18-03-2025
- Business
- Wall Street Journal
‘Meltdown' Review: A Failure of Oversight
Switzerland's two global banks suffered very different fates as a result of the 2008-09 financial crisis. While UBS was forced to go cap in hand to the Swiss government for a bailout, its rival Credit Suisse deftly sidestepped the subprime debacle. Nearly 15 years later, however, Credit Suisse would find itself on the brink, its reputation sunk so low that it could be brought down by a single tweet.
In 'Meltdown,' Duncan Mavin, a financial journalist who has worked for a number of newspapers (including this one), chronicles Credit Suisse's decline. The root of the problem, in Mr. Mavin's view, is that Credit Suisse was a hybrid organization: a secretive, apparently staid Zurich-based private bank attached to a 'high octane' global investment firm formed from the acquisitions of First Boston (in 1988) and Donaldson, Lufkin & Jenrette (in 2000).
Credit Suisse's investment-banking arm gained a reputation for being smart, innovative—especially in the field of derivatives—and client centric, but it never overcame the cultural differences between Zurich and New York. John Mack, previously the president of Morgan Stanley, came to Credit Suisse in 2001 to run its Wall Street operations. But he refused to learn German, the language of the bank's board; he also reportedly clashed with members of the board on numerous occasions. Three years later, he was pushed out.
Foreign banks have always struggled to establish themselves on Wall Street. Credit Suisse was no different. A 2022 internal report revealed that the bank had a headcount and expenses similar to those of Goldman Sachs while generating a fifth of Goldman's per capita revenue. In the 10 years leading up to its collapse in 2023, Mr. Mavin writes, Credit Suisse produced cumulative losses of more than $2 billion but paid out around $35 billion in bonuses.
