AIG’s CEO Robert Benmosche wants to reinvent the rules of Wall Street, saying that IPO fees should be halved and attorney costs should be reigned in. He calls it “a vision.”
The insurer is planning IPO spin-offs of certain business lines to repay some its government bailout funds. Notably it plans to IPO American International Assurance, a Hong Kong-based life insurer, and has tapped Morgan Stanley and Deutsche Bank as joint global coordinators.
“I went into one presentation, and they said, ‘Well, the investment banking deal will be in the range of 2% and 2.5%. I said, ‘How about 1 per cent?’ So then everybody’s face turned red, and I said, ‘So change it.’ So we’re talking about 1 per cent, not 2 per cent to 2.5 per cent.”
Benmosche’s also had enough with attorneys and consultants fees, apparently, and maybe with attorneys and consultants period. “We forget to look in our own backyard for skills,” because managers feel “we need the consultants. I think we have too many.”
You can bet Wall Street will fight tooth and nail against any assault on its deal fees. With trading being reigned back at some firms, and profits down in fixed income particularly, the investment banks will need to make money somehow. Many were counting on the old underwriting public offering business to be a key part of future profits.