| Mr. Glass & Mr. Steagall rolling over in their gravesThe Glass-Steagall Act. Though it was officially repealed in 1999, today marked the official end of the era of the investment bank. As my friend on facebook put it ever so eloquently: "wow..now that i am choosing between checking accounts in BoA (ML) or GS or MS? a lot of decisions to be made!" Once upon a time (like 2 weeks ago), it actually meant something to be in MGM: Merrill Goldman Morgan. (And Lehman too, but MGML just doesn't have the same ring to it). Exclusive investment banks of the elite ranks, where zombie-like Wharton graduates kill each other to try to get into, the names of the respective founders from a century past fill the headlines of respected financial publications everyday, executing mega-billion-dollar deals for companies that make the world go round. Just six months ago almost to this day, Merrill (and Banc of America Securities LLC) was among 15 banks that graced the cover of the prospectus of the largest US IPO ever, a US$17.8bn offering of Visa Inc. Yes, the same Visa that's in all of your wallets, probably several times. To an equal extent, our asset management arms managed trillions of dollars of assets that bought and sold and longed and shorted in the markets to make the markets move, and our private wealth management arms managed other trillions of personal finances for the world's richest and most famous. In less than two weeks, all of that has changed. Lehman has declared bankruptcy, with its valued US operations being picked up for a mere US$1.75bn. Merrill Lynch had a better financial fate, being sold for US$50bn, but will now be known as Bank of America, like your free checking accounts and your home mortgage loans (ironically some of which brought Merrill down to its knees). And today, Morgan Stanley and Goldman Sachs, the last two remaining independent investment banks, surrendering themselves to become commercial banks under the jurisdiction of the very FDIC which was created by Mr. Glass and Mr. Steagall 75 years ago to protect commercial banks from the risky antics of investment banks. What does this mean? Merrill Lynch will now operate under one of the largest commercial banks in the world, while Goldman and Morgan will either start up their own commercial banking operations or gobbling up some smaller commercial bank players to become a full service "financial supermarket" a la Citigroup. This means like Citigroup, you might soon be seeing Morgan Stanley ATMs, Goldman Sachs checkbooks, student loans, credit cards, etc. They may operate under different brand names, but that is the essence. Instead of sending their resumes to MGM, Wharton juniors will be applying to Bank of America in the same career website as bank tellers. If I sound elitist in this little rant, it's because I am. A lot of us worked hard for a hundred years to build Merrill, Goldman, Morgan into the #22, #35 and #37 brand globally, surpassing the values of each of Starbucks, Rolex, KFC, and with a combined value of US$35bn for the brand alone.(http://www.interbrand.com/best_global_brands.aspx?year=2007&langid=1000). Bank of America didn't even make the freakin list. Now, it's like telling Lamborghini to start producing Civics, or Harvard to merge with City College of SF. Dunno...I guess I'm still shocked. I mean I'm glad how it worked out for us...I still have my job, unlike some of my Lehman friends scrambling their resumes around. But it's the end of an era. And I'm just sad. Need time for all this to settle in. |
