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The end of a period of excess

When the largest brokerage firm in America sends an email to all its employees offering them voluntary redundancy, it's a sign that something more than a periodic bout of investment banking blood-letting is under way.

A shakeout is beginning that will reshape whole firms and sectors of the financial services industry, throw up unexpected winners and losers, make some old skills obsolete and put high value on new and different ones.

Banks have always tended to bulk up their staff in the busy times, lay them off in slowdowns and rehire them when markets pick up. It's a brutal culture that bred a mercenary outlook among bankers who cast aside loyalty to their employers and determined to take as much money as they could in the good times, while negotiating guarantees whenever possible to protect against the bad.

As the great bull run of the 1990s finally careered towards its ugly end with the technology share crash, senior executives at many firms seemed for a while unable to comprehend what was happening around them. Allen Wheat at CSFB offered the most extreme example, still negotiating multi-million dollar deals with even fairly junior members of a team of 40 debt capital markets bankers that threatened to quit for Barclays Capital this February.

Wheat left his successor, John Mack, the extraordinary task of having to ask subordinates to forgo their lucrative guaranteed deals for the good of the firm.

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