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End of an Era

September 22, 2008

Its definitely not the best of the times. Neither I will say the worst. But definitely the curtains down on an era, marked by hefty paychecks and characterised by the chest thumping image of a Wall Street broker.

Goldman Sachs and Morgan Stanley, the two entities part of the Manhattan skyLine which made its name by remaining an investment and security analysis firm today ended the era by declaring themselves bank holding firms.

Almost two decades of supremacy on Wall Street. And so much of the public image of millions minting Wall Street drone.

In 1933, Glass Steagall Act, cleaved and put a demarker between the two class of firms: Banking and Investment Analysis. Morgan Stanley was the spawn of that act. Hit by plummeting stock prices and hammered by rising borrowing costs, the job at hand has just got a new name: falling credit lines.And when this last and the only line of defence comes under attack, these things happen.

And in light of all these, volatility just adds the last straw on the proverbial back. In the last two days, DJIA whipsawed a thousand points, when the firms realised its trust balance is too low in the eyes of investors.This wont help them much. Its like “blood in the water, the sharks are ready to pounce”. When such huge deficit in trust befalls a financial firm, any action is seen as additional breach of trust. What today Sachs did, or Morgan Stanley did, will not help bolster the trust but might help when the last remaining credit lines dry up and it goes with a hat in hand for asking for alms.

Its a wonder that financial banks and firms run so much on trust and faith. And when this get breached,the rules are rewritten and eras come to an end

4 Comments leave one →
  1. September 23, 2008 4:48 pm

    i think Glass Steagall Act was revoked by Congress in 2003 or something….if this change of status had occurred for Goldman Sachs and Merryl Lynch sometime back then…it would have caused less havoc..anyways..Fed is the God now for them….

  2. Soham Das permalink*
    September 24, 2008 1:06 am

    True… if it would have happened a few years back or even a year back, things would have looked a lot different. And its an interesting thing, that Nouriel Roubini, when predicted the demise of more than one [three to be exact] big banks going “belly up”, around 3 years back, people laughed. Bears and Stearns, Lehmanns and AIG went pfoot in a blink of six months… 🙂

    Welcome to the New World!

  3. Paulraj Madasamy permalink
    September 25, 2008 7:11 pm

    yeah.. a world where the customer is more than cautious and entrepreneurs(if thats how you spell it :P) and companies alike are even more reluctant about handing out jobs..
    the bailout plan is just something like a parachute with microscopic gaps.. lets hope it works and the most powerful citizens of this planet plug up those..
    later 😀

  4. Soham Das permalink*
    September 25, 2008 8:38 pm

    Welcome back, Comrade!

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