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NEW YORK - Loathing and fear continued to grip Wall Street on Tuesday as investors and financial sector employees struggled to understand how allegedly iron-clad institutions, including Citigroup and Merrill Lynch, fell so dramatically foul of the sub-prime mortgage fiasco announcing multi-billion-dollar write-downs.
"Wall Street wants heads," said analyst David Dreman, whose firm Dreman Value management is based in Aspen, Colorado.
Shaken investors have seen two very large ones roll from top perches already - first Stan O'Neal of Merrill Lynch and on Sunday, Charles "Chuck" Prince of Citigroup - but the spectacle of their respective humiliations has been scarcely satisfying.
Healthy though it may be that even the most senior-ranking universe-masters are willing to fall on their swords, it doesn't answer how their respective banks bungled so badly in the first place, exposing themselves to such gargantuan risk with deeply complicated financial products that perhaps even their own specialists didn't understand, all built on a sup-prime lending bonanza that so quickly went sour.
Nor can anyone truly pretend that the departure of these two men will solve a great deal while so many questions still abound.
How come these and other banks struggling to cope with assets turned rotten, like UBS and Bear Stearns, did not see what was coming sooner? Did they, in fact, hoodwink investors and even themselves in pretending the problems would go away? And what shoes are still to drop?
UBS, Europe's fifth-largest bank that until recently was widely respected for managing the wealth of the rich, has already sent its chief executive, Peter Wuffli, packing after his steering of the bank into the mortgage-related securities business resulted in depressed results and a 21 per cent plunge in its stock price.
Still in his job is Bear Stearns CEO James Cayne, but hardly comfortably.
Last week, he was stacking sand-bags around his suite at the bank's headquarters after a scathing profile in the Wall Street Journal accused him of smoking pot and goofing off at critical moments to play golf and bridge.
Blaming is a game few can resist when Wall Street hits rocks with so dramatic a jolt.
Not escaping even is Hank Paulson, the US Treasury Secretary, whose job it is to reassure markets when not a few analysts are recalling his tenure as head of Goldman Sachs at a time when that bank also was accumulating some $37bn of bonds backed by sub-prime loans or second mortgages.
Nor are many reassured by the choice of the former Treasury Secretary Robert Rubin as the new chairman of Citigroup, given his job over previous months advising that bank's board as it made course for the reef.
Neither he nor the wider board at the bank apparently had the foresight or courage to grab the wheel from Mr Prince.
"Since joining Citigroup, Mr Rubin's performance has vacillated between disappointing to terrible," Richard Bove, an analyst at Punk Ziegel & Co, wrote in a note to investors.
But the ripples - or tsunami waves - of the crisis extend far beyond the daily schedules of some sacked CEOs.
Merrill Lynch faces a practical vacuum of talent as brokers, mostly paid in a stock that has collapsed in value, flee to competing institutions with lower levels of dodgy exposure.
Then there is the pain for the much wider workforce on Wall Street without corner offices.
The lay-off train has barely departed and yet, according to one New York recruitment company, as many as 42,000 Wall Street employees have already found themselves laid off this year because of the collapse in banking fortunes.
Bank of America has already shed a total of 3,000 jobs and Lehman Brothers a further 1,200.
There will not be a happy bonus season on Wall Street this year.
As for New York City, it too is preparing to tighten its belt and the banks that have fuelled its prosperity for the past several years are beginning to look like junk.
- INDEPENDENT
