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Wednesday, November 05, 2003

More Acrimony in the World of Finance

(In case you were worried this had become purely a politics blog...)

The hits just keep on coming. Tuesday the feds indicted Richard Scrushy of HealthSouth (read the full indictment here). The House held a hearing on exorbitant mutual fund fees Monday (somewhere John Bogle is saying "I told you so" for the billionth time). And the market-timing recriminations continue to reverberate through the Boston financial industry. In the last two days alone we've seen charges brought against Prudential, the resignation of the head of the SEC's Boston office (who apparently knew about the misconduct long ago and didn't act), and the resignation of Putnam boss Larry Lasser.

Lasser's departure was a long time coming. Two years ago I spent a summer working in the Boston office of a financial firm and a controversy arose because Putnam had invested some supposedly conservative funds more heavily in technology than they should have. The returns weren't pretty and brokers were pissed. I had the opportunity to attend a meeting one afternoon at Putnam's offices in Post Office Square during which financial advisors from the area grilled Lasser on the actions of his subordinates. Larry was under fire from the Boston Globe at the time too, and he came across as a very slick salesman, oozing with confidence. I could see why he had risen to the top and at the same time I was a little unnerved by him. His getting pushed out by Marsh McClennan two years later for inadequately reigning in subordinates does not surprise me in the least.

The other big shake-up in the Boston business world of late has been the Fleet acquisition by Bank of America announced last week. There's a lot of local anxiety over this one from people scared about losing jobs or the potential decline in service from not having a major bank based in New England. I think these complaints are overblown. For one thing, everyone and their brother has known Fleet was a likely acquisition target for a while. If you were concerned about your job security in the event of a takeover, you shouldn't have been working at Fleet. The point about maintaining a regional banking giant is silly too, indicative of the enlarged self-importance of people in Boston. As the "Observer" column on page 2 of Sunday's Globe noted, Boston has half the population of San Antonio now. Our collective regional ego alone is not sufficient justification for keeping a big bank HQ in the area.