The folks at 24/7 Wall St do a great job stirring up controversy with their annual list of familiar brands that are in danger of disappearing. It takes guts to go out on a limb and claim that some venerable companies are on their way down the tubes. In the spirit of the moment, let's think about why some financial brands that should have disappeared are still around.
Merrill Lynch. These guys were spiraling down pretty hard in late 2008 until Bank of America agreed to buy them out. The deal made little sense for BofA; they already had a presence in wealth management and investment banking and would have been stronger had they just stayed away from Merrill Lynch. This is where ego trumps business sense. CEOs who want to be known for closing the biggest possible deals retain the prerogative of throwing due diligence out the window. Way to go, BofA. Grabbing Mother Merrill did nothing but make your TARP bailout needs grow.
Goldman Sachs. Do a web search on this firm and you'll see its tentacles in every business sector on the planet. The firm is insanely profitable but the way they do business raises questions about whether the firm has a conscience. "Vampire squid" pretty much nails it. Warren Buffett considers GS to be a good investment precisely because its amorality enables it to be so dominant in the financial markets. Amorality is not necessarily a recipe for immortality. Someday their enemies list will reach a critical mass and their moles at Treasury and the SEC won't be able to save them.
AIG. The continued existence of this firm is a strong argument that U.S. financial markets are rigged by the government. The firm's credit default swaps in 2008 were so radioactive that they almost single-handedly took down the economy. Hundreds of billions in TARP assistance later and taxpayers still hasn't received a decent return on their "investment."
Compiling this list is depressing. These firms will probably be around for a while. That doesn't mean I have to do business with them.
Merrill Lynch. These guys were spiraling down pretty hard in late 2008 until Bank of America agreed to buy them out. The deal made little sense for BofA; they already had a presence in wealth management and investment banking and would have been stronger had they just stayed away from Merrill Lynch. This is where ego trumps business sense. CEOs who want to be known for closing the biggest possible deals retain the prerogative of throwing due diligence out the window. Way to go, BofA. Grabbing Mother Merrill did nothing but make your TARP bailout needs grow.
Goldman Sachs. Do a web search on this firm and you'll see its tentacles in every business sector on the planet. The firm is insanely profitable but the way they do business raises questions about whether the firm has a conscience. "Vampire squid" pretty much nails it. Warren Buffett considers GS to be a good investment precisely because its amorality enables it to be so dominant in the financial markets. Amorality is not necessarily a recipe for immortality. Someday their enemies list will reach a critical mass and their moles at Treasury and the SEC won't be able to save them.
AIG. The continued existence of this firm is a strong argument that U.S. financial markets are rigged by the government. The firm's credit default swaps in 2008 were so radioactive that they almost single-handedly took down the economy. Hundreds of billions in TARP assistance later and taxpayers still hasn't received a decent return on their "investment."
Compiling this list is depressing. These firms will probably be around for a while. That doesn't mean I have to do business with them.
