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Strategies & Market Trends : The New Economy and its Winners -- Ignore unavailable to you. Want to Upgrade?

To: Bill Harmond who wrote (12690)	7/12/2002 6:04:40 PM
From: Wizard	Read Replies (4) \| Respond to of 57684

The problem is partially due to banks not being able to withstand the volatility of investment banking. Weisel employees aren't getting paid anything but salary and they run their shop tighter than a subsidiary of a bank would. Also, Robertson had real liability problems because of various lawsuits due to some errors they made in loaning money to tech/internet CEO's and using worthless stock as colateral. Things are bad at Weisel but they aren't going to close. Its an easy decision for BofA, clear some space in NY and move some employees out of SF and layoff the rest. I don't know any more than rumors I hear so none of this is gospel but it makes sense. Closing Robertson is just a 1-time charge for FBF and they want to build predictability in their business units for shareholders and not much predictability in investment banking. Robertson was losing money so earnings estimates could theoretically go up for FBF upon this closing. There is one other force at work here. The business of trading has fundamentally changed. Electronic trading has cut into the trading profits in a big way. It is unclear if any investment bank is making any money at trading anymore. So if trading is losing money & investment banking is losing money, tough to make the model work when there are this many players with deep pockets. Besides, there are 6 BEHEMOTHS with managements that are all telling their boards that they are going to be top 3 or heads are going to roll... Salomon Smith Barney Morgan Stanley Goldman Sachs Merrill Lynch JP Morgan Chase CS First Boston Then there is another tier of pretty big players... BofA UBS Deutsche Bank Also, Lehman and Bear Stearns.... not to mention another 20 or 30 bucket shops out there. I am not even sure where Weisel goes in all these tiers... Probably with Lehman..