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October 5, 2007

Merrill Lynch Overhaul Management Thanks To SubPrime

by Stewart Douglas

Story link: Merrill Lynch Overhaul Management Thanks To SubPrime

Investment banking giant Merrill Lynch has today announced sweeping management changes as it sacked several executive officers in the wake of the sub-prime sector fallout and the subsequent global credit crunch.

After extensive exposure to the sub-prime lending sector through high-risk investment strategies and lax lending policy review, Merrill Lynch was amongst several of the large worldwide investment banks to lose heavily in the collapse of the sector.

As a consequence a number of high profile management staff employed at the time the relevant investment decisions were made have lost their jobs, down largely to the shareholder’s call for blood after many had deemed the level of sub-prime investment to be too substantial in hind-sight.

It is thought that Merrill Lynch will work hard to find replacement staff of a high calibre, with one or two trusted ‘celebrity’ personnel likely to take over from the departing executives.  As much a move of principle as necessity, the change in management is expected to take several weeks to fully complete, during which time it is hoped the current sub-prime unrest will begin to die down.

Deutsche Bank today also publicly announced it has suffered losses running into billions of dollars as a result of the same market externalities, which saw it tie up a great deal of liquidity in bad sub-prime debts.

Deutsche Bank has also undergone significant personnel changes in the wake of the sub-prime saga to reflect the markets perception that investors had lost confidence in the current management team.  This pattern has been mimicked across several other major banks involved in the recent turmoil. 

Despite the news shares in Deutsche Bank were up today with investors feeling more secure in the knowledge that the true extent of their losses had now been clarified.


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