Summary of Greg Farrell's Crash of the Titans

Everest Media

Description

Please note: This is a companion version & not the original book.
Sample Book Insights:
#1 The CEO of Merrill Lynch, Stan O’Neal, was re-elected almost unanimously by the institutional investors representing huge blocs of votes. The few individual shareholders who did attend the meeting were typically entranced by the prospect of getting themselves in front of a microphone.
#2 In 2007, problems emerged in the U. S. real estate market, which was the engine of growth across the country. This led to a 36 percent increase in FICC revenues for the first quarter of 2007 over the previous year’s first quarter.
#3 It was clear why O’Neal had touted Semerci as potential CEO material. Poised and elegant, Semerci demonstrated to the board how he had figured out the formula for maximizing the company’s revenues in an overheated real estate market without exposing Merrill Lynch to any of the downside of the real estate crash.
#4 In early July, John Breit, a physicist by training, had been a risk manager for Merrill’s fixed-income group until a year earlier. He heard from some of his people that they had been contacted by Dale Lattanzio, Semerci’s second in command. Breit was puzzled. There was a group in place in the FICC department that could have handled this request easily.

Sujets

• Banks
• Business
• Economics
• Economie gestion
• Banking

Informations

• Publié par: Everest Media LLC
• Date de parution: 03 mai 2022
• Nombre de lectures: 0
• EAN13: 9781669399018
• Langue: English
• Poids de l'ouvrage: 1 Mo

Extrait

Insights on Greg Farrell's Crash of the Titans
Contents Insights from Chapter 1 Insights from Chapter 2 Insights from Chapter 3 Insights from Chapter 4 Insights from Chapter 5 Insights from Chapter 6 Insights from Chapter 7 Insights from Chapter 8 Insights from Chapter 9 Insights from Chapter 10 Insights from Chapter 11 Insights from Chapter 12 Insights from Chapter 13 Insights from Chapter 14 Insights from Chapter 15 Insights from Chapter 16 Insights from Chapter 17 Insights from Chapter 18 Insights from Chapter 19 Insights from Chapter 20 Insights from Chapter 21
Insights from Chapter 1

#1

The CEO of Merrill Lynch, Stan O’Neal, was re-elected almost unanimously by the institutional investors representing huge blocs of votes. The few individual shareholders who did attend the meeting were typically entranced by the prospect of getting themselves in front of a microphone.

#2

In 2007, problems emerged in the U. S. real estate market, which was the engine of growth across the country. This led to a 36 percent increase in FICC revenues for the first quarter of 2007 over the previous year’s first quarter.

#3

It was clear why O’Neal had touted Semerci as potential CEO material. Poised and elegant, Semerci demonstrated to the board how he had figured out the formula for maximizing the company’s revenues in an overheated real estate market without exposing Merrill Lynch to any of the downside of the real estate crash.

#4

In early July, John Breit, a physicist by training, had been a risk manager for Merrill’s fixed-income group until a year earlier. He heard from some of his people that they had been contacted by Dale Lattanzio, Semerci’s second in command. Breit was puzzled. There was a group in place in the FICC department that could have handled this request easily.

#5

During a meeting of the board’s finance committee, Tosi, the chief operating officer of Merrill’s global markets and investment banking division, made a presentation about the spin-off of Barry Wittlin, one of Merrill’s top bond traders, into Wittlin Capital Group. Tosi was furious and went up to Semerci to confront him about the mass of CDO positions, of which he'd been completely unaware.

#6

In late July, O’Neal went out to dinner with the two co-presidents of Merrill Lynch, Fakahany and Fleming, and a member of his board of directors, John Finnegan. They were optimistic that the subprime market would stay contained within the mortgage area.

#7

The French bank BNP Paribas announced on August 9 that it was suspending valuation of its mortgage-backed investment funds. This was an admission of massive losses on its balance sheet, which damaged the bank’s capital levels. It caused the flow of overnight interbank funding to seize up on the Continent.

#8

In late August, O’Neal left for a two-week vacation on Martha’s Vineyard. He was aware that concerns had been raised about how much exposure Merrill Lynch had, so he left Fakahany to get a grip on the CDO problem and give him updates.

#9

Eric Heaton, the treasurer, and Greg Fleming, who was higher up in the organizational chart than Semerci, knew that something was wrong in the FICC department. They wanted to convince Fakahany to look more closely at the FICC books.

#10

In 2006, Dow Kim, the head of Merrill’s FICC department, was negotiating to buy out the hedge fund run by Jack DiMaio, a top fixed-income salesman. But when Semerci found out that he wasn’t going to get the promotion, he discussed leaving with Fakahany. If he didn’t get the top FICC job, he might as well leave and take some of his top people with him.

#11

As head of investment banking, Fleming knew that the most successful bankers were dysfunctional, and he was used to functioning that way. But when O’Neal promoted Semerci to head of fixed income, commodities, and currencies, he knew it would be completely dysfunctional.

#12

One of Tosi’s complaints about Semerci was that he was not addressing the concerns and fears of the buyer. Semerci was a master of the art of addressing the concerns and fears of the buyer, and he worked on O’Neal constantly between July and September.

#13

On September 4, O’Neal returned from his vacation and met with Fakahany to get a status update on the CDO issue. Fakahany told him that it seemed impossible to sell the CDO positions at anything close to their carrying value.

#14

After the meeting, Tosi received an email from Fakahany that detailed everything Semerci had done in the past year, and he attacked it point by point.

#15

Tosi spent the next 48 hours tracking down every scintilla of information concerning the claims that Semerci had made. He found that it was all Semerci’s risk, and he could have sold out a long time ago.

#16

The manufacturing of CDOs is a two-step process. First, an investment bank must open a warehouse for mortgages. The warehouse isn’t a physical location, but a commitment to fund loans offered by mortgage origination companies to home buyers. Once the warehouse has enough mortgages in its pool, the investment bank turns around and securitizes this pool of funds into financial products that resemble bonds.

#17

In his year as head of fixed income, commodities, and currencies, Osman Semerci created $70 billion in new CDOs, and sold approximately $40 billion of the stuff. He left Merrill Lynch with $35 billion of the most toxic assets in the marketplace.

#18

As the losses continued to mount, O’Neal began exploring other options. He met with the top executives of two large commercial banks in Tokyo, Mizuho and the Bank of Tokyo Mitsubishi, and offered them a strategic partnership with Merrill.

#19

After O’Neal’s meeting with Lewis, he was clear that he wanted to be president of the combined organization. His board was behind the deal, but Lewis couldn’t guarantee that O’Neal would be his successor.

#20

O’Neal was one of the best-paid executives on Wall Street from 2002 to 2007. He accumulated just over $163 million by 2007, but he spent time and energy trying to save a few thousand dollars of personal expenses. He fused the family adventure with a legitimate business trip underwritten in part by Merrill Lynch shareholders.
Insights from Chapter 2

#1

O’Neal wanted to be in private equity, and he wanted to join a top-tier firm. He asked his mentor at Merrill Lynch, Barry Friedberg, for advice. Friedberg told him that if he really wanted to be in private equity, he should aspire to one of the top-tier firms, like KKR.

#2

As O’Neal was dealing with the problems on Merrill’s balance sheet, it appeared as though Cribiore was going to land a job at Citigroup. O’Neal passed the word quietly to several other board members that Cribiore was about to leave.

#3

In September, after revealing the truth about Semerci to Fakahany, Tosi was on to the next challenge: figuring out a way for Merrill Lynch to extricate itself from its disastrous situation. The company would need to raise cash quickly, so Tosi suggested that Merrill sell its 20 percent stake in Bloomberg L. P.

#4

On October 3, the head of fixed income, Semerci, was fired after the losses for the third quarter were so large that Merrill would have to give its investors a warning.

#5

After the interview, Semerci was not very composed. He had lost the unconditional support he once enjoyed on the thirty-second floor. He checked out of the Four Seasons Hotel, where Merrill Lynch had been paying for his suite, and returned to London on the first flight he could catch.
Insights from Chapter 3

#1

Reese was a competitor, and he wanted to grow his bank aggressively. He merged his bank with Commercial National in 1957 to form American Commercial Bank, and two years later merged with First National Bank in Raleigh.

#2

The sudden arrival of a major out-of-state commercial bank in Florida in 1981 was a template for future growth at NCNB and demonstrated the importance of speed to the top managers in Charlotte.

#3

Lewis grew NCNB’s lending operations in the western United States, and in 1985, he was sent to Florida to help organize the bank’s Florida branches. By 1989, he had acquired control of First Republic, the largest bank in Texas, and the biggest victim of the Lone Star State’s boom and bust economy.

#4

NCNB’s triu