Some people on Wall Street used to describe Frank Quattrone as a “force of nature.” But there are no forces of nature on the Street, only forceful desires to make money. If forces are at work, they are employed to raise and address these questions: Who is making money? How are they making money? How can we get in on that?
There were always two main types of traditional “Wall Street” firms, even if they weren ’t all technically located on Wall Street, and those are banks and brokerages, or “investment brokerage houses.” These latter types of firms have also generally been thought of as “investment banks.” The Big Five, or “Bulge Bracket,” historically consisted of Goldman Sachs, Morgan Stanley, Lehman Brothers, Merrill Lynch, and Bear Stearns.23
By any name, bank, investment bank, these entities could make money a couple of ways. They sell their “services” (stock research analysis and prime brokerage, to name two small examples) or sell, to investors, securities and security-like instruments that they create and distribute to investors for a taste of the profit. Securities can be anything from a stock IPO to something more exotic, such as a “credit derivative,” like “asset-backed securities,” which are basically IOUs linked up to some future incoming stream of assets, perhaps many years worth of mortgage payment streams. Or banks can do what banks have been doing for half of forever: lend money. In this regard, hedge funds became banks even as banks ...

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