Yesterday we interviewed an investment banker who thinks the Federal Reserve will permanently close the new facility for borrowing by investment banks when it expires in September. Michael Lewis says its too late, the impression that Wall Street's biggest institutions are too big to fail has already taken hold and cannot be reversed. Regulation will surely follow.
For some time now the action has been moving out of the big Wall Street firms and into hedge funds. The quality of financial information, and the ability to act on it, is better outside the big firms than inside of them, even, it now appears, when the information concerns one of the big firms. (The Security and Exchange Commission's investigation into the run on Bear Stearns that preceded the crash has identified three alleged culprits and two of them are hedge funds: Citadel Investment Group and Paulson & Co.)How Bernanke's Banker Rescue Spells Their Demise: Michael Lewis [Bloomberg]
That trend is about to accelerate, as the golden age of the Wall Street investment bank draws to a close. The glorious 25- year run of these firms will have ended not with a bang, or a whimper, but with a government guarantee.And the investment banker himself will have taken the final step on the journey to becoming, in all but name, the worst thing he can imagine being: a commercial banker.
Posted by mrpink , Jun 10, 2008 10:05AM
mmm.. commercial banking... fun.
Posted by guest , Jun 10, 2008 10:07AM
no turning back...regulation will follow...
that's the way it works.
Hedge funds are the new pools of entrepeneurial capital. Sad, isn't it?
Wall Street was built by high-school dropouts and destroyed by MBA's.
Posted by guest , Jun 10, 2008 10:08AM
yeah, I misspelled "entrepreneurial." Sue me.
Posted by Investorcluzo , Jun 10, 2008 10:15AM
big sigh...yes, I've been saying that ib has gone the way of commercial banking for some time. think about it, commercial bankers were once the golden children. then came the big split, and ib'ers were the chosen ones (wall street). private equity jumped into the game (barbarians at the gate - hbo version) only to be one-upped by the hedge funds (the seth tobias story?) who can do whatever they please depending on what side of the bed they got up on...but I'm not jealous ( ;
Posted by guest , Jun 10, 2008 10:16AM
Errr.. I dont have an MBA but I am pretty sure that the 25 years Lewis talks of here was pretty much all about MBAs. Also, some of the biggest pools of private capital out there currently are being controlled/ managed by MBAs.
Some back office angst 10:07?
Posted by guest , Jun 10, 2008 10:22AM
Also, some of the biggest pools of private capital out there currently are being controlled/ managed by MBAs.
Indeed. Stellar performers, too, all.
{Some back office angst 10:07} Yes, absolutely. Been watching frat boys ruin this place my entire career. It's pitiful.
Posted by Anal_yst , Jun 10, 2008 10:37AM
@ 10:22
And I assume you can do better, Kerveil?
Posted by mrpink , Jun 10, 2008 10:37AM
I'm going to head on over to the Shake Shack (seriously) and try to spot any 'Junk Bond' Credit Suisse Fratboys.
Commercial Bankers welcome.
I'll be there from 1p-6p. :-)
-mrp
Posted by NSD , Jun 10, 2008 10:59AM
mrp, how did the interview in chicago go?
Posted by guest , Jun 10, 2008 11:17AM
Did Erin's lawyers shut down the "comments" section for the latest DB report on her fashions and business acumen?
Posted by guest , Jun 10, 2008 11:21AM
@11:17 no...you can comment.
Posted by guest , Jun 10, 2008 11:54AM
Lewis made a similar prognostication during the LTCM event: I-banks would now wield all the leverage and take the risks the hedge funds couldn't. He's right with this current prediction that if banks' hands are tied from regulation, the incentive and ability to take risk falls back to the hedge funds.
In the public eye, banks at least have an air of credibility. Hedge funds scare both Average Joe and capitol hill. It would only take at most 2 spectacular blow ups such as bankrupting a Fortune 500 company or inducing hyperinflation in energy prices before the govt. steps in to regulate them as well
Posted by guest , Jun 10, 2008 1:00PM
I *heart* commercial bankers.
RichBich