IFR International - 20.10.2018

BOB PENN, PARTNER FOR LAW FIRM ALLEN & OVERY, P

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Philip Scipio

FROM THE ARCHIVE: 10 years ago this week

THE FINANCIAL CRISIS

From October 25 2008 issue

Thain installs allies

Reflecting not only Bank of

America’s desire to retain Merrill

Lynch talent once it has completed

its acquisition of the broker-dealer,

but also the lack of overlap with

current BofA executives, senior

Merrill staff are already dominating

the investment banking structure of

the combined firms.

With former Merrill CEO John

Thain having been confirmed earlier

as president of the combined firms’

banking activities, last week saw Greg

Fleming and Tom Montag installed

at the top of the investment banking

and markets businesses.

Fleming, former president and

COO of Merrill Lynch, will head the

global corporate and investment

bank. Montag, who signed a

lucrative package last year to head

global sales and trading at Merrill,

will head global markets, which

includes sales, trading and research.

Wachovia’s Golden misstep

Expectations were not high for

Wachovia’s third-quarter results,

but the commercial bank last week

managed to record an eye-popping

loss of US$23.89bn – one of the

largest in history.

It is likely to be the last earnings

report from Wachovia before it is

acquired by Wells Fargo. The report

highlights some of the wrong turns

the North Carolina firm took –

most notably, the 2006 purchase

of mortgage-lender Golden West

Financial – before the Federal

Deposit Insurance Corporation had

to intervene and eventually bring

about the bank’s sale.

Argentina seizes pensions

The Kirchner administration justified

the nationalisation of pension funds

last week as yet another government

intervention during a time of crisis,

similar to what is being done in the

US and Europe. But such talk failed

to convince investors, who widely

believed the underlying motive was

control of pension fund assets and

flows to cover financing gaps.

“The perception of the market

is that this is a play on the part of

the government to get that money.

It is as simple as that,” said Dario

Pedrajo, senior portfolio manager

at Kapax Investment Advisers.

The takeover has also negatively

impacted on the country’s local

debt capital market, which, for

the first time in years, was finally

showing signs of life and promising

to become one of the few bright

spots on the planet.

Up to eight corporates were

looking to come to market, with

more names prospecting behind the

scenes. But local bankers now believe

the government has effectively

torpedoed any such hopes of a local

debt capital market recovery – the

first since the country was plunged

into a financial crisis in 2001 and

2002 and ended up defaulting.