Wall Streets New World Order and the Big Three

Submitted by SadInAmerica on Thu, 12/11/2008 - 5:42pm.

Meet the new Big Three... JPMorgan Chase, Bank of America and Goldman Sachs.  And... they've already received their federal bailout money!  In a report released Wednesday, Greenwich Associates, a consulting and research firm, said the three companies are poised to become the dominant investment banks after the global financial crisis caused a shakeout in the industry, winnowing out independent firms.

"Never before have three banks dominated corporate investment banking relationships to the extent that this troika could," said Jay Bennett, a Greenwich consultant, in a statement. Greenwich Associates described the financial industry's realignment as "Wall Street's New World Order."

Greenwich said Bank of America's emergency acquisition of Merrill Lynch in September was "the seminal event to date in the dramatic remaking of the U.S. investment banking industry," exceeding even the forced sale of Bear Stearns to JPMorgan in March.

It said the newly combined Bank of America/Merrill Lynch would rank only second to JPMorgan/Bear Stearns in terms of investment banking relationships with big American companies.

The firm said its analysis showed that 60 percent of big companies would choose JPMorgan for investment banking business, while 55 percent would choose Bank of America.

Still, Bank of America ranks third when companies consider their lead investment bank. More than a quarter picked Goldman Sachs, Greenwich said, while 22 percent picked JPMorgan.

Greenwich Associates did note that there are several other contenders for the investment banking business of big companies — in particular, Citigroup and Morgan Stanley. It said each of those banks was used as a top-five investment bank by approximately 40 percent of companies and as a lead bank by roughly 12 percent.

In October, the federal government invested tens of billions of dollars in these five banks, along with Merrill, after the collapse of Lehman Brothers in September caused severe turmoil in the financial system. Late last month, Citigroup received a further multibillion-dollar bailout.

Among the other options, Greenwich said, American companies looked overseas to Britain, Switzerland and Germany. The firm said Barclays, which bought Lehman's North American business, and Credit Suisse were each named as a top-five investment bank by about a quarter of big companies, while UBS and Deutsche Bank were named by about 20 percent.

"Any one of these banks has the potential to capitalize on the huge dislocations in this market to dramatically expand its investment banking franchise in the United States," said John Colon, a Greenwich consultant, in the firm's press release.

December 11, 2008 - source NY Times

Tag this page!
Submitted by SadInAmerica on Thu, 12/11/2008 - 5:42pm.