The game’s over for independent investment bankers
Do you remember them? The likes of Morgan Grenfell and co who briefly ruled the City following ‘Big Bang’, the 1980s liberalization of trading rules in the UK which allowed clearing banks to compete with what we used to call merchant banks. They long since disappeared in London as the banks discovered that it was easier to buy these ‘experts’ than grow their own.
Now the credit crunch has had the same effect in America with the two remaining independent investment banks, Goldman Sachs and Morgan Stanley, applying to the Federal Reserve to become regulated banks, able to take deposits from savers.
This means that they'll be eligible to offer their own securities for cash from the $400bn the Fed is making available to cash-starved regulated banks, thereby (possibly) securing their future as independent enterprises.
And it also signals the end of the two-tier system invented on Wall Street with boring old deposit-taking banks on the one hand and whizzy investment banks (merchant banks) on the other.
Who'll be the first to open a Goldman Sachs Master of the Universe current account?
Short shrift for the shorters
Australian and Taiwan followed the US and the UK overnight in placing restrictions on short selling (Australia banned short selling of an stocks).
This helped to boost Asian markets although not quite to the same extent as the US and the UK rose on Friday.
But everyone thinks US Treasury Secretary Hank Paulson (a former Goldman Sachs chief) will get his deal to buy $700bn of dodgy US mortgages and save what’s left of the banking sector.
Meanwhile it emerges that Royal Bank of Scotland, HSBC and Barclays will also be able to tap Paulson’s fund because of their US banking businesses.
Hedge funds and other traders are up in arms about the short selling ban, partly because they’re saying the demise of Halifax Bank of Scotland 'wasn't me guv', claiming that only 3% of the bank’s stock was out on loan, and partly because the rules were brought in overnight, leaving many of them exposed to sudden rises in all the banks’ share prices.
Barclays plays its investment hand
Barclays Capital’s Bob Diamond wanted to buy Lehman Brothers but his board wouldn't let him.
But he has bought the failed bank’s US stockbroking business and was also a bidder for its European and Asian broking and investment banking businesses in competition with Japanese bank Nomura, which appears to have clinched the deal.
Diamond found himself in hot water over the weekend as it emerged that Barclays was prepared to pay out billions in bonuses to secure top Lehman staff in New York when it looked as though Lehman staff in London wouldn’t be paid anything because New York had dragged in all the money ($8bn which the UK government wants to get back).
In the end administrator Price Waterhouse raised a loan to pay the September salaries and no doubt Nomura will be forking out bonuses too to those lucky London staff it deems to be important.
But Barclays has still emerged as one of the biggest players in global equities at, on the surface of it, a remarkably cheap price.
If the market turns up anytime soon (stocks are still well below their peak) Diamond will make a fortune.
If they don’t Barclays will be going cap in hand to its shareholders again.
What’s in a financial brand?
Not a lot, according to the Interbrand list of 2008’s top 100 brands.
Top among the financials is American Express at 15, which is a bank in the US not just a credit card operator.
Then we find Citigroup (down from 11 to 19), HSBC, down from 23 to 27, Merrill Lynch (which has a big high street presence in the US) down from 22 to 34 and Goldman Sachs down from 35 to 38 (this survey was not undertaken last week).
Swiss bank UBS, which has also been battered by the credit crunch, is down from 39 to 41 and insurer AIG, bailed out last week by the US government, is down from 47 to 54. Visa creeps in at 100.
This is a somewhat US-centric list but it’s easy to see that banks and insurers are not the best-loved companies around, even by marketing professionals desirous of their business.
It makes you wonder why some of them bother. In the UK HBOS' CEO Andy Hornby is credited with the smartest marketing in the sector and look where it got him (too dependent on the money markets to finance loans to all those customers he attracted).
You can imagine the next presentation to the board by the marketing director: Look guys they'll hate us even more if we don't spend £50m.
Yell up as London stocks inch higher
Yell Group, the old Yellow Pages business, rose in early London trading as it reassured investors that its business was on track and it could live within its current banking arrangements.
At the same time it announced it was cutting dividend payments, so it wasn’t roses all the way.
Yell is lumbered with billions in debt following an acquisition spree and will remain in the intensive care ward for a while yet.
Markets will remain nervous this week as they wait to see the details of the US ‘bad bank’ package and keep a weather eye on any more nasties emerging form the financial sector.
Stephen Foster is a former news editor of 北京赛车pk10, former editor of Marketing Week and Evening Standard ad columnist. He is a partner in Editorial Partnership and writes the blog and Politics of the Media for Brand Republic.