Oct 15 2008
Small firms sit pretty as Wall Street mayhem continues…
In times when uncertainty looms large over global financial markets there is an interesting observation that I would like to point out. The bloodbath which has taken its toll on almost all big, reputed and established Wall Street institutions have strangely left the smaller, lesser known firms untouched and in a position where surprisingly it is expected that they will not only survive but will also lead towards prosperity.
The large firms had to bear the brunt as they were suffered from heavy leverage as against the small firms which take very less risk because in reality it is the money of the partners of the firm which fuel and fund the business. It is generally observed that in smaller firms the owners of the firm play the role of the officers as well. This puts their own money at stake when they operate and thereby are careful with the operations relating to the business like the underwriting process undertaken for the transactions etc.
This proves out to be the major reason for these smaller entities dwelling on Wall Street to do well. They have been seen generating profits even in such turbulent times and have gained a significant share in the market. I would mark this current scenario as the biggest opportunity ever seen by these firms since they have no debts or burdens to carry forward and are now spoilt for choices looking at the huge number of brokers and bankers available in the market for recruitment.
Also worth consideration is the act of acquisition of other smaller firms by them with the aim of expanding their reach in the financial market. But the recent spate of reforms I believe is a cause of worry amongst the community of these small firms. The lawmakers will have to take into consideration that these proposed reforms follow a tiered system so that the small firms do not end up on the receiving end owing to their small size and limited capabilities to do business.