Friday, September 19, 2008

Folding investment banking back into commercial banks???!!!

Pre 1933: Banks could take deposits and make loans as well as play the role of an investment bank

Post 1933: When the financial system collapsed, many blamed the business model of these "universal banks". As a result the Glass-Steagall Act was passed, whereby universal banks could no longer take deposits while also issuing and selling debt and equity.

1999: 66 years later the Glass-Steagall Act was repealed, but majority of the bulge bracket investment banks refused to merge with the boring commercial banks, perhap they werent sexy enough? Citigroup was an exception...

2008: This year we see the situation reversing really quick, in a matter of a week! We now see investment banks begging on their knees to be adopted by commercial banks. That leaves us with just Goldman Sachs...

Not too different from things in Malaysia...flip flop flip flop haha

Wednesday, September 17, 2008

I wish i was back in school

The awesome CDS spread equation

Its a terrible time to be working in the investment banking biz, those employed are hanging by a thin thread. Uncertainty looms, to be honest I dont even know where things might head for me. Observation tells me everyones on the beach, nothing is moving and potential deals are all on hold. So, with three bulge brackets gone and news of Wachovia buying Morgan Stanley, that leaves ppl like us with less choices in the future. At the moment, I'm glad to be where I am but if things do change, boutiques or SWFs will likely be my options.

Market shed billions of dollars today after Wall Street took massive plunged amid the cosmic AIG bailout, seems like nobody is convinced! The US Gov had to cough out $85b to rescue them. As I understood, it'll be a 2 year loan and within that timeframe AIG will dispose off bits and pieces of itself. The root cause lies with their troubled capital markets division where they sold credit default swaps to banks and investors against defaults in CDOs. I wonder what my CDS-loving uni professor thinks of the current situation...

and will AIG continue to sponsor Manure??!!!

Monday, September 15, 2008

50,000 job losses?

Bear Stearns Lehman Brothers filed for bankruptcy and Merrill Lynch sold at $50bn, we're potentially witnessing 50,000 jobless bankers out there. May be good news to the surviving banks but its bad news for those fresh grads planning to start a career in IBanking as they'll be competing with far more experience ppl. Its going to be really tough.

When Bear Stearns got bought over, I remembered how senior bankers at my firm were laughing and making fun about them, especially after they made a statement prior to its sale that the company was not in trouble and assured the market that it could weather the storm. That was the end of an 85 year old bank.

I wonder to what extend will BoA scale-down Merrill's Asian operations...