How Investment Banks Changed the American Landscape

19th Century – Civil War

Investment banking has been around since the start of the 19th century. To put that in perspective, Napoleon was still winning wars, and Ohio just became the 17th state. Private banks were offering investment-banking functions during this time and up until the Civil War. In the 1860’s, Jay Cooke started the largest securities selling operation the United States had ever seen. He amassed more than $1.5 billion dollars in war bonds for the U.S. treasury, supplying much needed capital to the Union Army.


The period after the Civil War was tumultuous for the financial market. In older established countries such as Great Britain, capital could be sourced from a vast number of international banks. The United States, on the other hand, was growing rapidly but had no such resources. Investment banks emerged to connect investors with capital and firms who needed that capital during the time of western expansion. Large amounts of capital were needed to fund heavy industry, mining companies, and railroads, such as the Union Pacific and the Central Pacific.

The Great Depression

Skipping ahead to the 1930’s, The Great Depression had taken hold of the nation, and President Roosevelt was in office. The banking system in the United States had collapsed and all functions had ceased. Roosevelt had constructed the New Deal, a series of laws and executive orders designed to provide relief, recovery, and reform to the ravaged U.S. A huge portion of the New Deal was concerned with the banking system. The Glass-Steagall Act of 1933 formally separated banks by function, either commercial or investment banks. Unlike traditional commercial banks, they could no longer accept deposits or issue notes. They would serve as intermediaries or brokers.

Post Depression- Present

After the era of the New Deal, investment banks shifted their focus to advising on mergers and acquisitions and public offerings of securities, such as stocks. The Glass-Steagall Act of 1933 was repealed in 1999 and removed the separation between investment and deposit banking. This move directly contributed to the financial crisis of 2007. This is sometimes called the Great Recession or the Global Financial Crisis. It was the worst financial disaster since the Great Depression. There is currently reform and change going on regarding the banking system.

Regardless of the banking highs and lows, investment banking changed the American landscape. It turned the tides of the Civil War, and Western expansion would have been deterred without it. It facilitates capitalism in America and is a pillar of modern banking. Lending money and making money – it’s all a part of the American dream.

Bad News for Bankruptcy Attorneys, Bankruptcy Filing Numbers Down

Recently, the numbers of Americans filing bankruptcy were released by the U.S. Bankruptcy Court and it showed a steady decline in filings. While this sounds good for the economy, it also will affect the career choice of a bankruptcy attorney. Bankruptcy attorneys typically strive in a bad economy as many Americans need to use their services to get out of debt. In 2010, the US had a record 1.6 million Americans filing for bankruptcy because of the financial debacle back in 2007. At the end of fiscal 2012, that number had dropped to 1.3 million bankruptcy filings and we are expected to finish this year off around 1 million. Realistically, this number is still very high if we compare that to the record high back in 2005 when it was about 1 million. Back in 2005, there were a large number of people filing for bankruptcy prior to the bankruptcy code changes because of fear of not being able to qualify. When the dust settled and the bankruptcy code was changed it included a means test that made people now qualify to file Chapter 7 bankruptcy. Because of the new regulations of the code, many Americans raced in to get their bankruptcy filed before it went into effect.

Although I’m sure a bankruptcy attorney would be concerned for this decline, many economic experts are now saying this might be the calm before the storm. Governments around the globe have their printing presses running at full speed, printing their own currencies. The United States is no different, as the US has quadrupled the amount of dollars over the last five years. As history teaches us, this kind of behavior ends up badly for everyone involved.

Every country that was the reserve currency for the world that has followed the quantitative easing type of model, lost their global reserve status. Many experts believe that this will lead to hyperinflation forcing bankruptcy filing on many Americans. So for someone that’s a bankruptcy attorney, this is good news because many more people will be using bankruptcy in the next few years. It was also recently reported that close to 5 million homes in the US were at least two months past due on their mortgage payment, default or in some phase of foreclosure. This is one of the things that economic professionals look at for future economic growth. With all these homes hitting the market, real estate is sure to take another hit. Only time will tell, but I don’t think too many attorneys are really concerned about this. Remember the old adage whatever goes up must come down and this economy is once again overheated and on the verge of boiling over.

The Added Services And Features Of Trusted Banks

Most banks nowadays actually tend to offer more services and features. From convenient online transactions, to a highly systematised set of instructions for various activities to be carried out in their official Internet domains, these banks ensure the most positive experience for their clients. However, aside from carefully laid out methods and different banking functionalities, trusted banks have decided to be an even bigger help to all those people who look to their financial knowledge by releasing informative blog posts about common financial matters. These posts are proving to be incredibly beneficial to many because they get to read the expert opinion of established authorities regarding often complicated financial subject matters.

Aside from that, posts have also included business-related subjects such as employee retention and the provision of employee benefits to boost engagement and development. In addition to detailed explanations of business and money processes, these blog posts also offer a bounty of bite-sized information or quick and easy tips on how people can be smarter with the most trivial financial activities. For example, they have tips on how to save money on money transfer services.

Likewise, they offer short yet comprehensive guides to help people further understand the process their money goes through whenever they have their currencies exchanged in different parts of the world, and how zoning affects the value of money retained in accounts whenever a certain amount is withdrawn overseas. These blog posts are not all, though; these banks also regularly update their miscellaneous offerings such as their rewards system for particular banking activities. It’s always a delight for customers that some of their transactions allow them to purchase items or secure special service deals at no cost to them.

Beneficiary Strategies for 529 Plans

529 plans can be an attractive vehicle to save for higher education expenses. The plans are tax deferred while invested, and withdrawals that are paid directly to an accredited post-high school program are tax free. Plans can be established from any state or private program regardless of where you live or plan to go to school. However, now that these plans have been around for many years, some of the first wave of parent investors are tripping over a new problem. What do you do if you over-funded a 529 plan? Generally, 529 plans will only let you change beneficiaries to another family member which might limit your options for excess funds. There are a few strategies to consider, however, if you realize a plan has grown more than enough to pay for Junior’s college plans:

1. Change the beneficiary. The owner on the account retains control and can change beneficiaries as many times as the plan allows as long as it is to a member of the same family. If you have another child that can benefit, the easiest solution is to change the beneficiary of the remaining 529 funds. Of course, the beneficiary can only use the funds to pay for education.

2. Plan for Life Long Learning. A 529 plan can fund many different accredited post-high school education programs. If you have an adult family member such as yourself, your spouse, a mother, father, aunt or uncle that wishes to pursue continuing education of any kind, you may be able to use the excess 529 funds to pay for their pursuits.

3. Exchange funds with family members. If you have a close relative that is still funding their 529 plans, perhaps you can discuss an exchange. You designate your extra funds to their child and receive the cash they planned to invest.

4. Withdraw the excess funds and pay the penalties. It is possible to make non-qualified withdrawals from a 529 instead of sending the money to a school. However, the gains on your investments will be taxed as ordinary income with an additional 10% penalty tax.

You might consider making a withdrawal by having the funds sent as a check to your young adult beneficiary already on the 529. The withdrawal will then be reported as their income, and taxed at a presumably much lower ordinary income tax rate.

529 plans offer an easy way to save for higher education. They have limitations as to investments, beneficiaries and flexibility. For these reasons they are not always the best choice as some families are now finding out. As with any investment vehicle, do your research on the right plan for your family and seek advice to help you with the best choice for your unique circumstances.

How to Create a Budget Around Debt Repayment

In order for you to start putting extra money aside to pay off your debt, you must first gain control of your monthly spending. After all it is your spending habits that have led you into debt in the first place. Before each month begins, you must sit down and allocate every single Dollar of your income to a particular spending category. Every Dollar has a purpose. You must create what is known as a Zero Balanced Budget. What this means simply is that when you total up your income and subtract all of your expenses, the balance is $0. Every single Dollar of your income must be put to work for you, there is no spare money. Not even a spare cent!

When completing your budget, you must allow for every single area of spending. If you do not then you will not have money for it when it comes up. For example, if you do not include money for tires or car servicing, you will not have the money for them when they are required. It is easy to account for the general monthly expenses such as food, lights, heat, mortgage and so on, but you must also include a category to cover annual expenses such as clothes, car maintenance, insurance etc. My own personal budget is created using EXCEL, but you can simply use a pen and paper if you wish.

OK you have now created your budget but this is only half the plan. If you do not stick to your budget then it is all but pointless. You need to record every single penny that you spend on a daily basis. You can simply jot it down on a piece of paper or notepad or you can use any number of smart phone apps. I personally use an app called Spending Tracker and it allows me to export my spending record to EXCEL. Last point on this is to record your spending as soon as possible after you spend the money or you will forget.

When you have created your first budget and recorded your spending for one month you will be ready to adjust your budget. It is extremely unlikely that your first budget will go according to plan. If it does then you have not set it tight enough and you need to cut it more. Using your spending record, adjust your monthly expenses as required to get a more accurate budget. Keep doing this until you have developed a budget that you can live on and includes all of your spending requirements.

Once you find yourself following this budget process regularly and consistently, you will free up money to pay towards your debts. If you do not, then you have an “Income/expense gap” problem. I will tackle this in a later article. If you need any further help with budgeting or budget forms, please do not hesitate to get in touch.