Needled over the size of his firm's exposures to collapsing emerging markets, hedge funds, suddenly unsecuritizable real estate and other assets of doubtful value, pushed on how much of its capital the firm might lose if the worst comes to the worst, the chief financial officer of a top-league international investment bank finally loses patience. "It's not a question of how much capital we'll lose," he snaps. "It's a question of how will we earn a return on the capital we have left."
Succinct and to the point. That has been precisely the debate among the top managers of leading international firms since roughly mid-September, once most of them felt reasonably sure they were not actually going to go bust. What are business volumes and revenues likely to be in their key markets in the next few quarters? What businesses might they want to get into or out of? How should they redeploy capital and human resources in businesses they intend to retain? Where should they cut back? Where might they exploit competitors' weaknesses and expand share in promising markets? Do they need to rethink their entire strategies, or just reshape existing businesses?
Quickly, by mid-October, decisions were being made.