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Where's the money coming from?

Until the market debacles of the past couple of years investment banks had grown used to new doors to profit opening as old ones closed. That's no longer the case and in the absence of anything better proprietary trading seems to be back in vogue.


John Mack stood up and began to speak. He was the guest speaker at a breakfast last month for fellow Duke University alumni working in financial services. About 100 of them were there to hear the CSFB chief executive, including senior bankers from rival firms.

It was mid-July, and Mack was about to celebrate his first anniversary at CSFB. It had been a tough year as he worked to overcome the mess of regulatory, cultural and expense management problems left behind by his predecessor, Allen Wheat. Mack has had a lot of success sorting them out, but if any of his audience were expecting him to talk up the previous 12 months, they were in for a shock.

He painted a grim picture of investment banking: there was little sign of a quick turnround in the big-ticket business; salaries, already under pressure, would have to come down more; the sell-side analyst would have to revert to working simply for the buy side; and more staff cuts were on the way.

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