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Despite evacuating 9,000 employees from Merrill Lynch's headquarters in the World Financial Center just six days earlier, Chairman and Chief Executive David H. Komansky was able to get his company operating for the reopening of the New York Stock Exchange on Monday, Sept. 17. This week, he spoke with BusinessWeek Investment Banking Editor Emily Thornton about trading on opening day, where the market may be headed, and how the company has reacted in the wake of the Sept. 11 attacks. Here are edited excerpts of their conversation:
Q: What's your view of what happened in the markets on Sept. 17?
A: It was pretty well expected that the market would sell down, rather than try to recover. [It was] a flushing out of those emotional sellers or those sellers who felt they had to reach liquidity. The market will search for a point of equilibrium.
Q: Will it be over the next couple of days, or months?
A: I don't think the market will sell down for the next couple of months. I think you'll see a lot of volatility. You'll see sharp breaks on the downside and sharp rallies until it reaches the point of equilibrium.
Q: Some analysts are estimating that brokers are operating at 30% to 40% capacity. Is that the case with Merrill Lynch?
A: In our case, on the retail side we're pretty much at full capacity. On the trading side, we're at about 60% or 70% capacity.
Q: In terms of investment banking, are you telling your clients to go ahead with mergers and initial public offerings?
A: I think right now everyone is taking a wait-and-see attitude and giving the distribution system a chance to regain its equilibrium. Most underwriting will slow down over the next several days, but I wouldn't be a bit surprised if by next week...you'll see offerings come to the market. There was a calendar building up prior to what happened last week. Now there will be initial issuance particularly in the fixed-income market...to raise capital.
Q: I understand you've moved traders to New Jersey. Will Merrill Lynch and others come back to the World Financial Center?
A: We will reoccupy our buildings. We're planning on moving back into the area. Longer term, I think firms will be much more cognizant of having their backup and recovery sites in a different area. But I don't expect to see a mass exodus from the Wall Street area. Everybody has to be practical about this. Everybody has long-term leases. The properties
will be restored. The infrastructure will be restored.
Q: I've heard that you're considering separating your people by their different business groups.
A: These are just emergency steps. We're trying to keep the various groups together, such as research and banking. That's very much dependent on where we've been able to get space. What will be more trying is the intracompany communications and how we relate to one another. We'll have to work a little harder to put those mechanisms into place. But
basically, people know their jobs, and they know what they have to accomplish.
Q: When will Merrill Lynch be up and running as it was before Tuesday?
A: I expect by the end of this week we'll be at full capacity. [To get back to what] it was before Tuesday could take some time. Then you're talking about when will our facilities be back the way they were. With the [ones] in the South tower in particular, it could be 9 to 12 months.
Q: How are you managing the healing process?
A: It's a situation where from the minute we evacuated the building, until [just before the market reopened], we were totally focused on getting back to business. Now we're attending to the human needs of people. You have to have a lot of exposure. People have to see you. You have to be with them. That will be a continuous process.
That's one of the reasons we're not rebuilding an executive suite, so to speak. One of the reasons we're dispersing [senior executives] is so that they can be with their people, and their employees can see the most senior management of the firm.
Edited by Patricia O'Connell
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