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.

of African Americans’ presence on Wall Street. Since the peak of 1993, municipal underwritings by minority firms have plunged 42% to roughly $16 billion, according to Securities Data Co. And while there is clearly a need to diversify, many firms remain committed to mums.

Only this time around, firms are approaching the business with a been awareness of its economic realities.

Clearly, the worst thing any firm can do is stand still. Jim Beard, first vice president of Miami-based Howard Gary & Co. (No. 8 on the BE INVESTMENT COMPANIES list), puts it bluntly: “That minority slot many of us counted on is going the way of the dodo bird,” he says. “You simply change or get out of the way.”

While the rule of thumb for other businesses, product differentiation is a concept muni-bond firms didn’t need in the salad days. Now it has become one of the most important ways Howard Gary aims to thrive. By cutting costs and focusing more tightly on business development efforts, the firm hopes to win issues by doing jobs quicker and at lower fees than the competition. “When it comes to golf outings at expensive country clubs, we’re not the one,” Beard says. “We won’t use our resources in that way.” What’s more, the firm is concentrating more on its Southeast home base than other areas of the country where the travel expense versus the chance of landing an issue don’t add up.

In spite of the changing environment, M.R. Beal remains heavily involved in municipal bonds, but it can no longer afford the luxury of waiting for business to come knocking on the firm’s door. Beal does more consultant banking than pure transaction banking today. And rather than look for requests, he says he tries to generate proposals and ideas. Recently, the firm senior-managed a pension obligation fund for Alameda County, California.

“Look, the muni business will continue to contract and the margins will be thin,” says Beal. “But capable people can still make a living at it.”

Like several of his peers, Brandford maintains that the “muni-panic” is way overblown. He insists that just because the rules have changed doesn’t mean the business is dead. As an industry veteran, he remembers the climate in 1981 when the prime rate was at 20.5% and industry volume was at less than a quarter of its current levels. “People still made money,” he says.

That’s encouraging news. But a trip down memory lane is of little use to firms whose recent past is so bruising. Whether Grigsby is guilty of any wrong doing remains to be seen. He didn’t return repeated phone calls. But the federal government’s intense spotlight on black-owned bond firms makes it clear that, unlike their more established white-owned counterparts, African American concerns live a precarious existence on the Street. Pryor, McClendon, Counts & Co. stands as another illustration of the vulnerable nature of black-owned firms. As the target of a Securities and Exchange Commission inquiry into how PMC brokered 70% of Atlanta’s $10 billion in

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