Final answer:
Commercial banks focus on deposits and are usually FDIC-insured, offering safety in transactions, whereas investment banks deal with higher-risk financial activities such as securities underwriting and corporate financial services, which can influence economic stability especially during financial downturns.
Step-by-step explanation:
In discussing financial changes that influenced the economic volatility of recent years, Adeel Qalbani might describe how commercial banks are mostly deposit-oriented, offering a range of accounts such as checking accounts, savings accounts, and certificates of deposit, whereas investment banks are mostly focused on underwriting and dealing with securities, and providing services to corporations, like helping them raise capital through stock offerings and bonds. Commercial banks are generally seen as financial intermediaries that provide convenience and safety in transactions and are insured against failure by the FDIC. In contrast, investment banks typically engage in higher risk activities related to underwriting securities and advising firms on mergansers, acquisitions, and complex financial transactions. These differences in function and operation contribute to how each type of bank responds to and influences economic and financial markets.
During periods of financial stress, such as the 2008-2009 Great Recession, the decline in the value of assets held by banks can lead to a significant reduction in loan availability, harming sectors reliant on borrowed money such as business investment, home construction, and car manufacturing. At the same time, firms and individuals tend to use bank loans for smaller amounts, while bonds are generally issued for larger sums, although this is not a strict rule.