In the past few months all economic indicators have been signaling the possibility of a recession. Economic conditions are already somewhat stagnant and are expected to deteriorate further in future months. The Federal Reserve Board meets this week to discuss the current economic situation and to determine whether there is a need to change their monetary policy.
As a financial analyst for a diversified financial conglomerate, you have been asked to asses what economic forces you believe will affect the Fed’s decision. Next, forecast what actions you believe the Fed will take, explaining how they will conduct monetary policy, and how this move will affect the debt and equity markets.
Next, assess all the subsidiaries of the conglomerate’s holding company (see below) and indicate how each units financial performance, their sources and use of funds, and their exposure to interest rate risk and default risk will be affected. Also, which units(s) will be affected the most?
Subsidiaries:
1.Commercial Bank
2. Thrift (Savings & Loan)
3. Consumer Finance Company
4. Investment Banking Company
5. Mutual Fund
6. Insurance Company
7. Pension Fund
