Heavy lifting ahead

Mon Mar 30, 2009



Faced with constraints on precious capital and a shrinking client base, prime brokers struggle to profit from an industry in flux.


Faced with constraints on precious capital and a shrinking client base, prime brokers struggle to profit from an industry in flux By Josh Friedlander

After Lehman Brothers' catastrophic collapse last September, the financial markets grew so chaotic it seemed conceivable that even the two investment bank and prime brokerage leaders, Goldman Sachs and Morgan Stanley, could follow in Lehman's footsteps. In those crazy days last autumn, saber rattling or grandstanding wouldn't have been surprising. Yet Morgan Stanley's chief executive, John Mack, still managed to shock. Desperate to halt his stock's freefall, Mack publicly pushed to suspend short-selling. "What's happening out there?" Mack wrote in an internal memo on September 17. "It's very clear to me - we're in the midst of a market controlled by fear and rumors, and short-sellers are driving our stock down." It was a stance that denied the import of Morgan's considerable revenue from facilitating short...

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