) -Investment bank ( I never understood why Goldman Sachs was considered a kind of bank) -Systemic risk -Counter party risk -Mortgage backed securities vs. mortgages (does a mortgage become a security when it's bunched up with a lot of other mortgages so a person can invest in the whole bunch?) -Hedgefund -Relationship between hedge funds, short selling and credit default swaps. Financial Institution - any company that deals in finance - money, credit, stocks, insurance. It could be a bank, stockbroker, insurance company, hedge fund, credit card company, mutual fund company, etc. Even half of GE is a financial company. Investment bank. In 1934, the U.S. government passed a law dividing banks into commercial banks and investment banks. That law has since been repealed so there is a lot of overlap...