John Gutfreund On Recent Capital Markets Events

CNBC snared one-time Salomon Brothers CEO John Gutfreund for about five minutes of incredibly candid, sensible interview time.

If you recall Gutfreund from the days just before his ouster at Salomon, you would, as I did, remark that he has aged very well. Further, for a guy who was among the most powerful men in investment banking, at the apogee of his power, he is very understated, unassuming and plain-spoken.

Almost the opposite of his former economist, Henry Kaufman.

Gutfreund was asked how Lehman's demise came about, and he said something to the effect,

"By the over-optimistic actions of the firm's CEO and his senior managers."

Pressed further, he allowed as how the firm was unrealistic, in this era and environment, to believe it could remain independent while grappling with its writedown problems. Gutfreund never used Fuld's name, but pointed out that Lehman had had months in which to gracefully sell itself before coming to Chapter 11.

On BankAmerica's purchase of Merrill Lynch, Gutfreund was far more terse and opinionated. He caustically asked, was this not the bank that had, in years past, bought, then sold brokerage firm Charles Schwab?

Gutfreund then opined that,

'commercial bankers like brokerages for what appears to be their simple business model, and the brokerage commissions.'

However, he noted, this century was already far different than the last, and the brokerage business of today is not that of last decade. With that, he simply dismissed BofA's purchase as too expensive, "greedy," and something doubtless to be punished by shareholders as they sell the company's stock in disgust and disbelief.

Gutfreund's attitude regarding the BofA-Merrill transaction was little short of disdain. He clearly believes that Ken Lewis is making a major mistake that he, and his remaining shareholders, will regret.

As the nearby, Yahoo-sourced chart for BofA over the last five days indicates, Gutfreund was right on target.

It was refreshing to see a sensible, blunt Wall Street veteran avoid needless emotion and hysteria, while simply calling yesterday's events as he saw them. Nothing to be panicked about.

Rather, one company, Lehman, prolonging its own agony, while another, BofA, foolishly bought a troubled, also-ran investment bank.