In a 2009 Newsweek article, The 50 Most Powerful People List, there are 3 bankers who are listed as the 4th, 5th, and 6th most powerful people in the world.
Read the following article on the "Economic Triumvirate": Downloadable pdf version: The Global Elite: Economic Triumvirate, or go to
Explain why these three men (the 3 bankers who are listed as the 4th, 5th, and 6th most powerful people in the world) might be considered more powerful than most countries' leaders.
Explain how or why, during the recession of 2008–09, banks of the world seemed to unite on cue to lower interest rates worldwide.
Provide a short, 2-paragraph policy on how you would improve U.S. monetary policy. Use APA style to cite any references that may support your policy or a current policy that you are refuting.

1-Basics of Mergers and acquisitions
2- Advantages and disadvantages of
Mergers and acquisitions
3- Stakeholder view of mergers and
acquisitions
5-Banks merger and acquisitions
4- Lessons learned from banks mergers
and acquisitions and banks failures
6- Policy recommendation
There
are three basic legal procedures
that one bank can use to acquire another
firm:
Merger or Consolidation
Acquisition of Stock
Acquisition of Assets
Merger
One firm is acquired by another
Acquiring firm retains name and acquired firm
ceases to exist
Advantage – legally simple
Disadvantage – must be approved by
stockholders of both firms
Consolidation
Entirely new firm is created from combination
of existing firms
1. Vertical integration—the company wants to take
control of a key supplier, product or service on which the
company depends; or to gain the profits that are
otherwise going to these suppliers, products or services.
2. Horizontal integration—the company needs to fill in
holes in the product line, to add complementary
products, or to add customers in new markets.
3. The company wants to grow they merge to compete.
4. Synergy— the idea that the value and performance of
two companies combined will be greater than the sum of
the separate individual parts.
Most
acquisitions fail to create value for the
acquirer.
Intellectual capital often walks out the door when
acquisitions are not handled carefully.
Traditionally, acquisitions deliver value when they
allow for scale economies or market power, better
products and services in the market, or learning
from the new firms.
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Suppose firm A is contemplating acquiring firm B.
The synergy from the acquisition is
Synergy = VAB – (VA + VB)
The synergy of an acquisition can be determined from
the standard discounted cash flow model:
Synergy =Sum of the present value of the incremental
cash flow
Revenue Enhancement
Cost Reduction
Replacement of ineffective managers
Economy of scale or scope
Tax
Gains
Net operating losses
Unused debt capacity
Incremental
new investment required in
working capital and fixed assets
Economies of scale: Merger may reduce or eliminate overlapping
resources
1995 merger between Chemical Bank and Chase
Manhattan Bank resulted in elimination of 12,000
positions.
Economies of scope: involve some activities that are possible only
for a certain company size.
The launch of a national advertising campaign
Economies of scale/scope most likely to be realized in
horizontal mergers.
Resource complementarities: Merging firms have operational
expertise in different areas.
One company has expertise in R&D, the other in
marketing.
Successful in both horizontal and vertical mergers
Since 1982, both DOJ and FTC have used HerfindahlHirschman Index (HHI) to determine market
concentration.
HHI calculator.

HHI = sum of squared market shares of all
participants in a certain market (industry)
If HHI> 1800 Highly concentrated
If HHI between 1000 -1800 Moderately concentrated
If HHI < 1000 Not concentrated
Since 1982, both DOJ and FTC have used
Herfindahl-Hirschman Index (HHI) to
determine market concentration
HHI = sum of squared market shares of all
participants in a certain market (industry)
Elasticity tests (“5 percent rule”) is an
alternative measure used to determine if
merged firm has the power to control
prices.
A
concentration ratio is “the sum of
percentage of output in the market”.
The formula for the four-firm
concentration ratio can be represented as:
CRm = S1 + S2 + S3 + S4.
Each “S” represents each firm’s output in
percentage= firm output/ Industry output.
Adding the top four firms’ output
percentage equals the four-firm
concentration ratio =CR.
MS= Market Share, MS^2= Market Share squared, CR%= ‘Concentration Ratio in Percentages’
Merge Firm 7 and 8.
Merge Firm 1 and 2.
Premerger Concentration
Postmerger Concentration
Postmerger Concentration
Firm
MS
(%)
MS
^2
CR%
Firm
MS
(%)
MS
^2
Firm
MS
(%)
MS
^2
1
20
400
1
20
400 1 & 2
35
1225
2
15
225
2
15
225
3
15
225
3
15
225
3
15
225
4
15
225
4
15
225
65
4
15
225
5
15
225
5
15
225
5
15
225
6
10
100
6
10
100
6
10
100
7
5
25
7
5
25
7& 8
10
100
8
5
25
8
5
25
100
0
0
S
UM
1450
S
UM
1500 S
UM
2050
HHI
1450
HHI
1500 HHI
2050
MS
%=Market S
hate pPercentage
MS
^2=Market S
hate Percentage S
quared
The
most recent airlines to merge are:
Delta and Northwest,
Continental and United, and
Southwest and AirTran.
Why Consolidate? Oligopolistic Firms
Profits motive via more concentrated firms.
Reduce production costs via economies of scale.
Corporate governance and control with oligopolistic level
of competition.
Compared with monopoly, oligopolistic competition may
benefit corporations by helping their managements keep
their organizations innovative and efficient over the long
run.
Is there a benefit to consumer from consolidation
(mergers and acquisitions)?
Few dominant firms may engage in price gouging.
Consumer surplus declines and income is redistributed
from consumers to suppliers. Recent airline mergers
and acquisitions.
Can an oligopoly market structure benefit both
consumers and businesses by forging common
standards in industries that experience rapid
technological change?
Yes, consumer electronics and computer software, a
high degree of market concentration standardized the
compact- disc formatting method.
Market forms can often be classified by their
concentration ratio. Listed, in ascending firm size,
they are:
Perfect competition, with a very low concentration
ratio,
Monopolistic competition, below 40 percent for the
four-firm measurement,
Oligopoly, above 40 percent for the four-firm
measurement, (Example- Boeing and Airbus in
jetliners)
Monopoly, with a near-100 percent four-firm
measurement. (Example- Microsoft in PC
operating systems)
Fiscal policy Vs. Monetary Policy
Federal Reserve Bank
The governmental entity that control money
supply
The Fed.
http://www.federalreserve.gov/
http://www.federalreserve.gov/releases/h6/current/

http://www.ftc.gov/bc/caselist/merger/index.shtml
The amount of money in the economy.
Money talks! Is their any thing money can’t do???
Ben Bernanke, of the US Federal Reserve; JeanClaude Trichet, of the European Central Bank;
and Masaaki Shirakawa, of the Bank of Japan,
are considered to be the 4th, 5th, and 6th most
powerful people in the world. (Samuelson, 2008,
newsweek.com) They are considered to be the
most powerful because they are appointed to
top government jobs that were responsible for
determining whether the global economy avoids
calamity.
Gupta, A and L. Misra, 2007” Deal Size, Bid Premium, and Gains in
Bank Mergers: The Impact of Managerial Motivations” The
Financial Review 42, 373—400
D. FRASER and H. ZHANG (2009) “Mergers and Long-Term
Corporate Performance Evidence from Cross-Border Bank
Acquisitions” Journal of Money, Credit and Banking, Vol. 41, No. 7
(October 2009)
G. OLSON AND M. PAGANO (2005), “A New Application of
Sustainable Growth: A Multi-Dimensional Framework for Evaluating
the Long Run Performance of Bank Mergers’ Journal of Business
Finance & Accounting, 32(9)&(10), November/December 2005,
0306-686X


Failed banks websites:
http://www.ftc.gov/bc/index.shtml

Fed.
http://www.federalreserve.gov/
http://www.federalreserve.gov/releases/h6/current/

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