Word: modell
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...which features theories and numbers and equations and gobbledygook and, ultimately, rationalization (as in, "How were we supposed to know that people who lied about their income and assets would walk away from mortgages on houses in which they had no equity? That wasn't in our computer model. It's not our fault"). Then there's the right way, which involves asking the questions that really matter: How did we get here? How do we get out of it? And what does all this mean for the average joe? So take a deep breath and bear with...
...believe that Goldman and Morgan Stanley will survive the meltdown, that view is not unanimous. Says doomster New York University economics professor Nouriel Roubini: "They will be gone in a matter of months as well. It's better if Goldman or Morgan Stanley find a buyer, because their business model is fundamentally flawed." Both firms would beg to disagree, but their stock prices have been hammered...
...Didn't the folks on Wall Street, who are nothing if not smart, know that someday the music would end? Sure. But they couldn't help behaving the way they did because of Wall Street's classic business model, which works like a dream for Wall Street employees (during good times) but can be a nightmare for the customers. Here's how it goes. You bet big with someone else's money. If you win, you get a huge bonus, based on the profits. If you lose, you lose someone else's money rather than your own, and you move...
...some industry experts say the stand-alone investment-bank model is no longer working. Investment banks made buckets of money for many years by tapping capital markets and leveraging to the hilt. But with credit drying up, financing activities with deposits - like commercial banks do - appears to be a better strategy. Commercial banks like Wachovia also have fairly conservative caps on the amount of leverage they use, which affords them greater flexibility during periods of financial-system stress...
...There are, of course, defenders of the stand-alone model. On Goldman's conference call, CFO David Viniar dismissed the notion that Goldman would be better off with a deposit base, saying that because of regulatory constraints, only a "small portion" of Goldman's business could be funded that way. "We think it's not about the model. It is about the performance of the company," he said...