John Gutfreund of Gutfreund & Company Examines The Financial Crisis
Thursday, October 02, 2008PAUL KANGAS: Joining me now is a man who is no stranger to financial crises. He's John Gutfreund, former chairman and CEO of Salomon Brothers and current president of Gutfreund & Company, a New York-based financial consulting firm. And, John, welcome to NIGHTLY BUSINESS REPORT.
JOHN GUTFREUND, FORMER CHMN. & CEO, SALOMON BROTHERS: Thank you.
KANGAS: Business Week magazine once called you the king of Wall Street. So drawing on that kind of vast experience, do you think that the stock market declines are being overdone here?
GUTFREUND: No, I think the circumstances are unique. In 55 years in the Street, the only thing that ever struck me as strongly as this was the bombing September 11th in '01.
KANGAS: Mm-hmm. So now if the rescue bill-passes, will that bailout get money flowing on Wall Street again in your opinion?
GUTFREUND: I don't think money on Wall Street is necessarily the issue. I think that the public confidence has been sorely shaken and the procedures in Washington where they confuse the issues by adding all sorts of goodies on a bill, on a most serious matter, just is so offensive. Anybody that can read and write has got to be sore as hell at their congressman and Senators who are anxious to get back to their political hustings.
KANGAS: Do you think they are sore enough so that this plan will not make it through the House like it did the Senate?
GUTFREUND: I think that the -- these monkeys are under enough pressure and they have probably got enough goodies, pork barreling stuff, that they will get it through, whether it makes sense or not is something else.
KANGAS: So they will pass it, do you think?
GUTFREUND: Yes, but I thought they were going to pass it the other day.
KANGAS: OK. Well, if it passes, what will it do for investor and consumer confidence, won't that be a bit of a boost, at least near term?
GUTFREUND: Well, it should be. But when are you are going downhill on a slide, it will take more than one or two things. I think that the thing that they added the other day about increasing the limit of insured deposits from $100,000 to $250,000, things like that are much more important and really bear consideration. Who are they kidding with this nonsense, bailing out Wall Street? The public is concerned. You have got a huge population, it isn't just Wall Street.
KANGAS: Mm-hmm.
GUTFREUND: I am of the school who thinks it will take a lot of work. I think people will be more interested in watching that lady and that senator debate tonight.
KANGAS: OK. What are you telling your clients to do, if anything, here?
GUTFREUND: Stay liquid. Stay close to shore. I don't think that we have seen an absolute market bottom. The credit problems are very severe. And the one thing that we've never had before is, because of the technology and the age in which we live, it's a global problem. It isn't just a U.S. problem. And you can't detach us from the rest of the world. The banks in Europe, in Asia, they will all suffer, those who have been as imprudent as ours.
KANGAS: Mm-hmm. Now you have been through these types of crises before at Salomon. What are the lessons from today's credit crunch?
GUTFREUND: The lesson is you ought to treat your depositors, your shareholders, as if they were yourself. In other words, act as if it is your own money. Don't do things you don't understand. Don't take crazy, imprudent risks and because other people seem to be getting rich doing it. Don't get carried away. If you were that smart, would you have been rich already.
KANGAS: Very good points that you make. John, I want to thank you for sharing your candid insights with our viewers.
GUTFREUND: My pleasure. Glad to do it. I wish all of them well and I wish I felt more enthusiastic or euphoric. But I think you really have to pay attention to this and say, it's my money, and I want to be careful. I may have made some foolish mistakes up to date, but in here I want to keep my liquidity.
KANGAS: John, thanks very much. John Gutfreund of Gutfreund & Company.
GUTFREUND: Thank you.
