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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.
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
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