Saturday, October 13, 2007


I have been much too busy, Dear Readers, raping and pillaging making hay while the sun shines these past weeks to entertain you with any pearls of wisdom, and for that I do apologize. There seems to be a mad sort of Morris Dance taking place in the capital and M&A markets right now, with the storms and alarums of August faded to but a distant memory in the minds of many market participants. Accordingly, my services as mercenary consigliere have been in high demand. I fear it will all end in tears, but as I am not paid ridiculous amounts of money to salt away Kleenex for the bleary morning after, I must soldier on and do my duty by helping various consenting adults do the nasty.

One recent bit of news has tempted me to stick my head up from my spider hole, however, if only briefly. I write, of course, of the recent management reshuffles at Citigroup. I will not rehash the endless commentary, both professional and amateur, that has been lavished on this little soap opera, but I will offer a couple of remarks, since I do have some passing acquaintance with a few of the players.

I do not know Vikram Pandit, who seems to have been anointed Chuck Prince's chief lieutenant and bodyguard, so I cannot comment on his New York Times personality profile:
A calm, dispassionate man with a professorial bent and a Ph.D. in finance from Columbia, Mr. Pandit’s selfless disposition has caused him to stand out from his banking peers.

His administrative and technical skills, plus an ability to make himself indispensable to bosses like John J. Mack and Phillip J. Purcell, fueled his career at Morgan Stanley, where he became president.

But he is also a retiring man, not prone to ruthless acts, with a natural hesitancy about taking risks, both professional and personal.

However, I will note that The Wall Street Journal's stock dot portrait of Mr. Pandit, which seems to portray him as somewhat of a genial old elf, sets my PLF1 radar buzzing. I do not know of too many selfless, retiring, and non-ruthless individuals who have risen much beyond the level of First Year Analyst at any major investment bank, much less to President of the poisonous nest of vipers that was Morgan Stanley under Phillip Purcell. I suspect he has many hidden qualities as yet undiscovered by our redoubtable financial press.

He will certainly need them, given that his direct reports include the formidable Michael Klein, whom the Times describes as "a smooth investment banker ... who has shown a keen instinct for survival." Uh, yeah, that's one way to describe him. Others might point to the fact that Mr. Klein pins the Scary Investment Banker-o-Meter at "Run. Run away now," or that he is the perfect person to have with you at a knife fight on the Manila waterfront, as long as you keep him in front of you. His co-head, Equities' Jim Forese, should prove a genial Stepin Fetchit to Klein's Simon Legree, but he may yet have a trick or two of his own up his sleeve which could come around to haunt either Pandit, Klein, or both.

Meanwhile, exeunt stage right, on a cloud of fragrant encomia, the Three Musketeers of Fixed Income, Tom Maheras, Randy Barker, and Geoff Coley. Barker has taken the bullet for spearheading Citi's promiscuous lending spree, Maheras has swanned off the trading floor after refusing to report to Pandit, and Coley has been "reassigned," no doubt whither all disgraced ex-Salomon Brothers bond traders go to nurse their pride and plot revenge, equities in Dallas.

Little Tommy M. is now free to fritter away his time handicapping his chances of elevation to the pantheon of saints of Our Mother Church of Mammon while he considers the flood of employment and hedge fund offers no doubt winging their way to his inbox. Apparently, he received the same sort of standing ovation on the Citi trading floor when he left that Jamie Dimon did after Sandy Weill pulled the rug out from under him. Traders. Always the cheap and obvious gesture, then back to work until the next firm gives them a better offer. Sure, Maheras was a personable guy, and he inspired a lot of loyalty in his troops, but that and three ninety-five will buy you a latte at Starbucks. Heinrich Himmler himself could have pulled the loaves and fishes trick if he had been in charge of a universal bank's fixed income division these past few years, so making money for Citi is not proof that Maheras is God, or even "a very good banker."

* * *

Notwithstanding its justified reputation as an oxymoron worthy of inclusion with classics such as jumbo shrimp and military intelligence, there is in fact such a thing as investment banking management. (For one thing, it is a never-ending source of revenues for management consulting firms like McKinsey, in part because the problems are never fixed and arguably unfixable.) The higher up the management hierarchy a banker travels, the further removed he or she becomes from the actual making of money, and the more important it becomes for him or her to stake claims to money. This is known colloquially as politics.

Normally, or when times are good and the money is flowing, the political situation among top management of an investment bank resembles a logjam, or the Western Front: lots of strains and pressures under the surface, but very little movement on the surface. When crisis hits, however, the logjam breaks, and the long knives and artillery come out in earnest. Those are the times senior IB managers live for, since it is open season on your friends and enemies, time to settle scores and pay back prior injuries, and often your one big chance to leap to the top of the heap over the dead and falling bodies of your foes and allies. At times like these, the backbiting, backstabbing, and betrayals in the executive suite would make Machiavelli blush.

What I find interesting in the Citigroup process is that Chuck Prince apparently tried to formalize this fingerpointing exercise into a formal report on sources of the bank's problems. Usually, top management power struggles take place in the shadows, supported by whisper campaigns and off-the-record remarks, which can preserve the illusion of professionalism and statesmanship amidst the carnage. Here, causes and blame must have been assigned—and attributed—on paper, which as we all know is a very dangerous thing nowadays. Is it too much of a stretch to believe that Prince did this in part to cover his own ass, and to have a documented record of the nasty little maneuverings of his subordinates that he could use against them in the future? I think not.

So, Dear Readers, fret not. The winners and losers in this little brouhaha all look pretty much the same, notwithstanding what their publicists tell us, and the losers will no doubt land on their well-shod feet quite nicely. Besides, no-one I know gets really upset when the sharks start attacking each other in a feeding frenzy.

What I will say is that I feel for the poor junior slobs who took on the task of interviewing senior management and compiling this report. Let's hope for their sake that it was a well-written report, since their future chances of getting a job on Wall Street are probably limited to reporting for the New York Times.

1 Poisonous Little Fuck. As opposed to, say, other hallowed senior IB management types like the GSB (Genial Son of a Bitch) or the HTB (Heartless Technocratic Bastard). Some particularly skillful inside players are adept at donning and doffing many such disguises at will, depending on the dictates of circumstance.
© 2007 The Epicurean Dealmaker. All rights reserved.