Investment Banking Cartel More Concentrated than Ever, Drops to 5

Thursday, January 12, 2012
Where once there were 17 major investment banks on Wall Street, there now are only five.
During the financial crisis, stalwarts such as Bear Stearns, Lehman Brothers Holdings Inc. and Merrill Lynch crumbled, leaving behind Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, Bank of America and Deutsche Bank AG in command of investment banking.
These Big 5 act a lot like a cartel, according to William Cohan, a former investment banker and columnist for Bloomberg. In fact, investment banks have been operating like a cartel for a long time.
In 1947 the U.S. government sued Morgan Stanley, Goldman Sachs and 16 other Wall Street investment banks, claiming the banks were violating antitrust laws by colluding to set prices for their services. The lawsuit was finally dismissed in 1953 when Judge Harold Medina ruled that evidence of collusion was only “circumstantial,” leaving the banks to continue their antitrust behavior.
Now, 59 years later, the number of major players in the investment banking industry is so reduced that the 17 of the old days seems positively competitive in comparison.
Cohan urges the Obama administration to go after the five institutions dominating investment banking, “break up the Wall Street cartel and re-establish the integrity of the capital markets.”
-Noel Brinkerhoff, David Wallechinsky

How Wall Street Turned a Crisis Into a Cartel (by William Cohan, Bloomberg) 


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