How well is Wall Street doing? That depends on whether you are looking at their results as a casual observer, or a shareholder.
This is turning into one of the best earnings seasons on Wall Street since 2009, when banks made a rapid recovery from the 2008 crisis. Not only were they bailed out but supported by ultra-low interest rates and official backing for troubled assets. Read more
I’m intrigued by the possibility that the civil trial of Fabrice Tourre, the former Goldman Sachs banker, may hinge on whether an email to his girlfriend was a love letter or an injudicious admission that he was misleading investors about the complex mortgage-related securities he was selling.
The lead attorney for the Securities and Exchange Commission said at the opening of the civil hearing on Monday that it was the latter. Mr Tourre’s lawyer asked the jury to put the language of the communication down to “youthful arrogance” and said it was “an old-fashioned love letter” to his girlfriend, who was a Goldman co-worker. Read more
SAP’s striking decision to hire people with autism to programme and test its products has already generated some sceptical commentary from FT readers. But it should be welcomed, and not only by sufferers of the condition. Read more
Lehman Brothers collpsed in 2008. Getty Images
The demise of London’s merchant banks, which were sold to US and European banks in the mid-1990s after the collapse of Barings in 1995, showed they could no longer exist in the modern world of finance.
Was the US much different, though? Looking back at the 2008 financial crisis, the collapse of Lehman Brothers had roughly the same effect on the Wall Street investment banks as the collapse of Barings in 1995. Read more
The Deutsche Bank case, in which three whistleblowers have accused the bank of hiding up to $12bn in derivatives losses during the financial crisis, is complex, confusing and opaque. But the underlying principle is simple and important.
Banks used to have a lot of leeway in how to treat bad loans at the bottom of the cycle. That allowed groups to avoid taking losses immediately, and instead to wait for the assets to rise in value again.
But the rules for recognising bad loans have tightened over the past three decades, while a lot of credit instruments are now carried on a mark-to-market basis instead of on the loan book. Their old freedom of manoeuvre has largely gone. Read more
Jeff Bezos is famously smart but I wonder whether he has thought through all the political implications of Amazon’s strategy of becoming back-office ecommerce infrastructure provider to the world.
The first part of FT colleague Barney Jopson’s series on the etailer was full of insight, but it was the comparison between Amazon and investment banks that struck me most forcefully. As Barney writes:
One investment banker says Amazon’s position is reminiscent of Goldman Sachs’ dual role as a broker and trader at the centre of capital markets. “People complain about conflicts of interest. But you still have to do business with them.”
Like Goldman and others, Amazon has set out to simplify the life of its clients, so they can concentrate on what they do best. One business identified by the FT investigation – RJF Books and More – has delegated the “selling, shipping, customer service, payments and complaints” functions to Amazon, which left me wondering what else was left for RJF to do. Simplification was a strong theme of my recent trip to Silicon Valley, where countless start-ups, and a few larger businesses like NetSuite and Salesforce.com, are offering businesses the opportunity to “plug in” their operations to outsourced back-office services and payment systems. Read more
The conviction of Rajat Gupta, the former managing director of McKinsey & Co, the management consultancy, on insider trading charges is an extraordinary event – not just because it was a hard case to prove but because of his status at the apex of the business establishment.
The man who ran McKinsey and went on to become a board member of Goldman Sachs and Procter & Gamble, is very likely to receive a jail sentence in October. That makes him the most senior establishment figure to be convicted by a jury since the 2008 crisis.
He had already lost his reputation – silently disowned by McKinsey and discarded by Goldman. Lloyd Blankfein, Goldman’s chairman and chief executive, testified at his trial that leaking information from Goldman’s board – as Gupta was caught on tape doing to Raj Rajaratnam, was wrong. Read more
Monday was only the opening day of the trial of Rajat Gupta, the former head of McKinsey and board member of Goldman Sachs, on charges of conspiracy and insider trading. But one thing is already clear: he is not a crowd-pleaser.
Compared with some other recent trials of Wall Street figures, such as Bernie Madoff and Raj Rajaratnam, the turnout was modest. The man that Reed Brodsky, the prosecutor, described as “the ultimate corporate insider” was mainly surrounded by friends and family.
Judge Jed Rakoff’s courtroom on the 14th floor of the court building filled up sufficiently to require some of the press and lawyers to decamp to an 11th floor overflow room (in which the sound quality was abysmal).
In general, however, it felt like a private affair in relation to other landmark Wall Street cases. Given the status of Mr Gupta – the most senior figure from the US corporate establishment to face charges since the 2008 crisis – that is odd. Read more