There is a great TV series currently showing on BBC4 called Mad Men. It depicts the life of the US Advertising industry (based on Madison Avenue) during the heady days of the 1950s and early 60s. Oh how the US banks must wish that they could return to those days of great certainty when they were so widely admired. In contrast this has been yet another terrible week for the banks. It started with news in last weekend's FT that the US government was to become the largest individual shareholder in the troubled bank Citigroup. With a reluctance to undertake a full nationalisation the government it will take a 36% stake in one of the world's largest financial institutions. This is quite a fall from grace for Citi which has seen its stock market value fall to under $9bn. In return for taking this action the FT reports that the US administration will be expected to take much greater control of the bank's operations and overall business strategy. There will be changes in the group's senior management and a move away from "high risk" activities. As has become normal in these sorts of deals the big losers will be the bank's shareholders. They were left with little option but to support the rescue or they would see the end to the bank's existence as a public company. These are indeed mad mad days!
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Kevin Boakes
- About Kevin Boakes:
- I used to work in the City but gave it up in the late 1980s when we had our first child. The hours were not too compatible with a good family life! Since then I have taught Finance and Financial Markets at Kingston University. In addition I have acted as a consultant to a number of Investment Banks. My great working passion is trying to explain complex financial market terms as simply as possible. I also like to make it interesting by relating it to the real World. I wrote the book with the aim of showing lots of other people that Finance can be interesting and accessible. I hope you like it!
3 comments:
And Citi still continue recruiting interns for summer/autumn. Is it a trick? How can the bank even in its worst times employ new people?
Natalia Kalitenko
Thanks Natalia for your excellent comment. I guess all Investment Banks will now be re-considering their recruitment plans for summer/autumn 2009. However, they may be reluctant to cancel all graduate recruitment as in past downturns such action has caused future problems. In time the banks will rebound from their current severe problems and they will need well trained staff to work on the usual investment banking projects.
Citigroup sent a memo around that year to date performance has been very good.
How seriously should the market take this? Can it be that they wanted to simply to inject confidence? Its shares were $1 and now they are around $1.70. And this was followed by a similar announcement by BofA.
Bo Lundgren is to talk to Washington’s Congressional Oversight Panel about the banking crisis Sweden had in the beginning of 1990's. How much of his advice do you think Washington will listen to? Since US seems to be principally against nationalisation but that is exactly what Sweden did. Do you think they should listen to the sweded carefully?
Recruiting graduates is an investment so I think it is natural that they dont cut it completely. In addition it might me easier to cut older staff wwith bigger paychecks and get new people that can be moulded from the start.
-K0606852
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