The bank's management appears unable to see that it is spinning out of control
The defining feature of a bunker is psychological, not architectural. The bunker might be 50 feet underground or it might be an elegant house overlooking Lake Zurich. The walls might be bare concrete or they might be decorated with masterpieces. It makes no difference. The view from the bunker is always the same. Everything's fine.
A bunker is where Lukas Muehlemann, chairman and chief executive officer of Credit Suisse Group, along with the rest of his board and management team, appears to have taken up residence. As the bank spins out of control, its leaders remain calm and serene. Don't worry, they purr. Everything's fine.
What other conclusion can observers draw from events over the past few weeks at what remains of one of Europe's largest banks? With the recent sacking of Allen Wheat and his replacement with John Mack, Muehlemann delivered a master class in financial confusion and turmoil.
Amid investigations into its role in an IPO scandal in the US and a dramatic slump in the investment banking business, Muehlemann dropped the architect of his acquisition strategy and brought in a man who, until recently, was running one of his biggest rivals. He managed this trick without uttering a word that suggested he, as chief executive, had any role other than disinterested observer of his own company's disintegration.
There are two interesting points that emerge from the free-wheeling debacle that travels under the name of Credit Suisse. One is that this is an organisation entirely bereft of management. Not where the management is poor or reckless or greedy or stupid or any of those things, but an organisation where management, in any honest sense of the word, has abdicated its responsibilities and has ceased to exist. Credit Suisse is about as close to corporate anarchy as a big company ever gets.
The second point is even more dismal. The market has looked at this situation, considered its implications and decided it just doesn't matter. No management at Credit Suisse? Who cares? Sure, the shares are down about 7% this year but not as much as its peers: the Dow Jones Europe Stoxx Financial Services Index is down about 9%.
Now, after five years pushing through a costly strategy of global expansion to become one of the leading investment banks in the world, the situation looks perilous at Credit Suisse.
Much of the money now looks to have been wasted. Under Wheat, Credit Suisse bulked up in every direction. He himself had been a superstar who was let rip (creating CSFB's mighty derivatives business) and his style was to hire lots of other stars and let them rip as well.
His biggest star was Frank Quattrone, whom he took from Deutsche Bank AG to lead the firm's technology unit in the US, and who made it the leader in internet IPOs.
Like Spanish Catalonia, Quattrone operated a semi-autonomous republic, writing his own rules and gathering his tribe around him. Now his unit, though not the man himself, is under official investigation.
Late last year, Wheat steered Credit Suisse into a $13bn acquisition of Donaldson, Lufkin and Jenrette, which significantly increased its size in investment banking and added to its collection of mini-Quattrones.
That was a big bet to make at the top of a market. Over four years, Wheat increased his staff from 5,000 to 28,000, many of them lavishly paid. Along the way, he made CSFB the most expensively run operation in the most expensively run industry in the world.
And Wheat was not without his successes. Last year, Credit Suisse First Boston was the third largest investment bank in the world, earning fees of $5.5bn. So long as the bull market kept going, and all his stars behaved themselves, the future looked bright.
Of course, that's not what happened. Management is about foreseeing problems, planning for contingencies, assessing risks, setting standards. At Credit Suisse, none of that ever happened.
Still, the world's investors have concluded that big investment banks don't need to have effective management before they buy the stock. Of the 44 analysts that cover the stock, 21 rate Credit Suisse as a buy, 18 as a hold and only five as a sell.
The lesson of Credit Suisse's problems is that there is, it seems, no price to be paid. Wheat will be compensated for his departure, Mack for his arrival. Muehlemann and the entire board of Credit Suisse remain in place. The shareholders stay onside.
Retribution for failure remains for other people. At Credit Suisse, the good times just keep on rolling. Inside a bunker, that's how life is.
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