Saturday, 28 June 2008
One of the consequences of the credit crunch is going to be a big change in the way the investment banks work. The swaggering, deal-making culture is going to have to change. The banks will probably have to start going back to their roots - working for clients, operating like partnerships, thinking long-term. The interesting question is how they get there. One way, would be to merge with some of the private equity houses, who have plenty of money, and also the kind of long-term, partnership culture the banks need to re-create. So it is fascinating to see two senior executive from Carlyle Group, Olivier Sarkozy and Randal Quarles, arguing in the Wall Street Journal that the rules should loosened to allow private equity firms to own banks. I think they've had the same thought -- and as soon as they are allowed to, the private equity moguls will start buying banks. In the UK, we've already seen the start of it with TPG taking a stake in Bradford & Bingley. But we will see a lot more before the credit crunch is over.