& Tornado Alley
The Rise and Decline
Bankers Trust started in 1903 in New York as a service institution for banks. At that time commercial banks were not allowed to provide trust services for their customers. Bankers Trust was formed to provide those services and regular commercial banks sent their clients to them.
In 1914 with the formation of the Federal Reserve System commercial banks were allowed to provide trust services and Bankers Trust's market disappeared. Bankers Trust became a commercial bank, but it was decidedly smaller than the other commercial banks in New York City. After struggling along for decades it decided to leave the commercial bank field when Automatic Teller Machines came into vogue. Citibank announced it was going to spend $100 million for ATM's and Bankers Trust barely could match that figure in terms of total assets.
Bankers Trust morphed itself into
an investment bank. Always innovating, Bankers Trust developed a
specialization in derivative securities. It rose to be the dominant
bank in the derivatives field. Then it was sued by several customers
who claimed they were victimized by Bankers Trust in derivative
transactions. In the suit brought by Procters & Gambles of Cincinnati
some tape recordings of Bankers Trust employees talking about how they
would victimize their customers became part of the public record.
This lost Bankers Trust its reputation and
creditability. It began to lose money and agreed to its acquisition
by Deutsche Bank. Under Deutsche Bank, Bankers Trust still operates
but it does not have the high profile it once had.
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