Posted on 03/10/2009 5:52:25 PM PDT by TigerLikesRooster
Beware the seductive allure of investment banks
Carl Mortished
The stranger is charming, clean-cut and well groomed. A good companion, witty and worldly, he takes you to the opera, to the races and he seems to know lots of people. He is attentive; you meet regularly for lunch in quiet corners at exclusive restaurants. He listens as you talk about your problems, and he seems to care, offering comfort and sensible advice.
Soon, you are confiding in this stranger, spilling your guts about your plans, business dealings and investments. Again, he has sensible advice to offer, but he asks for money. He explains that he has burdensome expenses and needs financial assistance if he is to carry on seeing you in private. You pay him and then he asks for more.
This could be the tale of Susanne Klatten, the German heiress who testified this week against her blackmailer, the Swiss gigolo Helg Sgarbi. But the scenario might well describe the fate of the chief executives of many large companies — wealthy but isolated, they are easy prey to the business world's predatory seducers: the investment bankers.
It may not be entirely coincidence that Sgarbi once worked at Credit Suisse, in the bank's mergers and acquisitions department. Of course, the Swiss bank is not a blackmailer and had nothing to do with his subsequent career pursuing lonely, rich women in spa hotels in Central Europe. Yet within the complex relationship that develops between a corporate financier and his client, there is a wooing, and the ultimate cost of that seduction is counted in millions, even hundreds of millions. In this case, the price is not paid by the target of the seduction, the chief executive, but by the company's shareholders — the pension funds and, ultimately, you and me.
(Excerpt) Read more at business.timesonline.co.uk ...
Ping!
Great post. bttt.
I love to tell this story about cold call brokers fishing for clients.
The phone rings-——broker says he has a good deal. Gives me the details-—I act interested. Then I spill it-—I just happen to have a $100,000 inheritance from my aunt that’s sitting around doing nothing. Just when I got the guy salivating over the thought of a large commission-—I say I can’t talk-—I gotta get back to work.
“Work,” he says? “Yeah,” I say-—”I head the FBI’s Telephone Fraud Unit.”
They hang up so fast-—don’t even say goodbye.
This is accurate only if we continue to bail out the investment banks again and again.
If banks actually failed (not just shareholders losing all their value, but debt holders as well), maybe investment bankers won’t look like a bunch of bad guys. Of course, the LIBOR rate will shoot to 20 percent and the economy will shut down temporarily. But much better is that alternative than is propping up zombie banks where the successful ones are those who take crazy amounts of risk on the expectation they will be later bailed out.
Very good.
I am out of money, so I just sent an empty bucket.
If this particular corporate financier wasn't such a dolt, he could pick up the phone and call one or two other investment banks and get them competing against each other. That's what a typical CFO would do.
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