GOOD riddance to Frank Newman.
When Newman, then a top official in the U.S. Department of the Treasury, was tapped to become head of Bankers Trust near the end of 1995, he had never before headed a for-profit concern.
A cruel person might say Newman still can’t claim to be a prophet of profits. Sure, Bankers Trust did manage to post some measly profits during Newman’s 14-quarter reign. But he also posted periods of huge losses, including last fall’s $488 million loss.
When Newman, after months of saying Bankers Trust would remain an independent bank, finally decided to sell out to the Germans, his new bosses at Deutsche Bank made it clear that they knew what he was all about. They declined to name him head of the American operations for the biggest bank in the world. They declined to put him on their board. They declined to make their corporate jet available to him and his lavishly-spending wife.
The officials at Deutsche Bank clearly knew that Newman was not someone they could count on to deliver profits.
The overall profitability of the seventh-largest U.S. bank moved steadily southward throughout Newman’s tenure.
In his very first quarter running Bankers Trust, in 1995, Newman said he was pleased to post net income of $126 million on revenues of $2.3 billion dollars.
By the end of the first quarter of 1999, Newman’s last before being ousted, he had managed to grow revenue to $2.76 billion. That’s 20 percent higher. Profits, over the same time period grew only 11 percent.
In his time at the helm of Bankers Trust, Newman pushed the bank into emerging markets at the absolute worst time, failed to clean up the bank’s already-existing derivatives problems – which led to several lawsuits against the bank by its institutional clients, and lent too much money to hedge funds just before they all started hitting the skids.
No wonder the Germans took over.
There is now much speculation about where Newman will go. My recommendation is for Wall Street to leave Newman to his multi-million dollar retirement.