Portfolios of Investment Bankers and Brokers

Most investment bankers are also secondary-market brokers and dealers. They are traders who maintain small inventories of securities, which they plan to sell in the near future. Note that the total assets of $61 billion of security brokers are only a small fraction of the total assets of any of the thrift-type institutions. Sources of financing are principally commercial bank loans and customer credit balances. Commercial bank loans and customer credit balances. Commercial banks extend broker loans, which are very short-term (less than 30 days or on call) credits collateralized by marketable securities. Customer credit balances are amounts due to brokerage customers. Many customers prefer to leave credit balances at brokerage firms to pay for future security transactions, and brokerage firms accept the funds as a short-term source of financing.