One day we are going to wake up to discover that the brokerage and bank industries have merged into a half-dozen entities capable of making fortunes through fees in America and loans in the rest of the world.
The only wonder is why that day wasn't yesterday.
One of my favorite things about Mondays is that a boatload of trade publications come, including one of my faves --
. I didn't get my mail until 1 p.m., but sure enough, there on the front page was an article about how
Chase Manhattan Bank
wants to do a "transforming" deal with some major brokerage house. In fact, the article implied that we should expect to see this deal any day now.
I am long Chase, and it would be great if this were to happen. More important is that if there was one sector where we could see an overnight consolidation, it is the financial industry. The feds have blessed the mergers, the technology is here to save fortunes in the combinations. The fee structure is so steep that these companies could make a risk-free fortune every day.
And from the looks of the restructurings in Japan, the losses in Euroland and the collapse of Latin America, or at least Brazil, there is nothing but open-field running for the combined U.S. banks.
Think about it: Japan has had to bail out almost every one of its banks. The price is a massive retrenchment away from worldwide lending as they get their act together at home. After all of that hedge fund chaos from the summer, it looks like the only banks that sustained any sort of real damage were European banks. Brazil seems like it might be stabilizing, but I would not count on its financial institutions emerging stronger. And Southeast Asia, where Japan once dominated in lending, is now wide open to the U.S.
What the U.S. lacks, however, is critical mass. Sure
is big and Chase is big and
is big and
is big. But if these banks want to dominate in the 21st century, they need to merge and purge.
Put simply, there should be three or four powerful U.S. banks out there in the same way that there are a handful of German, French and British banks.
These bigger entities would have far greater control over these destinies than they have now. And have far more capital.
How important is this? Until this summer, I thought
was a well-capitalized bank. But one big hedge fund collapse, and -- boom -- they became history.
The winners for the 21st century in banking will be those with the most scale and the most capital. That's why the big mergers haven't even begun yet -- and I don't regard the Citi-
deals as big mergers.
But I think they will -- soon. These bankers know what I know: They know they need giant war chests if they are going to carry out the necessary ascendance that the U.S. finally has arrived at financially, now that the Japanese have retrenched and the Europeans have stubbed their toes.
That's why as I scale back on stocks today, I intend to sell the financials very lightly. They just make too much sense to me.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At the time of publication, his fund was long Chase, Citigroup and Merrill Lynch, though positions may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column by sending a letter to TheStreet.com.