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Wednesday, 5 August 2009

The Wall Street Food Chain

Not so long ago, Sallie Krawcheck could do no wrong. Starting out at Sanford C. Bernstein, she was hired into Citigroup by Sandy Weill when the banking giant was accused of a conflict of interest between its investment research and its stockbroking arms. Exactly how that prevented a conflict of interest was never clear, but Krawcheck was clearly effective because she was made CEO of Smith Barney and later CFO of Citigroup before becoming the head of Citi's wealth management group.

The honesty thing didn't always work in her favour, and in 2008, when new Citi CEO Vikram Pandit took exception to her idea that victims of missold Citi products should be compensated, she left the firm. It seems that being honest is OK when it lets the firm continue to make money, but not when it might cost.

Ms. Krawcheck was out in the wilderness for several months biding her time with a few directorships, before being announced this week as the head of BofA's Global Wealth and Investment Management Division, which as far as I can tell means she is now managing the old Merrill Lynch.

Krawcheck replaces Daniel Sontag, the latest of approximately 30 senior Merrill executives who have left the bank since it was acquired by BofA. Many of those have simply retired, but Sontag's former boss Robert McCann is rumoured to have descended one step lower in the food chain, to the bottom crawlers at UBS, who want to know how to rebuild their wealth management business in the US and figure that a big name like Mr McCann might be able to do it for them.

Well I can tell you for a lot less. Merrill built their name on a vast national brokerage network that gave them unequalled distribution and made them a household name, at least among the share owning middle classes. That is a million miles from the hop-on-a-plane-to-Switzerland-with-a-bag-full-of-cash sort of wealth management at which UBS excelled.

That's Wall Street: from "Clean Hands" Krawcheck to the most recent major corporate felon in three short steps.

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