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Goldman, Jpmorgan Saddled With Debt They Can't Sell

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http://www.bloomberg.com/apps/news?pid=206...&refer=home

looks like they may be stuck with the companies.

Interesting. Investment banks really make a lot of money from fee income on mergers, acquisitions, IPOs and the like. None of their capital is at risk on those deals. However, I noticed that just before the Dotcom Carsh investment banks were increasingly being forced to participate in the deals themselves by making loans to the counterparties to the deals, buying pieces of the IPO equity, buying tranches of bonds issued by the counterparties - all in the name of facilitating the deals to keep the fee income coming in or even just being on the shortlist for the next deal.

I do not know for sure but it seems that the investment banks may be being pushed down this road again now that global liquidity is drying up.

EDIT: My lousy spelling

Edited by Wad

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Does anyone know how this would affect their other jpmorgan funds? Would their other funds be depleted to pay for the losses on these funds... or are they ring-fenced, i.e. immune? Might it cause selling of their other fuinds otherwise?

The investors in the failing fund bear the risk of investing in that asset class, so nominally, other funds should not be affected. I believe it would be illegal for them to plunder the savings of one set of investors to prop up a failing fund.

However, as someone once said (can't remember who): "There's the law... and then there's what people actually do."

Usually the banks tie these things up behind the scenes to save face.

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The investors in the failing fund bear the risk of investing in that asset class, so nominally, other funds should not be affected. I believe it would be illegal for them to plunder the savings of one set of investors to prop up a failing fund.

However, as someone once said (can't remember who): "There's the law... and then there's what people actually do."

Usually the banks tie these things up behind the scenes to save face.

Thanks benj :)

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The investors in the failing fund bear the risk of investing in that asset class, so nominally, other funds should not be affected. I believe it would be illegal for them to plunder the savings of one set of investors to prop up a failing fund.

However, as someone once said (can't remember who): "There's the law... and then there's what people actually do."

Usually the banks tie these things up behind the scenes to save face.

The trouble with institutional and mutual funds is that they act as investment pools for other funds (life & pension), if you have issues with the institutional fund it will ripple outwards to the other funds investing in it, in this case I would expect it to potentially hit mixed funds i.e. "cautious managed", "balanced managed" etc

edited for typo

Edited by se7ensport

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