Late Lunchtime Links: How politics, paranoia and placation brought down Merrill Lynch
Vanity Fair has got an excellent article on the demise of Merrill Lynch. On one hand, it shows how Merrill went to its grave because it was bursting to be just like Goldman. On the other, it shows that what really did for Merrill was outrageous internal politics, inept and paranoid managers, and enormous amounts of brown nosing.
In the first place, it points out that Stan O'Neal, who presided over Merrill's demise was a flawed character - "Proud, prickly, intolerant of dissent, and quick to take offense at perceived slights." As CEO, O'Neal allowed this culture to permeate the firm.
In 2003, O'Neal hired Chris Ricciardi, who ramped up the firm's CDO business. According to one former Merrill trader, Ricciardi "didn't care about rules" and if one of his managers didn't give him the answer he wanted, he simply looked for another one.
Ricciardi left and was replaced by the equally dictatorial Osman Semerci, who 'couldn't tolerate anyone who might be a threat to him,' and stalked the trading floors allegedly writing down the names of everyone he didn't' like. As such, Semerci insisted that Jeff Kronthal, 'the most respected trader at Merrill Lynch' was fired, so that he could bring in some Semerci acolytes.
In a highly distilled version of what happened next, Vanity Fair claims Semerci's traders then marginalised the risk function, concealed how much risk they were taking, and insisted there was nothing wrong even when there patently was.
The moral of the entire story seems to be this: banks that are run on the basis of sycophancy, paranoia and narcissism fail. Politics and backstabbing don't work.
Soon, we will all be billionaires. (NY Observer)
Michael Page profits up by a third, thanks mostly to US and Asia. (Evening Standard)
"The City of London is in danger of becoming little more than a regional hub of international finance as Shanghai and Singapore fill important banking roles." (Bloomberg)
Citadel rumoured to be dismantling its securities arm; mass layoffs said to be coming soon. (Business Insider)
Citadel denies this totally. (WSJ)
EU and FSA attempt to clarify stance on cash bonuses. (Bloomberg)
Warren Buffett says Wall Street bankers and their wives should go broke in future. (Telegraph)
Why actuaries are having sleepless nights. (SenseonCents)
Business school unemployment is increasing. (Business Insider)
