From Center for market intelligence
Banking & Financial Services
Feature Reports
Madoff's Mayhem
Bloomberg Markets, March 2009
An alleged $50 billion Ponzi scheme has wrecked lives and institutions from Palm Beach to Paris. It has also blurred the line between victims and perpetrators.
Lehman's Last Days
Bloomberg Markets, January 2009
158 years after its founding as a cotton brokerage in Alabama -- Lehman Brothers was gone. Treasury Secretary Henry M. Paulson Jr. said he didn't want to use taxpayer money to save Lehman, as the government had done in March when it pledged $29 billion to facilitate the sale of failing Bear Stearns Cos. to JPMorgan Chase & Co. Federal Reserve Chairman Ben S. Bernanke insisted there was nothing the government could have done in the end, even though Fuld had warned that Lehman's collapse could trigger a financial Armageddon. Chief Executive Officer Richard S. Fuld Jr.'s failure to save Lehman, after rescuing it three times before, is a story about how the most indomitable man on Wall Street became addicted to leverage and intoxicated with the power it brought. It is a tale about the inability to repair a financial model wrecked by a lack of limits and transparency, a story pieced together from interviews with former Lehman executives and outsiders familiar with the firm. Isolated, surrounded by acolytes and unaware of the rivalries tearing his firm apart, Fuld was too prideful to accept the fast-eroding value of the empire he had built, too slow to cut a deal.
Wall Street's Annus Horribilis
The Economist, December 13, 2008
Of Wall Street’s five big securities firms, only Goldman Sachs and Morgan Stanley remain. After an infusion of government capital they have become banks and are now trying to work out how—even whether—they will make money again. Many of those left on Wall Street are underemployed. In the worst global economic slowdown for a generation, capital-market activity has contracted sharply. No wonder market greybeards, including Alan “Ace” Greenberg, a former boss of Bear Stearns, have been queuing up to pronounce the old Wall Street dead. But what will take its place? Morgan and Goldman appear to disagree about the answer.
Which Way Now?
The Banker, December 2008
As the investment banking sector emerges wounded from the credit crunch, will the sector ever be the same? As Wall Street weakens, will the power shift elsewhere, and what are the chances of the banking behemoth rising again?
Back to the Drawing Board
CFO Magazine, October 2008
To survive and compete, banks are retooling. Universal banks such as UBS and Wachovia tried to be one-stop shops by jumping into investment banking. Investment banks tried to compete by stepping up lending. But some of these diversified firms are seeking to exit certain businesses and specialize again. When it doesn't involve balance-sheet risks, investment banking can be a lucrative and low-risk business. But in recent years, as commercial banks have entered the securities business, heated competition has driven dealmakers to package advice with financing (thus taking on substantially more risk) to win clients.
Newest Dino: I-bankodon?
Financial Week, September 21, 2008
Plagued by hundreds of billions of dollars in write-downs and flagging investor confidence, Wall Street’s biggest investment banks have been an endangered species for months. But with Lehman Brothers’ collapse into bankruptcy and Merrill Lynch’s decision to sell itself, they took a big step toward extinction. The big winners to date: U.S.-based universal banks, like Bank of America, which snapped up Merrill in an all-stock deal worth more than $50 billion when it was announced, and J.P. Morgan Chase, which took over Bear Stearns in March with the Federal Reserve’s help.
Death and Near-Death Experiences on Wall St.
New York Times, September 20, 2008
In 2008, the federal government has ponied up hundreds of billions in taxpayer funds to try to blunt the impact of outsize financial blunders on Wall Street and at Fannie Mae, Freddie Mac and the American International Group. On September 19, the government took extraordinary and historic steps to save some firms and restore investor confidence by proposing to buy hundreds of billions of dollars in distressed assets. Lehman Brothers had pleaded with regulators for months to use similar tactics to rescue it, but to no avail. Merrill Lynch, on the other hand, was able to stay in the game just long enough to find a suitor and benefit from the federal bailout.
The Mess at UBS
Bloomberg Markets, July 2008
The annual shareholders meeting of UBS AG used to be a time for Chairman Marcel Ospel to gloat over his accomplishments. Shareholders would praise Ospel for turning a slow-growing, insular Swiss bank into a global financial powerhouse, with a stock price that rose 115 percent from January 1999 to January 2007. Just last year, Ospel bragged to shareholders about how the bank's record profit was the result of its "smart expansion strategy." At UBS's most recent annual meeting in April, shareholders cheered Ospel again. This time, though, it was when he announced his resignation.
The Reckoning
Bloomberg Markets, April 2008
In trading rooms throughout the U.S. and Europe, the spectacle has been similar: soaring fees amid punishing losses. For the fourth year in a row, securities firms set a record for fees, according to Bloomberg's annual ranking of the 20 best-paid investment banks. Led again by Citigroup Inc., the banks collected $86.9 billion from advising on M&A and underwriting stocks and bonds. That was a 22 percent increase over 2006's $71 billion and 64 percent more than in 2005. The banks' craving for ever higher fees helped lead them to disaster. They underwrote and invested in billions of dollars of collateralized debt obligations, or CDOs, packages of debt that bundle subprime mortgages, bonds and other loans. The securities, because they carried top ratings and higher yields, earned the banks bigger fees. When rising foreclosures gutted the value of the CDOs, the banks were forced to curtail other lending to hang on to capital. Now the banks must struggle to drum up new business in the face of a U.S. economic downturn.
The Bear Trap
Time, March 31, 2008
It was, no question, one of the most dramatic episodes in American financial history. A famously scrappy Wall Street investment bank, Bear Stearns, went from seemingly healthy to dead meat in about five days. Federal Reserve Chairman Ben Bernanke, desperate to avoid a sudden collapse that might cause a full-fledged market panic, invoked a little-known 1930s legal provision to engineer a Sunday fire sale of Bear Stearns to banking giant JPMorgan Chase for a mere $2 a share. With Bear shareholders virtually wiped out, half the firm's employees slated to lose their jobs and no golden parachutes offered to the top executives, it wasn't a bailout. But it did take a $30 billion loan from the Fed to seal the deal. This was a truly extraordinary use of the central bank's powers and an indication that the subprime-mortgage crisis that erupted last summer has evolved into something bigger and more ominous--possibly the greatest challenge to the American way of financial capitalism since the Depression.
Bear Stearns Joins Drexel, LTCM on List of Wall Street Wrecks
Bloomberg, March 17, 2008
Bear Stearns is Wall Street's largest casualty from the subprime mortgage crisis. Its losses end 85 years of independence for a firm that survived the Great Depression. In all, banks have logged $195 billion of asset writedowns and credit losses linked to subprime home loans since the start of 2007. The sale to JPMorgan caps an eight-month slide in the company's fortunes beginning last July with the collapse of two of its hedge funds, which invested in securities linked to subprime real estate. That prompted investors to question the value of any asset linked to the mortgage market, Bear Stearns's biggest business.
The Man Who Must Keep Goldman Growing
Fortune, March 17, 2008
Lloyd Blankfein worries. True, as CEO of Goldman Sachs, he stands at the summit of the financial world. He just led his firm to its best year ever. He was paid $68.7 million in 2007 - record for a Wall Street chief - and recently bought a $26.5 million apartment at 15 Central Park West. That success has inspired a mixture of admiration, envy, resentment, and fear that can border on paranoia. "I wake up every morning with a pit in my stomach realizing I have to compete against them," says one banker at a rival firm, describing a common ailment on Wall Street.
Wall Street Shareholders Suffer Losses Partners Never Imagined
Bloomberg, February 11, 2008
Less than a decade after Wall Street's last major partnership went public, stockholders are paying the price for bankrolling the industry's expanding risk appetite. Four of the five biggest U.S. securities firms lost about $83 billion of market value last year, almost 90 percent of their net income since 1999, data compiled by Bloomberg show. That cut the annual average return for Morgan Stanley, Merrill Lynch & Co., Lehman Brothers Holdings Inc. and Bear Stearns Cos. during those nine years to 9.7 percent from 16.8 percent.
Behind the Trader's Market Chaos
Time, January 27, 2008
When global markets from Bombay to Wall Street were tanking, few investors had ever heard the name Jérome Kerviel. Why would they? The 31-year-old from small-town Brittany in France was a low-level futures trader. One week later, Kerviel — the rogue trader who has lost Société Générale $7.1 billion — now has 347,000 hits on Google, 14 groups dedicated to him on Facebook, and a Wikipedia biography — and the mounting political scandal over how he pulled off the biggest scam in banking history is only just beginning.
Customers, Not Brokers, Profited in an Odd 2007
New York Times, January 2, 2008
The brokers’ customers did reasonably well. The brokers did not. That is not the usual way of Wall Street. Two-thirds of a century ago, a best seller asked, "Where are the customers’ yachts?" It noted that somehow the brokers always made money, even when their customers suffered. And so it has been for most of the years since then. But not in 2007. How could that happen?
Web Resources
News Sites & Portals
Investment Banking
Daily investment banking news from Bizjournals, a publisher of metropolitan business newspapers.
Associations & Organizations
NYSE Euronext
The NYSE is the world's leading and most technologically advanced equities market. A broad spectrum of market participants, including listed companies, individual investors, institutional investors and member firms, create the NYSE market. The site includes news, online publications, regulatory information, and statistics.
Investment Company Institute (ICI)
The Investment Company Institute is the national association of U.S. investment companies. Founded in 1940, its membership includes 8,512 mutual funds, 650 closed-end funds, 143 exchange-traded funds, and five sponsors of unit investment trusts.
The Financial Industry Regulatory Authority (FINRA)
FINRA is the largest non-governmental regulator for all securities firms doing business in the United States. All told, FINRA oversees nearly 5,100 brokerage firms, about 173,000 branch offices and more than 676,000 registered securities representatives.
Securities Industry and Financial Markets Association (SIFMA)
SIFMA was formed by the merger between the Securities Industry Association and the Bond Market Association. SIFMA's priorities are to ensure the public’s trust in the securities industry and financial markets; encourage retirement savings and investment; and promote effective and efficient regulation.
