Now That The Smoke Has Cleared…

The year-long repositioning of Black investment banks has produced some unexpected winners andlosers. Here's how the new landscape shapes up.

blacks in the industry. Just a few years ago, muni-bonds were booming. And black-owned firms for once had a seat at the table. But 1994 changed all that. Municipal bond volume dropped by more than 50%. Then Congress legislated strict bans on political contributions in the industry, prompting well-established firms like CS First Boston and Donaldson, Lufkin & Jenrette to exit munis for more profitable lines of business. Easy for them. But the country’s black- owned bankers are still feeling the effects of the loss of what had been for many the cornerstone of their firms’ very existence.

Making matters worse, heavy-handed enforcement of the ban on political contributions has strangled leading black-owned firms, like the former Grigsby Brandford, in a web of investigations and controversy. Although Grigsby was not formally charged, Branford–sweating under the glare of public scrutiny–knew the situation could well be the firm’s undoing. “Why should so many suffer for the alleged actions of one?” asks Brandford, who was able to retain roughly two-thirds of the firm’s 60 employees.

In fact, firms are suffering through investigations that have yet to yield any wrongdoing. Unfortunately, the mere mention of a black-owned firm’s involvement in anything questionable has been enough to cripple or kill. Investment banking veteran Bernard Beal of M.R. Beal & Co. (No. 3 on the BE INVESTMENT COMPANIES list), lost business last year when he was unjustly ac
cused of paying a politician under the table to receive a municipal bond deal. His firm has come back stronger than ever, but surviving such scrutiny while battling a tumultuous industry takes leadership that most firms don’t have.

Such concerns are one reason Marianne Spraggins was tapped last fall to rescue WR Lazard & Co. (No. 14 on the BE INVESTMENT COMPANIES list) Spraggins, who is no stranger to controversy, became the first black female managing director in 1990 at Smith Barney, then left the securities industry in 1993. Proclaiming that she is “on a mission,” Spraggins says Lazard has scaled back the firm’s muni-underwriting business to focus on more profitable areas like consulting, equity trading and investment banking.

At WR Lazard, a firm whose capital base had slipped from $4 million to about $1 million in the wake of founder Wardell Lazard’s 1994 death, Spraggins has had to work quickly. She has aggressively moved to cut costs–slashing salaries at a time when firms on the Street were paying record bonuses. She has also recruited new talent. More importantly, she developed a strategic partnership with Prudential Securities Inc. which included a $500,000 capital infusion.

“That loan is part of a much larger relationship with Prudential,” Spraggins says cryptically. “There are a lot of synergies that relate to our day-to-day operations.” When pressed for details of the partnership with Prudential, Spraggins refused to comment further. Insiders say as part of the deal, Lazard would use Prudential to clear its trades.

While such innovative moves may be necessary to secure the future of blacks in finance, right now muni-bonds are the most visible signs

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