It's unlikely you've been following the ins and outs of the decline of Credit Suisse, once proud bearer of the First Boston name. The latest reports from Madison Avenue, where Credit Suisse's operations sit awkwardly between Manhattan's twin financial centres of Downtown and Midtown (and not far from my day job) are rather sobering. According to the FT, Credit Suisse is cutting back on colour photocopying, and client entertainment, in a bid to control costs.
I will leave it to the inestimable Mr. Gross to point out that such cost-cutting gestures are pretty pointless next to even the minimum bonuses required to hold on to investment bankers. Credit Suisse might have a reputation for extracting stupendous amounts of revenue and fees from sporadic, if highly tricksy, transactions. But the fact is, we've been here before.
I will refer you to this profile of former head of investment banking Adebayo Ogunlesi, now running a joint venture fund, from 2002:
A standing ovation at his first staff meeting in February did not deter Ogunlesi, 48, from delivering a sobering message: he would have to "break some glass" to control spiraling costs. Within weeks CSFB laid off 300 bankers, or 14% of Ogunlesi's division. The survivors with guaranteed contracts were asked by Ogunlesi to accept pay cuts. He pushed the bankers out of limos and required them to hail taxis. And he freed 12 top revenue producers of daily management responsibilities so they could spend more time generating business.
Now that's brutal. The fact the move does not seem to have made the slightest difference to CS' cost structure says more about the brutal nature of competing for investment banking personnel than the wisdom of such cost-cutting gestures.