Reading the Morning Paper

Tuesday, March 27, 2007

Reading the Morning Paper

You’re in the tube on your way to work, and you open your copy of the New York Times. Not because you want to know what is going on in the US market, not because you are interested in what the Fed is going to do next week, not because you are working on a US deal so you need to be up to speed. You want to appear more American. The firm has brought in a new executive director from New York and he is 110% by the book. Comps need to be superscrubbed, books need to be crisp clean, formatting needs to be 100% - sorry, 110% - firm standard …

There is no better way to be liked by these champions of the establishment who constantly whine that the standard of work delivered here is below that of an analyst in new York, and the coffee is not as good as that in New York, and the Italian Restaurants are not quite as Italian as those in New York… So, why not just give him a little bit of New York right in his front yard. Solution: you read the New York Times every morning (£2.10 each morning is a small price to pay), and leave it conveniently visibly on your desk so he can spot the Yank as he passes each morning.

You page through your copy of the paper and hey presto, right in the middle of the hottest i-banking market since the late 1990s, you read a shocking headline about an
i-bank planning to shed jobs.

The usual story: Commercial bank buys investment bank. Commercial bank is jealous of investment bankers BSDness. Commercial bank messes up bigtime on a number of occasions and is penalized by regulator. Commercial bankers exercise frustration by firing investment bankers.

Step one: commercial bank likes fat margins of investment bank.
Step two: commercial bank buys investment bank at very, very, very high valuation.
Step three: market turns.
Step four: commercial bank gets jealous that it has to pay expensive i-bankers also in a downturn.
Step five: commercial bank fires i-bankers, and is happy to reduce costs.
Step six: market conditions improve.
Step seven: commercial bank has no i-bankers left to take advantage of upturn and goes back to being the commercial bank it was in the first place, but billions of dollars poorer for the acquisition of the i-bank that no longer exists.

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1 comment:

Anonymous said...

haha...commercial bankers...the poor people...