Ancient history participant in the banking world...
In 1991, there was significant consolidation expected among the large banks in the U.S., particularly in New York and California. Residual credit issues from the 1980's and the need for cost cutting were the primary reasons, and higher capital levels were required. The big speculation at the time in New York was whether Manufacturers Hanover, my employer, would be combined with Bank of New York or Chemical Bank, or whether those two would merge with each other. It was not just speculation, the negotiations were underway. Another thought was whether any of the three banks would be acquired by Citibank or Chase Manhattan, all considered more viable at that time, yet their difficult days would come as well, and soon.
The President of Manufacturers Hanover had been recruited from Chemical Bank the year before, where he had been one of three Presidents there, under a Chairman and two Vice Chairman. To say this was a unique arrangement, not just in banking but in corporate America, was an understatement. Top heavy? The Chairman of Manufacturers Hanover was still firmly in charge of the troubled company, and realized that going it alone was not possible. The intrigue inside and outside of the banks was a source of speculation in the markets, the media, and among the employees of those institutions, rife with rumors.
My hours worked during that time were daunting. Having secret locations for negotiations and planning around Manhattan to avoid scrutiny was commonplace. At 8pm one evening in early June, I went out to dinner at a small and discreet French restaurant on East 48th Street with the CFO, who was my boss, the Controller, and the head of strategic planning. The CFO was filling us in on the status of the negotiations, the challenges faced, and the fact a choice was being made between merging with Chemical Bank or Bank of New York. Bank of New York was less stressed and smaller, but with limited international operations where big cost cuts would be possible. Chemical was generally viewed to be the stronger bank with its blue blood culture, but its capital levels were no better than MHT at the time. Unfortunately for Chemical, as well, they had entered into a huge interest rate swap in 1990, actually a big bet to supposedly hedge their balance sheet, and the swap was massively underwater. That was not public at the time. The brainchild of that swap was the new President of MHT.
Anybody still reading? Is this possibly boring? Oh well, this will continue. Keeps me busy!
At dinner that night on 48th Street, I was quizzed by the others about what our largest shareholders were thinking, as they were my contacts. Clearly they thought mergers were necessary for the industry. MHT's largest shareholder by far was Fidelity Management, and various portfolio managers there bent my ear daily with rational thoughts and opinions. My job required that there be no disclosure of confidential information and they did not expect that, or want it(illegal for them and me), but they could opine. A few days before in Boston, the new President and I had a meeting at Fidelity HQ, and at the dinner that night the CFO asked me to describe their thoughts. Basically, I related their position. What they wanted was the most beneficial deal possible, certainly, which depended on the exchange ratio, cost reduction possibilities, and management leadership choices. They expressed no preference about which merger partner, but liked the merger of equals concept.
Hearing that, the detail oriented, knowledgeable and usually soft spoken CFO yelled "Damn it", which was added to in a lower tone of voice as "that motherfucker". At the quiet tables around us, heads turned. As it happens, the President, in a meeting with the CEO and the Management Committee earlier that day, had told them that Fidelity much preferred Bank of New York as the merger partner. The President, reviled at Chemical after his departure to a rival, was talking his book and lying, no other word for it. His cover was blown.
Manufacturers Hanover and Chemical Bank announced their tentative merger agreement the next month and completed the merger in January 1992. The President had sealed his fate and found a job later at Toronto Dominion's U.S bank HQ in Chicago for a short time, aggravating everyone there, and eventually became Chairman of Greenpoint Savings Bank in Queens, where he promptly moved the executive offices to Manhattan.
That's my story and I'm sticking to it. Eventually the new Chemical Bank merged with Chase Manhattan, actually bought the massively mismanaged Rockefeller bank if truth be told, but the name Chemical Bank was justifiably retired, and subsequently the new Chase merged with(bought) JP Morgan in 2000. In 2003, they parted ways with me. It was an exhausting run, but the travel required in my investor relations role kept me on the road part of the time, limiting internal politics for the most part, until it didn't.
Enough of this. Avoided names above to protect the...
The President of Manufacturers Hanover had been recruited from Chemical Bank the year before, where he had been one of three Presidents there, under a Chairman and two Vice Chairman. To say this was a unique arrangement, not just in banking but in corporate America, was an understatement. Top heavy? The Chairman of Manufacturers Hanover was still firmly in charge of the troubled company, and realized that going it alone was not possible. The intrigue inside and outside of the banks was a source of speculation in the markets, the media, and among the employees of those institutions, rife with rumors.
My hours worked during that time were daunting. Having secret locations for negotiations and planning around Manhattan to avoid scrutiny was commonplace. At 8pm one evening in early June, I went out to dinner at a small and discreet French restaurant on East 48th Street with the CFO, who was my boss, the Controller, and the head of strategic planning. The CFO was filling us in on the status of the negotiations, the challenges faced, and the fact a choice was being made between merging with Chemical Bank or Bank of New York. Bank of New York was less stressed and smaller, but with limited international operations where big cost cuts would be possible. Chemical was generally viewed to be the stronger bank with its blue blood culture, but its capital levels were no better than MHT at the time. Unfortunately for Chemical, as well, they had entered into a huge interest rate swap in 1990, actually a big bet to supposedly hedge their balance sheet, and the swap was massively underwater. That was not public at the time. The brainchild of that swap was the new President of MHT.
Anybody still reading? Is this possibly boring? Oh well, this will continue. Keeps me busy!
At dinner that night on 48th Street, I was quizzed by the others about what our largest shareholders were thinking, as they were my contacts. Clearly they thought mergers were necessary for the industry. MHT's largest shareholder by far was Fidelity Management, and various portfolio managers there bent my ear daily with rational thoughts and opinions. My job required that there be no disclosure of confidential information and they did not expect that, or want it(illegal for them and me), but they could opine. A few days before in Boston, the new President and I had a meeting at Fidelity HQ, and at the dinner that night the CFO asked me to describe their thoughts. Basically, I related their position. What they wanted was the most beneficial deal possible, certainly, which depended on the exchange ratio, cost reduction possibilities, and management leadership choices. They expressed no preference about which merger partner, but liked the merger of equals concept.
Hearing that, the detail oriented, knowledgeable and usually soft spoken CFO yelled "Damn it", which was added to in a lower tone of voice as "that motherfucker". At the quiet tables around us, heads turned. As it happens, the President, in a meeting with the CEO and the Management Committee earlier that day, had told them that Fidelity much preferred Bank of New York as the merger partner. The President, reviled at Chemical after his departure to a rival, was talking his book and lying, no other word for it. His cover was blown.
Manufacturers Hanover and Chemical Bank announced their tentative merger agreement the next month and completed the merger in January 1992. The President had sealed his fate and found a job later at Toronto Dominion's U.S bank HQ in Chicago for a short time, aggravating everyone there, and eventually became Chairman of Greenpoint Savings Bank in Queens, where he promptly moved the executive offices to Manhattan.
That's my story and I'm sticking to it. Eventually the new Chemical Bank merged with Chase Manhattan, actually bought the massively mismanaged Rockefeller bank if truth be told, but the name Chemical Bank was justifiably retired, and subsequently the new Chase merged with(bought) JP Morgan in 2000. In 2003, they parted ways with me. It was an exhausting run, but the travel required in my investor relations role kept me on the road part of the time, limiting internal politics for the most part, until it didn't.
Enough of this. Avoided names above to protect the...
posted by John Borden at 12:37 PM
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