I did a double take when I saw this on Bloomberg. Last night, the two remaining investment banks in America, Goldman Sachs and Morgan Stanley “concluded there is no future in remaining investment banks now that investors have determined the model is broken”.
Wow! These entities were separated from commercial banks in the 1930’s, and have really been the mainstay of Wall Street. There were five of them back in March and four of them last week, but now they are gone. Does this mean the title, “Investment Banker” is gone? Must be, if there is no such thing as an investment bank. This is really startling to me as I spent much of my career with these guys, and got to know hundreds of them over the years. I got out of college in 1982, which was pretty much the beginning of a 25-year bull market, and these guys were the Masters of the Universe throughout the entire run.
It’s like waking up and finding that there is no longer the color brown, or that all the Wal-Marts were closed and shuttered. This will be a really big deal in NYC and other urban areas with a large investment banking population. As commercial bankers, these guys aren’t going to need food stamps, but the old days of multimillion-dollar bonuses every January is probably over, and that will definitely have an impact.
It’s reminiscent of the scene in Tom Robbins’s “Bonfire of the Vanities” in which the protagonist gets cut off from commissions and must live within his $100,000 annual salary but has a $23,000 a month mortgage. We’ll see soon whether it was just the little people living so far beyond their means. I suspect not.
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