The Greed Merchants: How the Investment Banks Played the Free Market Game

Are investment bankers the responsible guardians of free-market capitalism that they would have us believe? Or are they something more sinister altogether . . . necessary but dangerous players in our free-market economy?

“Greed” said Gordon Gekko in Wall Street,“is good” But how good is it for capitalism if the major investment banks are basically an oligopoly, keeping their risks low and their profits artificially high? How good is it for companies that listen to their value-destroying advice? And how good is it for the average shareholder, who pays a huge price through portfolios that underperform and have a raft of hidden charges?

Philip Augar worked in investment banking for more than twenty years and has since become a gadfly to the industry on both sides of the Atlantic. His new book reveals exactly how the investment banks make their money by acting simultaneously for buyers, sellers, and themselves while carefully avoiding fee-based competition with one another.

Their cushy role in the financial world has finally been challenged by New York Attorney General Eliot Spitzer in the wake of the dot-com bubble. But only a former insider like Augar can go beyond the headlines to reveal how the system really works and why it matters to anyone who owns stock.

"Augar's The Death of Gentlemanly Capitalism (2001) described how the cozy club of British merchant banking collapsed due to mismanagement and scandal. It was an insider's account; Augar was the head of Schroder Securities, a London merchant bank founded in 1804. (He sold the company to U.S. financial services giant Citigroup.) This book takes stock of similar doings on this side of the Atlantic. While many firms have met ignominious fates in the past few years, Morgan Stanley, Goldman Sachs and Merrill Lynch managed to avoid the worst of the scandals; through what Augar sees as superior management, they command investment banking. Three other firms, Lehman Brothers, Salomon Brothers (now part of Citigroup) and First Boston (now part of CSFB) proved 'impossible to kill,' making what Augar characterizes as huge errors but somehow surviving as a solid second tier. Finally, JPMorgan and Bear Stearns — along with two European banks that made U.S. acquisitions, UBS and Deutsche Bank — managed to find niche positions near the top. Despite the inflammatory title and cover, the author offers only mild and familiar criticisms: bankers are overpaid, the industry is too powerful and banks sometimes put their own interests above their clients (or one client's interests above another's). The heavy reliance on anonymous personal interviews of bankers gives a strong inside feel to the story, but one that undercuts its power as objective journalism. (On sale Apr. 25)" Publishers Weekly (Copyright Reed Business Information, Inc.)

A controversial insider's look at the secret world of investment banking.

Philip Augar is the former head of Schroders Securities. He is now a full- time writer whose books include The Death of Gentlemanly Capitalism and (as co-author) The Rise of the Player Manager.