MBA 820 Reflections on Module 1

Answer the following questions in your learning journal to stimulate your thinking. Your responses should demonstrate reflective thought.

What aspects of your life (personal and professional) are impacted by financial institutions? Briefly describe.
Personal aspects impacted are the commercial banks in which I have a checking account and brokerage services (stocks, mutual funds, etc.). Professionally aspects aspects are the money supply and availability of money to secure loans to purchase investment properties. At the company I work for, availability of money and short term loans fuel growth and expansions within the USA and abroad.

The last few years, money has started to tighten. The sub-prime mortgage business and the large investments by hedge funds in the sub prime business has melted down, leading to the further tightening of money. This will potentially make it difficult to purchase investment properties at 95 to 100% loan to value, due to the perceived higher risk in the real estate market. Most areas have depreciated in value (real estate), but others have continued to rise or even just stabilize. The information is not complete in most cases and financial institutions are not allowing as much leverage any more.

Personally this has also lead to increased rates in loans and credit cards, which leads to making sure balances are paid off. Deals of 0% interest for 6 months or even a year are gone, so the ability to leverage money for the short-term is gone. The easy money or cheap money is gone - no more loose credit lines.

Finance companies have even raised their rates, which has been speculated to tighten money supply more dramatically than the fed raising rates. This may be why the Fed held the rates and did not raise them - there are even talks of the fed lowering them before the year. The effects small businesses and companies using short to mid term loans to pay for capital projects, etc. It also effects the accounts receivable for many companies, like the one I work for. Some customers rely on these short term loans to pay for supplies of capital projects. This creates risk of greater chances of default or "longer" loans to customers via accounts receivable days outstanding dramatically increasing - effecting the cash flow of the company overall. This all leads to reduction in capital spending and lower profitability.

What financial institutions or markets have you interacted with? Elaborate on the differences in those institutions and their importance to your financial well-being.
I have interacted with commercial banks, saving and loan institutions, brokerages - securities firms, mutual fund institutions, and insurance companies. Really have not had direct involvement with Finance companies, credit unions, or pension funds.

Saving and loans mainly help individuals and investor of real estate (small) with loans for mortgages, line of credit, and car loans. Commercial banks offer some services for individuals, but have historically targeted businesses. Recently the commercial banks are looking at small businesses and investors as well as offering financial investment services. Banks have migrated over to the roll held by securities firms and mutual funds. Commercial banks can now offer all of these services as well as checking accounts, business checking accounts, savings accounts, CDs, etc. They have evolved into many services with a wide variety of products. Insurance companies make money by their investment department playing the market better than the average. Insurance companies also offer a variety of services and products that help with the long term planning of your estate. Life insurance polices have evolved into making sure almost every situation is covered for the short term and long term.

This helps my well being due to competition being fierce among these players and information being more timely available. Many of the commercial banks are not tied or paid to represent certain companies' products like the past days. Securities firms and mutual funds were paid to push certain stocks and products to unknowing customers. The manipulation of hedge funds and other institutional funds has become more difficult due to the financial conglomeration of the financial market place. The various life insurance polices allow many choices for the different stages of my life and situations, which is great.