The investment banker, like the commercial-paper dealer, is essentially a middleman engaging with governments and corporations who seek permanent capital to make public improvements or to develop private enterprises, and advising individuals and institutions who seek to invest funds for a long period of time. The investment houses are usually private institutions conducted by a small group of partners. Only a few are incorporated and are therefore subject to practically no public regulation. Investment houses are of certain recognized general kinds. The wholesale banks purchase large issues of industrial or governmental securities or they guarantee the raising of the required sum. These firms themselves do not sell to investors, but instead leave this function to retailers. The larger houses distribute stocks and bonds directly to investors and also indirectly through small retailers or bond houses.

In the field of investment finance there are certain institutions which parallel the discount companies which buy claims and with these as collateral issue their own obligations. These concerns are known as "investment trusts." In England and the Continent they have been organized for years for the purpose of absorbing foreign securities, and on these as a basis selling their own debentures. In the United States this plan has been applied largely to the raising of loans on city and country property. A mortgage of several millions of dollars on a large hotel or office building is distributed by the investment house in small units among a large number of investors. The holders of these bonds become creditors of the issuing bank, but in no sense are they the mortgagees of the property which is serving as collateral.

Mortgagees may retain title of property pledged and at the same time have the principal and interest of the mortgage guaranteed by a form of investment bank which specializes in this service. This company becomes practically the indorser of the obligation, for it assumes all liabilities even to the extent of fully reimbursing the mortgagee if the property at a foreclosure sale does not yield an amount sufficient to cover his claims.