Gordon
Gekko: For those who thought the age of the fictional raider in
Oliver
Stone's Wall Street had passed, prepare for a rude awakening.
Financial Times Deutschland, Germany
Wall Street's Gordon Gekko: 'Hero Again'?
"There’s
no doubt that many financial institutions are still making a lot of money, but
in 2011 at least, large investment institutions didn’t compare favorably with
their competitors in retail banking. … That will soon change. Gordon Gekko will
be back. And he will be a hero again."
By Frank Bremser
Translated By Stephanie Martin
January 19, 2012
Germany - Financial Times Deutschland -
Original Article (German)
The glamour of investment
banking is over. The winners of the U.S. quarter-earnings season are supposedly
boring institutions like Wells Fargo. Is this a turning point? Unfortunately,
no.
Gordon Gekko was a hero. And it
wasn't long ago that almost every bank was happy to have investment bankers
along the lines of the lead character from the movie Wall Street in
their ranks - albeit without his criminal pizzazz.
Investment banking was
glamorous and above all, lucrative. At Morgan Stanley, Goldman Sachs, Lehman
Brothers and Merrill Lynch, profits soared; on the days when bonuses were
announced, in bars in Frankfurt and New York, bankers played drinking games to
decide who pays the highest tab. On occasion, sentences like the following were
heard: “That guy over there received a $150,000 bonus last year. I wouldn’t
even get out of bed for that.”
In September 2008, when
Goldman Sachs gave up its special status as an investment bank and subjected
itself to oversight as a normal holding company, a Goldman employee in
Frankfurt joked with a smug smile at a conference, “If you’d like to open a
checking account, we’re in the process of preparing applications.”
Bad Cards
By now most people have
stopped laughing. There’s no doubt that many institutions are still making a
lot of money, but in 2011 at least, large investment institutions didn’t
compare favorably with their competitors in retail banking. While Morgan
Stanley and Goldman Sachs still recorded profits, there was a sharp decline in
business - and gains were mostly thanks to considerable savings measures and a
reduction in bonuses. Experts estimate that it will take at least ten years for
the number of bankers working on America’s Wall Street to reach pre-crisis
levels.
Business was good for others in
2011 - namely those institutions that dealt with the boring aspects of the
business, including account management - and surprisingly again - mortgages.
Wells Fargo, for instance, which with satisfying regularity has made record
gains, U.S. Bancorp, or in Germany others that are less well-known, such as
Huntington Bancshares and Sun Trust Banks - all reported good results for 2011.
Part 2: A Flaw in the System
A look at Citigroup’s balance
sheet also shows that a majority of the group’s profits come from its
non-investment banking revenues. For 2011, the following is absolutely clear: Be
glad if you have no investment bankers or a trading department at your
institution.
Is this a sign that the end
of investment banks has come? No. After all, Goldman Sachs and JP Morgan still
earn billions. It is true that Morgan Stanley reported a fourth quarter loss,
but that was primarily because of exceptionally high amounts of leverage. But
it is also clear that profits frequently occur as a result of special
circumstances. The trading business was bad everywhere. Among American banks,
Bank of America remains a special case. In spite of fourth quarter profits, only
heaven - or perhaps leading shareholder Warren Buffet - knows how things will
continue for this bank.
Posted
by WORLDMEETS.US
What will happen now? Many
banks will adjust their business somewhat - and perhaps they’ll be humble a little
while more. But it won’t be long before they take bigger risks again and hence
make higher profits. And then will come a time when they again look down at supposedly
boring institutions like Wells Fargo with mocking condescension.
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Die Zeit, Germany:
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O Globo, Brazil:
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There is a simple flaw in the
system. The opportunity to regulate the financial sector has been missed. And
the banking lobby is once again strong enough to prevent anyone from placing effective
restrictions on their business. Similarly, politicians fear the loss of tax
income from this de facto non-productive sector of the market. By now the world
of finance is driving politics - politics that are admittedly operating at an
exceptionally diminished level.
It is countries and not banks
that are considered the problem now. And that is apparently why there is neither
the time nor the will to deal with financial institutions. It is sad and the
Occupy Movement won’t change a thing. In 2011, retail banking numbers were for
the most part better than those for investment banking. That will soon change.
Gordon Gekko will be back. And he will be a hero again.
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