The reason for folding and editing this paragraph
For the occurrence of the financial crisis in the United States, it is generally believed that the crisis is mainly caused by the lack of financial supervision system, and Wall Street speculators exploit the loopholes of the system, resort to deceit and deceive the public. One of the fundamental reasons for this crisis lies in the neoliberal economic policy that the United States has accelerated in the past three decades.
The so-called neo-liberalism is a set of ideas whose main economic policy goal is to revive traditional liberal ideals and reduce government intervention in economy and society. American neoliberal economic policy began in the early 1980s, and its background was the economic stagflation crisis in the 1970s. Its contents mainly include: reducing government intervention in finance and labor market, cracking down on trade unions, and promoting economic policies that promote consumption and drive high growth with high consumption.
1. In order to promote economic growth, we should encourage people to spend more money.
Liberal economic theory has always attached importance to promoting production and economic development through consumption. Adam Smith said that "consumption is the only destination and purpose of all production". Schumpeter believes that the capitalist mode of production and consumption "stems from the high secularization characterized by urban hedonic life", that is, they believe that luxury consumption promotes production on the surface.
Second, the social distribution relationship is seriously unbalanced, and the income of the middle class is falling instead of rising.
In the past 30 years, a strange phenomenon has appeared in American society. On the one hand, the American people have exceeded their consumption; On the other hand, their income has been declining. According to statistics, after deducting inflation, the average hourly wage in the United States is only equivalent to that of 35 years ago, and the income of a man in his thirties is lower than that of a man of the same age 30 years ago 12%. The fruits of economic development have flowed into the pockets of the rich. Statistics show that the income gap between the rich and the poor in the United States has been widening over the past few decades.
The American economy has developed rapidly, but its income has not increased, which is closely related to the neo-liberal policy since the Reagan administration came to power in the early 1980s.
Third, there is a serious lack of supervision in the financial industry, which induces ordinary people to spend in advance and speculate in the market through lending.
An important part of neoliberalism is deregulation, including financial supervision. Since the Reagan administration came to power in the early 1980s, the United States has been relaxing the restrictions on the financial industry and promoting financial liberalization and so-called financial innovation by enacting and amending laws. For example, in 1982, the US Congress passed the Garn-Saint-Germain Savings Institution Act, which gave savings institutions a business scope similar to that of banks, but not regulated by the Federal Reserve. According to the law, savings institutions can buy commercial bills and corporate bonds, issue commercial mortgages and consumer loans, and even buy junk bonds.
In addition, the U.S. Congress has successively passed the Fair Competition Banking Act of 1987, the Reform, Revival and Implementation Plan of Financial Institutions of 1989, and the Financial Services Modernization Act of 1999, etc., completely abolishing the Bank of America Act of 1933.
Against the background of the above-mentioned legal reform, the speculative atmosphere on Wall Street in the United States has become increasingly strong. Especially since the end of 1990s, with the decline of interest rates, the acceleration of asset securitization and financial derivatives innovation, coupled with luxury consumption culture and blind optimism about future prosperity, ordinary people may borrow more than they spend. In particular, through the myth that the real estate market only rises but does not fall, a large number of consumers who do not have the repayment ability are induced to borrow money to enter the housing market through mortgage loans.
On the surface, the direct cause of the US subprime mortgage market storm is the rising interest rate in the United States and the continuous cooling of the housing market. The rise in interest rates has led to an increase in repayment pressure. Many users with bad credit feel that the repayment pressure is high, and there is the possibility of default, which has an impact on the recovery of bank loans and has a serious impact on many countries around the world, including China. Some scholars pointed out that "the United States, which should have gone bankrupt technically, owes too much debt to other countries in the world, and creditor countries do not want to see the United States go bankrupt, so they can not only abandon US Treasury bonds, but even continue to subscribe for more US bonds to ensure that the United States does not go bankrupt."
Collapse and edit this outbreak process.
On February 3, 2007, 13, New Century Financial Company of the United States issued a profit warning for the fourth quarter of 2006.
HSBC Holdings announced its performance, and the US subprime mortgage reserve increased by $7 billion, or $65.438+00.573 billion, an increase of 33.6%; As soon as the news came out, the stock market plummeted that day, and the Hang Seng Index fell by 777 points, or 4%.
Facing the debt of $654.38+07.4 billion from Wall Street, New Century Finance, the second largest subprime mortgage company in the United States, announced on April 2, 2007 that it filed for bankruptcy protection and laid off 54% of its employees.
On August 2, 2007, Deutsche Industrial Bank announced a profit warning, and later estimated a loss of 8.2 billion euros, because one of its funds was "Rhineland Fund", with a scale of 654.38+0.27 billion euros. The bank itself had a small amount of participation in the US real estate subprime mortgage market and suffered huge losses. The Bundesbank convened banks from all over the world to discuss a package plan to save the German Industrial Bank.
On August 6th, American Mortgage Investment Corporation, the largest mortgage institution in the United States, formally filed for bankruptcy protection with the court, becoming another large mortgage institution in the United States after New Century Finance Corporation.
On August 8, 2007, Bear Stearns, the fifth largest investment bank in the United States, announced the closure of its two funds, also because of the subprime mortgage crisis.
On August 9, 2007, BNP Paribas, the largest bank in France, announced the freezing of its three funds, which also suffered huge losses because of their investment in American subprime bonds. This move led to a sharp drop in European stock markets.
On August 13, 2007, Mizuho Group, the parent company of Mizuho Bank, Japan's second largest bank, announced that the US subprime mortgage-related losses were 600 million yen. Japanese and Korean banks suffered losses due to the US subprime mortgage crisis. According to the estimation of UBS Securities Japan, the nine major banks in Japan hold more than one trillion yen of US subprime mortgage-backed securities. In addition, five Korean banks, including Woori, invested 565 million US dollars in CDO. Investors are worried that the subprime mortgage problem in the United States will have a strong impact on the global financial market. However, Japanese analysts are convinced that most of collateralized debt obligation invested by Japanese banks have the highest credit rating, and the impact of the subprime mortgage crisis is limited. Subsequently, Citigroup also announced that in July 2007, the losses caused by subprime loans reached $700 million.
The folding of the American economy
The crisis in the US subprime mortgage market showed signs of deterioration, which triggered violent turmoil in the US stock market. Investors are worried that the crisis in the subprime mortgage market will spread to the whole financial market, affecting consumer credit and corporate financing, and thus damaging US economic growth. However, at first, many analysts believed that the subprime mortgage market crisis was expected to be contained in a local scope and was unlikely to pose a major threat to the overall US economy. But at present, the subprime mortgage crisis has seriously affected the world economy. According to the latest data, the GDP of the United States fell by 0.5% in the second quarter, which has already declared that the American economy is in recession, and it is expected that the American economy will continue to slump.
First of all, many financial institutions in the United States won the bid in this crisis, and their subprime mortgage problems far exceeded people's expectations.
Second, the fundamentals of the American economy are strong, and there is no lack of motivation to continue to grow.
This is because the United States is still the strongest in the world in all aspects. For example, the latest world university rankings show that the scientific and technological strength and innovation of the United States are still the first in the world, and no country or organization can shake it for quite some time; And the United States has a strong ability of self-regulation. For example, in the 1970s, the strategic contraction of the United States effectively eased the crisis at that time.
However, some critics believe that the economic crisis of the United States in the 1970s was not solved at all, the debt increased year by year, and there was no trade surplus since 1975. Whether it is Keynesian Roosevelt's New Deal or the neo-liberalism replaced in the 1970s, the United States can't fundamentally get rid of the economic crisis without solving the gap between social distribution and total social demand and total social supply.
The folding of the global economy
The bursting of the real estate bubble will continue to hinder the growth of production. The bigger question is, what impact will the factors that affect the double-digit decline in house prices have on the United States, because American consumers borrowed heavily at the peak of the real estate bubble. Optimists get some comfort from the rebound in consumer spending, but this may be a mistake. The double-digit decline in house prices will make more and more mortgage borrowers fall into financial difficulties. Other consumer debts have already gone wrong. For example, the credit card default rate is rising, and lending institutions are likely to face a more difficult situation. As homeowners feel poorer and poorer, consumer spending is bound to be curbed, especially when the stock market continues to fall.
Even if the direct financial contagion is controlled, the subprime mortgage crisis in the United States may produce psychological contagion, especially the revaluation of housing prices. Although the scale of reckless lending to high-risk borrowers in the United States is larger than that in other parts of the world, house price inflation has been more serious than that in the United States, and countries such as Britain and Spain are more vulnerable to the bursting of the house price bubble.
In addition, The Economist also pointed out that the ability of the global economy to resist the weakness of the US economy should not be exaggerated. Although the current account deficit in the United States has been declining, it still accounts for about 6% of GDP. Because Americans consume far more products than they produce, Americans are still one of the biggest sources of demand in other parts of the world, and their sharp decline in demand will inevitably damage the economies of other regions.
From June 5438 to October 2008 10, the Bank of England's financial stability report estimated that the loss of financial bond products in Europe and America was as high as $2.8 trillion according to the mark-to-market price at that time. From June 5438 to 10, 2009, the International Monetary Fund predicted that the credit losses caused by the financial crisis would eventually reach 2.2 trillion US dollars. By the end of June 2009, 5438+1 early October, the total credit and market risk losses reported by major financial institutions in the world were1trillion dollars (740 billion dollars in banking and 260 billion dollars in insurance). In 2008, wealth lost (stocks, bonds, housing market, etc. The global asset market decline caused by) adds up to about 50 trillion US dollars, equivalent to the global GDP for one year. The subprime mortgage crisis in the United States, which began in early 2007, has lasted for as long as a year, and has deteriorated into the subprime mortgage crisis in the United States, causing huge losses to many internationally renowned lending institutions and investment banks, and facing the crisis of loss or even bankruptcy. The development of the incident has a deeper and deeper impact on the global economy, which not only leads to violent fluctuations in the stock market, but also damages the entire economic level.
First, the evolution process from subprime mortgage crisis to subprime mortgage crisis
1. The meaning of subprime mortgage
The so-called subprime mortgage loan in the United States, that is, "subprime mortgage loan", mainly refers to the loans provided by some lending institutions to borrowers with poor credit and low income, and its service targets are loan buyers with high debt-to-income ratio, low credit and high default probability. According to the traditional credit procedures, such people cannot apply for preferential loans, but can only seek loans in the secondary market. Various "subprime" products enable low-income people to repay their loans. Even if the interest rate is raised, they can't afford the loan. The fiery real estate market has also brought people a beautiful illusion that as long as the house is sold, the risk is "controllable". Therefore, since 200 1, the amount of subprime mortgage loans in the United States has increased substantially every year, and the home ownership rate in the United States has also increased rapidly.
2. The process of subprime mortgage becoming subordinated debt.
Sub-prime mortgage new products are enthusiastically sought after by poor credit and low-income buyers. The risk of sub-prime loans is mainly reflected in the fact that lending institutions do not do any credit review on borrowers, that is, lend many loans to people with "sub-prime credit". But for Wall Street elites, risk can be transferred out-spread the risk to those institutions that are willing to bear different degrees of risk. More and more investment banks buy loans from these lending institutions, then package them into bonds, which are rated by credit rating companies such as Standard & Poor's, and then sell them to funds, commercial banks or insurance companies in the bond market, or to commercial banks and other investors around the world. This bond product is asset-backed securities issued based on subprime mortgage, which is called "subprime mortgage bond" by Wall Street, which is what we call "subprime debt". As a result, "subprime loans" have evolved into so-called "subordinated debts".
3. The emergence of subprime mortgage crisis
From the examples of American subprime mortgage and subprime mortgage participants, we can see that a simple subprime mortgage crisis has evolved into a global financial storm, which is actually the result of the joint participation of the participants. We can see that the income and risk chain are interlocking. Once a link goes wrong, the whole transmission will be affected.
Subprime loan, as long as the house price keeps rising, the purchased property will appreciate and there will be a source of repayment, which is the income of subprime loan. However, when the real estate fluctuated contrary to expectations, the rate of house appreciation slowed down, and the continuous interest rate increase by the Federal Reserve made many subprime borrowers unable to repay their loans, resulting in a large number of defaults. Interest rate risk and default risk worsen the quality of assets, leading to the downgrade of asset-backed securities, a sharp drop in prices and a rapid cooling of the market. At this point, bond creditors forced lending institutions to take out problematic mortgages. The tipping point appears-lending institutions are unable to recover their loans in the face of creditors' debt collection, and then a large number of lending companies are acquired or even closed down, and the vicious circle continues to intensify, resulting in a domino effect.
Banks account for the majority in the proportion of subordinated debts. Banks evade supervision by using off-balance-sheet tools and lose control by issuing bonds such as real estate mortgage, but they do not take necessary measures for huge systemic risks. Coupled with the lack of its own capital, the leverage ratio is too high, holding too many non-performing assets, and these assets have depreciated sharply in a short period of time, resulting in an uncontrollable situation.
In this crisis, hedge funds have also suffered serious losses, mostly involving portfolio securities and other products backed by mortgage loans. These products act as risk absorbers, making use of high leverage ratio to obtain several times of income, and when there is a problem in a certain link, their losses will multiply. Excessive losses lead to the break of the overall capital chain, which fundamentally leads more hedge funds to declare losses or even bankruptcy.
In order to make subordinated debt more widely accepted and provide guarantee for bonds, insurance companies usually provide guarantee to issuers in the form of credit enhancement to enhance their credit. The insurance purchaser pays a certain fee to the guaranteed seller for the protection of the default risk of the basic asset pool on a regular basis, and the guaranteed seller provides compensation when the basic asset has an accident. When a large number of defaults occur, the responsibility that insurance companies should bear far exceeds their actual ability to bear, and they are in deep crisis.
Second, the reasons for the subprime mortgage crisis
The formation and deterioration of the subprime mortgage crisis is the result of many factors, which mainly come down to the following points:
1. Mortgage institutions rush to lend money.
Sub-prime mortgage borrowers have poor credit status, or lack sufficient proof of income, or have other liabilities, so it is easy to fail to repay their mortgages and default. However, in the case of loose credit environment and rising house prices, lending institutions can refinance or recover the mortgaged house for sale. As a result, a large number of lending institutions relaxed their lending process and even took the initiative to lend to groups with poor credit ratings, so that the scale of subprime loans reached about10.5 trillion US dollars, accounting for about 1 1% of the US GDP of 3.64 trillion US dollars in 2007. The sloppy lending mechanism and the release of a large number of subprime loans have laid many potential hidden dangers for the crisis.
2. The Fed encourages bubbles.
In order to prevent the bursting of the high-tech bubble and the economic recession caused by the "9 1 1 terrorist incident", the Federal Reserve has long implemented the monetary policy of low interest rate, which led to the flood of liquidity and the bubble of the subprime mortgage market. At the same time, the decline in interest rates has led to the emergence and expansion of many high-risk innovative financial products in the real estate market. These innovative forms of financial loans only require buyers to bear a low and flexible monthly repayment amount, which obviously reduces the pressure on buyers and supports the prosperity of the past years.
However, since June 2004, the Fed's low interest rate policy began to reverse. By June 2005, after 13 consecutive interest rate hikes, the federal funds rate rose from 1% to 4.25%, and reached 5.25% in August 2006. This interest rate adjustment marks a complete reversal of expansionary policies. Continuous interest rate hikes have increased the cost of housing loans, and started to play a role in restraining demand and cooling the market, resulting in a drop in house prices and a substantial increase in the risk of mortgage default. In the past, the Fed's monetary policy changed from loose to tight, which not only contributed to the real estate bubble, but also made the bubble reach its peak and eventually burst.
3. Illegal operation of financial institutions
In this round of subprime mortgage boom in the United States, some American financial institutions ignored standardized and high-risk mortgage loans and securities packaging for their own interests, used mortgage securitization to transfer risks to investors, intentionally or unintentionally lowered the credit threshold of loans, and carried out illegal operations, resulting in increased systemic risks in banking, finance and investment markets. In the past few years, the down payment rate of American housing loans has decreased year by year, and even negative down payment has appeared. Some financial institutions also deliberately package high-risk mortgage loans into securitization products. When issuing mortgage securitization products, they sell these questionable mortgage securities to investors without disclosing the real situation of borrowers. The illegal acts of financial institutions such as lending institutions and investment banks have added more moral hazard to the outbreak of this crisis.
4. Credit rating companies add fuel to the fire
Since the large-scale issuance of subprime mortgage bonds in the United States in 2000, rating agencies have always given subprime mortgage bonds the highest credit rating, which has greatly promoted the explosive growth of the subprime mortgage market. At this time, in the design of structured financing, rating agencies are no longer responsible for rating from a neutral point of view, but personally participate in financial engineering to design a complex structure that can reach AAA rating. With the AAA rating, subprime bonds immediately became high-quality products among investment products, attracting a large number of investors.
However, since the spring of 2007, rating agencies began to downgrade the newly issued subprime bonds, which became the direct trigger for the global investor panic caused by the subprime mortgage crisis. The data shows that, compared with the traditional corporate bond rating business, the rating companies get twice the income from rating the subordinated bonds with the same value. Rating companies have clearly understood the essence of so-called "AAA securities" through their own participation in asset securitization, but a large number of investors have been deceived. The opaque rating process of rating agencies and their excessive pursuit of benefits enable serious high-risk assets to enter the investment market smoothly and become the basic "tool" to deal with the crisis.
Third, the conclusion
The subprime debt storm is not over yet. From subprime mortgage to subprime crisis, the problems in the whole subprime chain and system are exposed, and there are mistakes in every link. Financial innovation brings vitality to the subprime mortgage market, but when the complexity of new products reaches such a level that the regulatory authorities cannot calculate risks and can only rely on the banks' own risk management methods, the whole market will get out of control and the crisis may break out at any time. How to re-understand the function and essence of financial products, how to strengthen its effective supervision and how to deal with the global financial turmoil are all issues that we should further seriously consider through this crisis.
References:
New Li Qiao. Subprime loan crisis [M]. Beijing: China Economic Press, 2008.
[2] Feng Bo: Financial derivatives market development problems and legal supervision [J]. Business Times, 2008 (29)
[3] Sun Qian: Risk control of credit derivatives from the American subprime mortgage crisis. [J] Business Times, 2008(7)
[4] Tan Genlin: Causes, development and results of the subprime mortgage crisis [DB/OL] From the perspective of the subprime mortgage crisis, American investment banks, as an important part of the financial market, originated from the initial stage of China's economic development investment demand, grew up in the development stage of the joint-stock company system and matured in the developed stage of the securities market. Investment banks play an important role in economic development, such as communicating the supply and demand of funds, building a securities market, promoting mergers and acquisitions, promoting the formation of industrial concentration and economies of scale, and optimizing the allocation of resources. An investment bank refers to a financial institution whose main business is investment banking. Generally speaking, the definition of investment banking can be divided into four categories from broad to narrow: first, investment banking includes all financial market businesses; Second, investment banking business includes all capital market business; Third, investment banking business is limited to securities underwriting, trading business, mergers and acquisitions and asset management; Fourth, investment banking only refers to securities underwriting and trading business. At present, the second definition is generally accepted. Therefore, investment banks are defined as financial institutions whose main business is capital market business. The financial crisis triggered by the subprime mortgage crisis in the United States has triggered a strong chain reaction in all walks of life around the world, with investment banks bearing the brunt. The top ten investment banks by revenue and assets are Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman, Bear Stearns, JPMorgan Chase, Citigroup, UBS, Credit Suisse and Deutsche Bank, among which seven are American enterprises. Following March this year, Bear Stearns, the fifth largest investment bank in the United States, was acquired by JPMorgan Chase because it was on the verge of bankruptcy. Later, Merrill Lynch, the third largest investment bank in the United States, was acquired by Bank of America for nearly $44 billion, and Lehman Brothers Holdings, the fourth largest investment bank in the United States, filed for bankruptcy protection because of the "abortion" of the acquisition negotiations. Only half a year ago, three of the top ten investment banks in the world and the top five investment banks on Wall Street went bankrupt. In the subprime mortgage crisis, the top ten investment banks can be divided into three levels according to the degree of loss: minor injury, serious injury and serious illness. At the critical level, in addition to Bear Stearns, Merrill Lynch and Lehman, there are also Citigroup and UBS, both of which are caught in the dilemma of quarterly or even annual report losses due to huge asset write-downs. Citigroup is the hardest hit area of subprime mortgage, with write-downs and losses as high as $5.5/kloc-0.0 billion, followed by Merrill Lynch with write-downs of $5 1.8 billion and UBS with write-downs of $44.2 billion. Goldman Sachs and Morgan Stanley are much luckier at key levels. But in September, Goldman Sachs and Morgan Stanley announced their transformation into bank holding companies. Moreover, Buffett and Sumitomo Mitsui invested $5 billion and $2.83 billion in Goldman Sachs respectively. Morgan Stanley sold 20% of its shares to Mitsubishi UFJ Financial Group (MUFG) and reached a strategic alliance with Mitsubishi UFJ. And all this is to enhance cash flow, on the one hand, through sufficient cash flow to tide over the crisis, on the other hand, to appease investors and let them regain their confidence! According to the latest news, Goldman Sachs may lose as much as $2 billion in the fourth quarter as of June 28th, 165438+, which will be its first quarterly loss since its listing in June 1999. This shows that no investment bank has survived so far! Compared with Goldman Sachs and Morgan Stanley, the subprime losses suffered by JPMorgan Chase, Deutsche Bank and Credit Suisse are not critical, but they are also very serious. In addition, in order to cope with economic deterioration, capital market chaos and asset value shrinkage. Major investment banks have laid off employees. Up to now, Citigroup has laid off 75,000 people. Citigroup said that its final layoffs will account for 20% of the world's 375,000 employees. Morgan Stanley will lay off 65,438+00% of its main business unit, Institutional Securities Department, and 9% of its staff in Asset Management Department. Goldman Sachs began to lay off employees 10%, nearly 3300 people. According to statistics from relevant departments, since mid-2007, the company has laid off about 4,800 employees, and more than 654.38 million employees in the global financial services sector have been laid off by the company. In this subprime mortgage crisis, the world's major investment banks are scarred! The once-in-a-century financial tsunami made the investment banks that once dominated Wall Street in the United States disappear instantly. Even though they escaped the fate of bankruptcy, the only two investment banks, Goldman Sachs and Morgan Stanley, were forced to become bank holding companies, and the global investment banking era came to an end. Goldman Sachs and Morgan Stanley returned to the arms of commercial banks. Not only that, the most respectable Merrill Lynch merger and Lehman the lamb to be slaughtered finally fell into the arms of commercial banks. This also means that the history of bank operation is circulating again, from separate operation mode to mixed operation mode again. As for the separation and mixing of banks, this problem has a long history! The early business model was naturally fragmented. By the end of 19 and the beginning of the 20th century, with the increasing prosperity and expansion of the securities market, economic activities such as investment, speculation and underwriting in the securities market were unprecedentedly active. With their strong financial strength, commercial banks and investment banks expanded their business to each other's industries, which was the initial mixed operation of the financial industry. However, the economic crisis of 1929- 1933 exposed the disadvantages of mixed operation of commercial banks and investment banks. In order to strengthen the control of the capital market, the US government adopted the glass-steagall act in 1933, which strictly restricted the business boundaries of commercial banks and investment banks. Subsequently, many countries followed suit, forming a pattern of separate operation of western finance. In the 1980s, the progress of science and technology and the continuous development of the world financial market promoted the innovation of various financial derivatives, and the penetration and integration between the financial industries gradually strengthened. The original separate operation and supervision mechanism hindered the innovation of financial business and the improvement of service efficiency. Under this background, the financial authorities of Britain, Germany, France, Switzerland and Japan have carried out reforms to break the boundary between securities and banks, forming a trend of mixed operation of modern banks. After entering the 1990s, with the relaxation of financial control and the intensification of financial innovation activities, the business integration of commercial banks and investment banks has further developed, and the wave of mergers and acquisitions in the financial industry is surging. The merger and acquisition of banking, securities, trust, insurance and other industries with strong alliances and complementary advantages has accelerated the pace of mixed operation of international banking. The Financial Services Modernization Act, 1999, 165438, passed by the U.S. Congress on June 4, legally lifted the restrictions on the cross-border operation of commercial banks and securities companies. With this as a symbol, modern international financial business has embarked on the development direction of diversification, specialization, centralization and internationalization, and investment banks and commercial banks have re-married. With its unique business model, investment banks have grown rapidly, and industry giants such as Citigroup, Goldman Sachs and Morgan Stanley have emerged. At the end of last century, the investment banking business gradually shrank, and the most profitable investment banking business in the United States began to decline. In order to pursue high returns, Wall Street investment banks have focused on self-operation. Since American investment banks are neither regulated by the Federal Reserve nor bound by the investment company law equivalent to the China Fund Law, a large number of derivatives have been developed. Investment banks have limited funds, so they will take risks when using financial derivatives. 1992, the average leverage level of wall street investment banks was 10 times, but it reached 30 times in early 2007. Since last year, the highly leveraged bubble has burst. Because American investment banks are victims of each other, the accidents of a few companies such as Lehman and Bear Stearns triggered a domino effect, which led to the collapse of independent investment banks on Wall Street. "The collapse of Wall Street investment banks is their destiny, and their self-management has brought them into a dead end. The subprime mortgage crisis is only the fuse. " Gao, president of Schroeder Investment Management Company in China, said. The collapse of Wall Street investment banks does not mean the failure of the traditional investment banking model, because a large number of multinational companies in the United States rely on the capital market to obtain funds and continue to grow and develop, and investment banks have played an important intermediary role in it. The American financial crisis has ended the myth of the five major investment banks on Wall Street. The investment banking model on Wall Street seems to be coming to an end, and the United States is returning to the era of mixed operation. However, investment banks in the United States do not simply return to the era of mixed operation. After returning to the mixed mode, there will be four new changes: first, the supervision will be stricter, including the supervision of the Federal Reserve, which has traditionally supervised commercial banks; Second, the leverage ratio will be greatly reduced, and deleveraging is the primary task; Third, derivative transactions will be greatly reduced, and counterparty transactions will also be greatly reduced; Fourth, the previous high-paying treatment system will also undergo major changes. Admittedly, mixed operation cannot be a safe haven for the banking industry. It is impossible for the banking industry to avoid the impact of the financial storm because of mixed operation. At the same time, it should be clear that there is no absolute advantage in mixed operation and separate operation. However, the mixed operation itself has some advantages that the separate operation mode lacks: first, the mixed operation has enhanced the adaptability of the banking industry to changes in the financial market. From the perspective of business development, the diversified operation of universal banks has created a huge development space for banks' financial products, thus greatly enhancing the adaptability of commercial banks to changes in the financial market. Second, mixed operation improves service efficiency through cross-business in the industry, especially for small and medium-sized customers, which is more obvious in reducing costs and is conducive to enhancing competitiveness. Thirdly, mixed operation can make full use of the resources of banks, reduce social costs, promote the competition of financial institutions, contribute to the effective allocation of social resources and improve economic efficiency.