Finance, Forex and Investments

Why have Investment banks suffered due to subprime crisis? I expected only commercial banks would.?

Commercial banks would lend money to borrowers and when these borrowers coudnt return money, these c banks closed but then why have investment banks suffered so much?

Public Comments

1. Investment banks issue loans as well in much larger quantities. Their goal is to issue loans, and sell them off to investors while collecting fees. However, when investors suddenly refuse to buy these securities, the investment banks are stuck with them and incur losses.
2. the values on all realestate dropped and their money is un-recoverable
3. The investment banks were either 1.) stuck with packages of subprime loans they created and couldn't sell or 2.) Believed in them and invested their own capital in them. They used these securities as collateral to buy all kinds of different assets on margin. As the subprime securities lost much of their value, the banks didn't have nearly enough capital to meet the margin requirements for all the other securities they bought. They were then forced to sell "good" assets to raise capital, and no one would give them a dime for the subprime assets b/c no one was sure whether they had any value. This forced selling / de-leveraging caused the value of the other assets to fall, so you had this death spiral.