Tuesday, October 28, 2008

Goldman's overture to Citi

It appears that Goldman Sachs CEO Lloyd Blankfein spoke to Citi's head Vikram Pandit about a possible merger between the two companies. This was soon after the US Fed announced that Goldman and Morgan Stanley would be given banking licenses. Goldman's approach was rebuffed.

This led the US Treasury to include the two in the recapitalisation plan announced soon after. Which, of course, reflected the Treasury's perception that the two would otherwise meet the fate of Bear Stearns and Lehman Brothers.

Soon after the two companies were given bank licenses, I wrote saying that this was intended to send out a signal that the US Fed was solidly behind them. It did not imply at all that the two could successfully convert themselves into banks. The sequence of events described above bears out my conclusion.


Anonymous said...

As of now..I believe investment banking is moribund if not dead.If I'm not profoundly mistaken,the US Fed from the past has orchestrated the collapse of banking institutions,slowly but surely making the banking world shrink to a large few banks with unprecedented dependence on the Fed Bank.

Don't u feel da problem lies in the Fed bank's priorities rather than the individual banking institutions.The 2004 SEC ruling that exempted 5 banks(3 of which are down) from maintaining the min debt:capital ratio surely points to a deeper plan..rather than problem.

Anonymous said...

Though I failed earlier to admit..my knowledge is rather precocious on da matter...almost everything I learnt came directly off da net..no experience.

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