Join the debate

Search

Post your resume

Back

Print

Will Goldman and Morgan Stanley be next?

16 September 2008

The brokerage model is deeply flawed. The best that Morgan Stanley and Goldman can hope for is a shutgun wedding with a big pocketed universal banking rival, and we're all doomed.

Nouriel Roubini, blogger, Professor of Economics and professional pessimist, thinks that where Lehman and Bear Stearns have gone, Goldman and Morgan Stanley will soon follow.

Roubini's reasoning is that broker-dealers are just as susceptible to a run on the bank as Northern Rock & Co., and they don't have any retail or commercial deposits to back them up. "The biggest problem is that they borrow in middle markets literally overnight, are leveraged 20 or 30 times, and lend very long term," he declared during an interview on CNBC.

John Gapper, over at the FT seems to be of the same opinion. "It seems to me that Goldman and Morgan Stanley have two options. One is to follow Merrill and sell out to a large commercial bank with a big capital and deposit base....The second is to scale back heavily, or abandon, their broker-dealer arms and become more like big hedge funds or private equity funds."

Equally downbeat is Christpher Walen of Institutional Risk Analytics, who thinks that if Goldman and Morgan Stanley try to carry on alone, they'll be shorted to death by hedge funds.

Do you dare disagree? We invite you to do so below.

Comments (21)

I find the whole "The Smartest Guys In The Room who never fails" notion around GS which some naive souls seem to believe in very blue-eyed. Remember the last company that had managed to create this image of itselt was called Enron.

View all comments

Bookmark

  • Digg.com
  • Del.icio.us
  • Stumbleupon.com
  • Reddit.com
  • Yahoo.com

Comments (21)

  • Goldman is the one bank to have come through this crisis with flying colours. It has the best traders and the best risk managers in the world. Of course it won't be next. What planet are you people on?

    I'm not telling you 16 Sep 2008

    RECOMMEND Recommended 0 times | Alert Moderator

  • It's about time we bring our belief in these people back to earth. 12-24 months ago executives at Wall Streets were regarded as Financial Gods for the very same thing that now they are getting fired for. It's time to go back to asking basic questions to all these elaborate models that were created and that ultimately nobody really understood. Successful business is based on trust and answering basic simple questions, not believing in supernatural god given financial gifts and MIT models that mean nothing. So yes Goldman could very well fall like the others, because some of its executives are  people motivated by the same greed and lack of vision as those banks that crashed.Let's hope not all of them for the sake of their employees.

    cfranklin 16 Sep 2008

    RECOMMEND Recommended 2 times | Alert Moderator

  • The irony of the falling stock price is all the super brain, algo quants at the broker-dealers have developed blackbox algo models that kill weak looking stock. In effect, their own algos are killing them.

    tothestars 16 Sep 2008

    RECOMMEND Recommended 1 time | Alert Moderator

  • The first comment posted boasts blatantly that Goldman ...won't be next..." Well wasn't that what Lehman Brothers bleated some weeks ago when Bear Stearn collapsed? No Wall Street firm is immune to this virulent virus created by their own greed and limitless risk-apetite!

    The GreatBanker 16 Sep 2008

    RECOMMEND Recommended 0 times | Alert Moderator

  • Goldman has profited 4bln in the last 9 months! this is the question - who could actually predict better?

    just a reader 16 Sep 2008

    RECOMMEND Recommended 0 times | Alert Moderator

  • The debacle of these Investment Banks shows that there was a problem with the strategies at the top end. Everyone was busy in capitalising the spreads, they forgot the pace of decay.So the risk needs to be redefined, and models need to revisited. Goldman & MS will learn and now it all depends on the support they get from the market. Undue panic should not happen!!

    neeraj 16 Sep 2008

    RECOMMEND Recommended 1 time | Alert Moderator

  • Goldman and Morgan will survive on such conditions - clearly draw the lines of business activities of investment and universal banks, i.e. universal banks play lesser role in debt or equity underwriting reducing their balance sheet size advantage, have in-place something like long-term revolving credit facilities with funding banks for investment banks and etc. That should level the playing field for both forms of banking business model. So it's now up to the regulars to scratch their heads working this out.

    Young 16 Sep 2008

    RECOMMEND Recommended 0 times | Alert Moderator

  • Goldman is a quality name and the results, in a dire market, show this.  MS is also a solid M&A advisory house.  Both will have it tough but will emerge as the last two standing and will be even more commanding. 

    The fact is ML, Lehman, and the other littlen were never in the same league.

    City trader 16 Sep 2008

    RECOMMEND Recommended 1 time | Alert Moderator

  • Goldmans. Ha ha. 3Q filing...
    " backlog of pending investment banking deals increased"
    I'll bet. They've got all this M&A sitting about they haven't got round to. Must be busy measuring all that level 3.
    Short it.

    Davros 16 Sep 2008

    RECOMMEND Recommended 0 times | Alert Moderator

  • First important point is that MS whether you like it or not is not at the same league of GS. GS is unbeatable and will not fall, its main asset is not mbs, abs, cds, equity, debt, or whatever you want.. is human capital and no one ever learned to manage this asset so well as Goldman did. You are more likely to see the FED go bust before GS.

    dragonfly 16 Sep 2008

    RECOMMEND Recommended 0 times | Alert Moderator

Add your comment

* Mandatory

You have 1200 characters left

Enter the code shown here or sign in / register to skip this step. (What is this?)

Post comment

Jobs

More jobs

Col3
Col4
Col5
Col6
bottom

Site Information

eFinancialCareers is a Dice Holdings, Inc. company. Dice Holdings, Inc. is a publicly traded company listed on the New York Stock Exchange (Ticker: DHX)