The seven secrets to becoming a rich merchant banker
Posted by: 555 on 04 August 2009
How could this happen? How could the banking sector go from near-death to robust and fabulously wealthy health, all in the course of just a few months?
The key to modern banking success, it seems, is for bankers to follow a few golden rules:
1. Adopt a universal banking model
Diversification and scale is everything. The bigger your bank, the more economies of scale you enjoy, and the more one struggling part of your business (eg retail banking) can be offset by another (eg investment banking). There is always somewhere to make money.
As a side benefit, this means you are far too big to fail, and that the government will do anything and everything to bail you out. Relaxed or enhanced liquidity operations, direct taxpayer injections, relaxation of competition rules, government asset guarantee schemes – you can have whatever you need, whenever you need it, no questions asked.
2. Go global
A global operation is vital. Banking is a global business these days, and the biggest companies and richest individuals have no respect for state borders: you need to be international to play the game. And your global scale will also help give you the ability to fund the biggest deals, the kind you would never be able to afford if you were a small, national operation.
As a side benefit, being global means you can also slip between the regulatory gaps. Nobody in the 46 countries you operate in will be quite sure who is responsible for you; all they know is that when the nasty stuff hits the fan, you are ‘too big to fail’. Better still, if one national regulator starts getting heavy you can simply threaten to up sticks and move away.
The best possible outcome would be for your bank to become to ‘too big to save’. Highly recommended.
3. Kill the competition
Investment banking is always highly profitable. But get rid of your main competitors and you will find that your cash-cow rapidly starts producing gold and diamonds as well.
But how? The key is to help engineer a financial crisis so big and so dangerous that not every bank can survive. That way, some of your key competitors will fall by the wayside, allowing you to sweep up their work and increase your profits margins in the process.
As a side benefit, you will be able to boast of a spectacular return to profitability once the immediate crisis passes, with few people ever clocking on to the fact that the only reason you can make such massive profits is that you helped bugger up the financial system in the first place.
4. Make friends in high places
It is vital for the successful banker to have powerful friends in high places, especially in government and regulation. The easiest politicians to influence are former lefties still blinded by the bright lights of high finance, and former school mates at top-ranking public schools.
It is vital to ensure that all reviews of the financial system are headed by City grandees whom you have worked with for decades and who speak your language; outsiders are always dangerous in these situations. This way, meaningful change can always be avoided.
As a side benefit, you will be able to enjoy visits to some of London’s finest restaurants/private clubs/lap-dancing bars.
5. Employ the best talent
You need to employ the very best talent, the kind of people who can structure fantastic debt deals based on lending to poor individuals who cannot afford it, or who are able to manipulate key commodity and energy prices through the use of complex derivatives that only a handful of maths PhD students properly understand.
Of course, employing the best talent means paying the best wages; tens of millions of pounds in some cases, a few hundred thousand for many others. Justify to yourself and others by pointing out that these people work really hard, sometimes getting in before 7am and not leaving before 6.30pm.
Under no circumstances should you confer with your fellow bankers over agreeing some kind of wage restraint, as a response to the painful fall in living standards being experienced by millions of non-bankers.
As a side benefit, employing the best talent will increase the size and importance of your sector at the expense of other, more productive industries, thus making you even more ‘systemically important’.
6. Create a massive debt bubble
The ability to create a mountain of unsustainable debt is clearly critical to success in banking. But this ability is occasionally compromised by customers’ dawning realisation that all this borrowed money will have to be paid back at some point, with interest. Fortunately, however, humans are stupid with short memories, and will soon allow you to do the same thing all over again.
In an ideal scenario, you will create such a massive financial mess that governments will be forced to borrow record amounts to fix it, which in turn will create more business for you. That is why investment banking is such a wonderful business.
As a side benefit, selling such vast amounts of debt at high margin will allow you to personally buy at least two houses in straight cash, without the need to get yourself a crippling mortgage.
7. Have no shame
Shame and guilt are luxuries no banker can afford. Affect them, certainly: when the storm blows up and you are forced to lean on governments for massive bail-outs, do look sorry and make all the right noises. You will probably need to, to persuade ordinary people of the wisdom of pawning their future prosperity on your behalf.
You can even promise to change, to stop paying the big short-term bonuses and manipulating key asset prices in the interest of a quick buck.
But when the immediate storm passes, you must return to business-as-usual as soon as possible, closing your ears to any protestations. They won’t last, remember – people are too docile to do anything about it. The impulse for reform rises and falls quicker than the price of a barrel of crude oil.
As a side benefit, you will be contributing to the long-term robustness of banking, ensuring that future generations of bankers will be even more mercenary and hard-hearted than you are.
By Tony Bonsignore
Source - citywire.co.uk
The key to modern banking success, it seems, is for bankers to follow a few golden rules:
1. Adopt a universal banking model
Diversification and scale is everything. The bigger your bank, the more economies of scale you enjoy, and the more one struggling part of your business (eg retail banking) can be offset by another (eg investment banking). There is always somewhere to make money.
As a side benefit, this means you are far too big to fail, and that the government will do anything and everything to bail you out. Relaxed or enhanced liquidity operations, direct taxpayer injections, relaxation of competition rules, government asset guarantee schemes – you can have whatever you need, whenever you need it, no questions asked.
2. Go global
A global operation is vital. Banking is a global business these days, and the biggest companies and richest individuals have no respect for state borders: you need to be international to play the game. And your global scale will also help give you the ability to fund the biggest deals, the kind you would never be able to afford if you were a small, national operation.
As a side benefit, being global means you can also slip between the regulatory gaps. Nobody in the 46 countries you operate in will be quite sure who is responsible for you; all they know is that when the nasty stuff hits the fan, you are ‘too big to fail’. Better still, if one national regulator starts getting heavy you can simply threaten to up sticks and move away.
The best possible outcome would be for your bank to become to ‘too big to save’. Highly recommended.
3. Kill the competition
Investment banking is always highly profitable. But get rid of your main competitors and you will find that your cash-cow rapidly starts producing gold and diamonds as well.
But how? The key is to help engineer a financial crisis so big and so dangerous that not every bank can survive. That way, some of your key competitors will fall by the wayside, allowing you to sweep up their work and increase your profits margins in the process.
As a side benefit, you will be able to boast of a spectacular return to profitability once the immediate crisis passes, with few people ever clocking on to the fact that the only reason you can make such massive profits is that you helped bugger up the financial system in the first place.
4. Make friends in high places
It is vital for the successful banker to have powerful friends in high places, especially in government and regulation. The easiest politicians to influence are former lefties still blinded by the bright lights of high finance, and former school mates at top-ranking public schools.
It is vital to ensure that all reviews of the financial system are headed by City grandees whom you have worked with for decades and who speak your language; outsiders are always dangerous in these situations. This way, meaningful change can always be avoided.
As a side benefit, you will be able to enjoy visits to some of London’s finest restaurants/private clubs/lap-dancing bars.
5. Employ the best talent
You need to employ the very best talent, the kind of people who can structure fantastic debt deals based on lending to poor individuals who cannot afford it, or who are able to manipulate key commodity and energy prices through the use of complex derivatives that only a handful of maths PhD students properly understand.
Of course, employing the best talent means paying the best wages; tens of millions of pounds in some cases, a few hundred thousand for many others. Justify to yourself and others by pointing out that these people work really hard, sometimes getting in before 7am and not leaving before 6.30pm.
Under no circumstances should you confer with your fellow bankers over agreeing some kind of wage restraint, as a response to the painful fall in living standards being experienced by millions of non-bankers.
As a side benefit, employing the best talent will increase the size and importance of your sector at the expense of other, more productive industries, thus making you even more ‘systemically important’.
6. Create a massive debt bubble
The ability to create a mountain of unsustainable debt is clearly critical to success in banking. But this ability is occasionally compromised by customers’ dawning realisation that all this borrowed money will have to be paid back at some point, with interest. Fortunately, however, humans are stupid with short memories, and will soon allow you to do the same thing all over again.
In an ideal scenario, you will create such a massive financial mess that governments will be forced to borrow record amounts to fix it, which in turn will create more business for you. That is why investment banking is such a wonderful business.
As a side benefit, selling such vast amounts of debt at high margin will allow you to personally buy at least two houses in straight cash, without the need to get yourself a crippling mortgage.
7. Have no shame
Shame and guilt are luxuries no banker can afford. Affect them, certainly: when the storm blows up and you are forced to lean on governments for massive bail-outs, do look sorry and make all the right noises. You will probably need to, to persuade ordinary people of the wisdom of pawning their future prosperity on your behalf.
You can even promise to change, to stop paying the big short-term bonuses and manipulating key asset prices in the interest of a quick buck.
But when the immediate storm passes, you must return to business-as-usual as soon as possible, closing your ears to any protestations. They won’t last, remember – people are too docile to do anything about it. The impulse for reform rises and falls quicker than the price of a barrel of crude oil.
As a side benefit, you will be contributing to the long-term robustness of banking, ensuring that future generations of bankers will be even more mercenary and hard-hearted than you are.
By Tony Bonsignore
Source - citywire.co.uk
quote:Now hang on! I'd like to say a word in favour of these much maligned people.
You gave it a much better shot than I thought humanly possible.
