The Death of Corporate Reputation: How Integrity Has Been Destroyed on Wall Street

3. The Way Things Used to Be: When Reputation Was Critical to Survival

This chapter presents the rise and fall of Bankers Trust Company as an example of how traditional reputation theory used to work. Founded in New York in the early 20th century, Bankers Trust grew quickly by acquiring smaller banks around the country, and suing to expand into markets from which it was barred. Eventually, under the leadership of CEO Charles Sanford, Bankers Trust moved out of retail banking and began to focus on merchant banking. It developed cutting edge risk-assessment techniques, pioneered derivative instruments known as swaps, and quickly became one of the most successful banks in the industry. In the 1990s, Bankers Trust entered into complex swap agreements ...